About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

14 Int'l Fin. L. Rev. 23 (1995)
Privatization and the Growth of Financial Markets in the Gulf

handle is hein.journals/intfinr14 and id is 79 raw text is: Gulffinancial markets Privatization and the growth of financial markets in the Gulf Jane Pittaway, of Fox and Gibbons, Dubai, United Arab Emirates, looks at the growing interest in privatization in the Gulf and the stimulus this has given to the emergence of the region's financial markets. The buzzword these days in the Gulf is privatization: there is no mistaking the very high level of interest, a phenomenon that can largely be attributed to falling oil revenues and budget deficit increases. Governments are now accepting that their expen- diture must be curtailed and the private sector encouraged. Most Gulf countries have announced programmes to end government monopolies of various utilities, communications systems, hospital and airport services and manufacturing entities by way of large- scale privatization. However, as there are also many public offerings which are being conducted by non-governmental entities, and rather more frequently, it would perhaps be more useful to discuss the growth of corporate finance in the Gulf generally and the capital markets in particular. Establishmentof stockexchanges For both foreign and local entities, the early 1990s has seen significant developments in the field of corporate fi- nance and the expansion of capital markets in the Gulf, and we are beginning to see ever more sophisticated transactions being carried out. The international investment community is focusing on the Gulf market as never before and is looking for possible entry routes into it, thereby stimulating the market further. Privatization programmes are encouraging the estab- lishment of formal stock exchanges and trading floors in various Gulf countries. Of the six Gulf Cooperation Council (GCC) states, Saudi Arabia, Kuwait, Oman and Bahrain have all es- tablished formal stock exchanges. The other two states, the UAE and Qatar, have still not established formal exchanges, although both are actively planning to do so in the near future. Ultimately, however, the plan appears to be to link up the exchanges of all six GCC states to create a single regional market. In the meantime, Oman will be listing Bahraini companies on its stock market soon, according to the director of the Muscat exchange. Bahrain and Oman signed an agreement in 1992 to cross-list shares before the end of 1994. Although the year ended with no announcement forthcoming, final approval is expected within the next few weeks. In the richer Gulf states, such as the United Arab Emirates, where raising funds is not generally a problem, the primary reason behind any public offering of shares is more likely to be the political objective of wider share ownership (albeit for the time being probably only among the nationals of the country or, at the most, other GCC nationals) and giving local investors an alternative investment opportunity, nearer home, to the exchanges in London, New York and Tokyo. By contrast, in Bahrain, Oman, the Lebanon, Syria and Egypt the primary reason for conducting offerings is to at- tract foreign capital. As economic reforms easing trade re- strictions and giving the private sector greater opportuni- ties begin to take effect in these countries, we may well see a surge in privatizations, and it is likely that eyes will be turned to the richer Gulf countries to fund a large part of the privatization programme. Accordingly, cross-border offerings are likely to become increasingly popular. In addition, with the exception of that in Saudi Arabia, legislation in the Gulf covering investment is generally intended to regulate foreign investment coming into the particular Gulf country, rather than to protect investors in their investments elsewhere. Accordingly, the market- ing of foreign investments in the Gulf countries is relatively unregulated. Recent developments in capital markets Last year saw the UAE flotation of Union Properties, a Dubai-based property company, by Emirates Bank International, to raise approximately $35 million. The issue generated a substantial amount of interest as it was the first such issue under the Companies Law and was significantly over-subscribed. Several substan- tially larger public offerings are expected in the UAE later this year, probably after the holy month of Ramadan, which falls this month. Although the UAE Stock Exchange Law has not yet been published, a joint committee from the UAE Central Bank and the Federal Ministry of Economy & Commerce is considering the matter and an official from the Ministry has confirmed that a recommendation to open an exchange will be made soon. This is likely to increase the pace of public offerings and privatization programmes. Local brokers take the view that the establishment of an official floor will boost dealing levels as it will help the government to push ahead with its privatization plans and will also attract small investors, who may have been International Financial Law Review February 1995123

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most