RIYADH, 18 February 2007 — Mobilizing the full potential of prospective investors in the light of the Kingdom’s economic reforms program hinges on prompt and expeditious implementation of government decisions, a Shoura Council member said yesterday.
Osama Al-Kurdi, connected with the economic committee of the Shoura Council, told Arab News that while the government’s intentions are good in pushing forward the reforms program, the implementation system remains slow. “There are 10 additional requirements in the Foreign Ministry over and above the existing regulations. Also, there are different requirements in the Saudi diplomatic missions abroad.”
Al-Kurdi was commenting on the government’s decision to expedite the issuance of visas to businessmen. “There is a great deal of scope for streamlining the system,” he observed. Al-Kurdi is among many other businessmen who have been calling for effective implementation of the reforms program. In his keynote address delivered in Riyadh recently, Microsoft chairman Bill Gates said unless the government in any country matches the performance of its private sector, the pace of national progress would continue to falter.
In a wide-ranging interview, the Shoura member said investment in venture capital companies should be stepped up in the interest of adding value to the economy. “We need to develop the concept of venture capital, which should be included in the regulations concerning the Company Law. Unfortunately, the concept has not yet caught on in Saudi Arabia.”
Asked about the flight of Saudi capital to the neighboring Gulf states, he said Saudi investment in the Gulf or vice versa was part of the normal process operating in both directions. “There is no contradiction between the two. There should always be the possibility of local investors going abroad. If you try to prevent this from happening, then there will be no investment coming to the country. So we should keep an open mind on the question of Saudi investment going abroad and overseas investment in the Kingdom.”
On the question of restoring confidence in the stock market, he pointed out that several measures need to be taken in that direction. At present, 80 percent of the traders in the stock market are individuals and 20 percent institutions. The Capital Market Authority (CMA) is trying to reverse the situation, so that 80 percent of the investment is generated from institutional investors and only 20 percent from individuals. “Once this happens, it will dramatically improve the investment environment. The CMA has already licensed 40 financial companies dedicated to the stock market. This should cause the reversal of this percentage leading to a situation in which more funds are invested institutionally rather than individually.”
In reply to a question on the Saudi commercial banks targeting mostly the large-scale investors, Al-Kurdi said the banking sector in the Kingdom remained “a non-consumer market. It caters very little to the needs of the individual as is clear from the fact that the number of licenses issued for retail banking is very limited as is the number of branches opened by those banks.
Similarly, ATM machines do not provide all the services. “So the combination of the number of licenses, the number of branches, and the services provided by the ATMs will tell you that this is not a consumer market.” He called for more bank licenses to be issued in the retail banking sector. Also, they should expand the network of branches and the services provided by ATM terminals. On the question whether there should be a slowdown in the flotation of IPOs (Initial Public Offerings) in view of the lackluster response from the market, Al-Kurdi said “there should not be a slowdown per se. On the other hand, the flotation of IPOs should be evaluated carefully.
Also, we have to examine the market in terms of the sustainability of the IPO. This may mean that we can either increase the volume of IPOs or we may reduce it, so that the IPOs are issued at the right moment in the right volume. I am not asking for an increase or decrease of IPOs. I am only demanding a closer look at the upcoming IPOs.”
Pointing out that investment in research and development in the Kingdom was no more than one-tenth of its GDP as against five percent allocation in other countries, the Shoura member stressed the need for setting up an R&D Institute in the private sector.
It could be funded by taking a small percentage of the profits from the publicly-traded companies and investing the amount in research and development. This would entitle those companies to benefit from any R&D project in which they are involved, he added.