Saudi bourse takes private sector route

Saudi Arabia has announced plans to turn its stock market into a shareholding company open to the private sector, in a bid to help the stock market operate on more professional and transparent bases, and introduce new products and services.

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By  Andrew White Published  May 14, 2006

Saudi Arabia has announced plans to turn its stock market into a shareholding company open to the private sector, in a bid to help the stock market operate on more professional and transparent bases, and introduce new products and services. “The Capital Market Authority is actively working on launching the Saudi Arabian Financial Exchange (SAFX) ... (which) will become a private sector corporation based on the leading-edge international model for exchanges,” revealed His Excellency Jammaz Al Suhaimi, Chairman of the Capital Market Authority (CMA). Procedures to “establish SAFX as a shareholding company will begin soon,” H.E. Al Suhaimi said, confirming that the studies prepared by the CMA envisaged “opening part of the company’s shares to public subscription.” The Saudi stock exchange, the Arab world’s largest bourse by capital, currently operates on an interbank basis. Meanwhile, the kingdom has launched a major new financial district, which will be the Middle East’s first on a scale, and of regulatory and technological standards, to match the world’s major global financial centres. King Abdullah bin Abdul Aziz Al Saud, announced the creation of the King Abdullah Financial District, in Riyadh. “We are blessed with a robust economy, a stable currency and a strong financial sector with equally strong supervision,’ he said. The new district will be built close to the business centre of Riyadh. The site covers 1.6 million square metres, and the development will offer floor space of over 3 million square metres. The master plan for the King Abdullah Financial District will be completed by the end of the year. Construction will begin in 2007, and will create thousands of construction and related jobs over a tight three-year period of building and development. The development is designed as a state-of-the-art and entirely self-contained centre for doing business, and facilitating investment and enterprise in the Kingdom and, in due course, across the wider region. The new financial district will be the headquarters for the CMA and the Stock Exchange (Tadawul), and for financial institutions and other service providers such as accountants, auditors, lawyers, analysts, rating agencies, consultants, and IT providers. In addition, the world’s major banks, financial institutions and professional service companies – many of whom already operate in Saudi Arabia - have indicated their intention to locate in the district in order to play a major part in the diversification of the world’s major oil economy. The CMA, which has introduced international-class regulation to the capital market, has been designed the strategy underpinning the development of the district, together with the Public Pensions Agency (PPA). One of the cornerstones of their strategy is the development of a public/private partnership. “We are working hard to strengthen and develop our capital market,” said H.E. Al Suhaimi. “The role of the King Abdullah Financial District will be to facilitate the financial sector’s contribution to our national economic growth in every way that we posibly can. “We will provide young people and others who want to learn with an opportunity to enhance their skills and develop their full potential to help deepen our financial markets,” he continued. “Thus, in addition to facilitating business and investment, a centerpiece of the District will be a new financial academy and conference facilities for financial services. “The purpose of this new financial academy will be to enhance the skills, training, and capabilities of current and future generations to consolidate Saudi Arabia’s position as the largest economy in the region,” he added. His Excellency Mohammed Bin Abdullah Al Khrashi, Governor of the PPA, revealed that the Agency will own and develop the entire project, and will provide opportunities for the CMA and other government agencies - such as SAMA, and other related companies including insurance companies, banks and financial services providers - to find suitable locations and offices that are equipped with state-of-the-art facilities. “[The Agency] has already taken the necessary steps towards achieving this objective, and it expects that the project will create an excellent working environment that will attract excellent investment opportunities,” he added.

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