Landmark move edges GCC closer to united market

New regulations in Saudi market herald the dawn of a new era

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By  Andrew Mernin Published  April 13, 2006

A leading capital market law expert has claimed a united GCC market is a reality following the historic decision to allow foreigners to sit on the board of listed Saudi Arabian companies. New regulations, issued by the Saudi Arabian Capital Markets Authority (CMA) and under the consent of the Saudi government, will also allow foreign residents to subscribe to capital increases of listed firms. Majed Garoub, chairman of the Saudi Law Training Centre and a lawyer specialising in capital market law, told CEO Middle East: “The main reason behind these decisions by the government and the CMA was to allow more money to enter the Saudi market, without involving government funds. “This is the start of a move towards a united GCC stock market, which will make the market larger and bring more opportunities between Middle Eastern companies (and their chief executives).” In November 2005, Saudi Arabia became the latest country to join the World Trade Organisation (WTO), the multilateral body which sets rules for global trade, opening up its economy to foreign policy and investment. Last month the Saudi Arabian CMA permitted six million foreign residents to invest directly in the local stock market in an attempt to boost liquidity. Other markets across the Middle East are also re-addressing their foreign policies after leaders at the GCC summit last December decided that nationals could invest in any market in the region. In February, the Dubai Financial Market (DFM) welcomed Salama Islamic Insurance Company as the first listed insurance company to allow non-UAE nationals to own its shares. Garoub expects the region’s stock markets to also be subjected to more change in the near future: “We will see more people go to market and more broker laws being formed. We need to change the laws quickly to support the economy,” he said. Last month the Saudi Arabian CMA also granted new brokerage licenses to Rana Investment Company and Team One Company, bringing the number of businesses providing stock market services in the Kingdom to five.

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