JEDDAH, 10 April 2007 — New investment environment and its impact on Saudi banking services, and the Kingdom’s insurance sector after joining the World Trade Organization were the subjects discussed by experts, economists and professors at the ongoing Saudi International Banking and Investment Conference 2007 at the Jeddah Hilton yesterday.
Wahib Binzagr, businessman and banking expert, speaking on the supervisory role of Saudi Arabian Monetary Agency (SAMA) in regulating the banking services, said that consumer needs should be taken into consideration while analyzing to what extent the rules and regulations are complied with. “Citizens get affected when the dollar increases or decreases and traders are affected when embezzlements take place in the market because their incomes are not substituted or not substantial. Managers and decision makers need to take positive roles to tackle such situations,” he said emphasizing that there ought to be transparency at various levels of official and business operations.
While SAMA has gained stability worldwide over the years, its role in financial services needed to be overemphasized. “SAMA needs to reach out to become a leading bank to fulfill the needs of individuals and corporates. One way of doing it is to apply checks at various levels so that certain unsavory situations in transactions between banks and businessmen are avoided. “When a businessman delays repayment of a bank loan, he is fined or blacklisted. There are also cases with businessmen incurring heavy debts,” he said, adding that bank managers and staff should be adequately educated about the various services they render as also their duties and responsibilities.
“I have been working for over 44 years and visited by many foreign banks, but I have not been visited by a single Saudi bank,” Binzagr said. “We are a developing and (oil) producing country. We have to emphasize on Islamic financial services and clarity in financial transactions. In all such matters, our culture, tradition and Shariah should continue to play a big role.”
Hatim H. Mouminah, general manager, Deutsche Bank AG, spoke about the challenges faced by overseas banks operating here. “Human resources are, for instance, a vital issue, in fact, more essential to foreign banks. Of course, we want to give opportunities to local people but we need to be selective.”
Dr. Khalid Alnowaiser, attorney at law and arbitrator in cases at International Chamber of Commerce, speaking on corporate governance in the new investment environment said that rules and regulations have been there to follow, “but they are not fully complied with.” There is an international system of rules and regulations that is applicable in countries joining the WTO. “With the Kingdom’s accession to the WTO, its establishments could have benefited from it but they did not know how to utilize the services,” he said. He called for coordination at the level of commerce and trade in the ministry. “There should be one administration to deal with all matters related to rules and regulations. However, such rules and regulations are not permanent, we need to systematize them for effective implementation.”
Yasser Saud Dahlawi, CEO, Shariah Review Bureau, stressed that while Shariah was most important what was needed was to make information related to it available to both consumers and companies alike. “What’s needed is more clarity and transparency,” he said.
Dr. Fahad ibn Yousef Sharif Al-Eatany, WTO approved chief economist in the Kingdom, also stressed the need for transparency and discussion, especially when there are conflicting interests among private business houses or companies. He called for a fullfledged administrative setup to oversee the compliance by the corporate sector of international rules and regulations related to the WTO “so that business was conducted legally, financially and economically.”
Moderating a discussion on “Banking services in the new environment: Challenges and opportunities,” economist Dr. Yasin A. Jefri said he agreed with Wahib Binzagr that there ought to be a transparent image to promote quality of services as the future was full of new challenges. “HR and financial services, especially, will be faced with greater challenges as there will be demand for jobs and positions in many organizations.
In the past, there has been dramatic developments in the economy to the extent that we could not fill them. With our WTO membership, there will be new opportunities for both Saudis and non-Saudis to be active in many organizations, more importantly in financial and banking sectors. These are all indicators of the Kingdom’s economy being solid and holding vast potential.”
This also shows that qualified and competent employees will be required at various levels of economy, he said and posed a question whether the Kingdom’s universities were prepared to produce graduates with professional competency. “For instance,” he said, “there is still a great need to fill secretarial jobs. If we don’t take the joint responsibility of responding to our needs, we will not be able to advance in such sectors.”
He said there were many obstacles to overcome in a bid to develop confidence and competence of the Saudi workforce to take up managerial positions. “Active participation by women also is a vital issue,” he said, adding that the universities should become more professional. There should be institutions for developing managerial skills.
Dr. John Sfakianakis, chief economist at SABB, spoke about the challenges and opportunities related to the economy in general and banking sector in particular. This year the economy would witness strong non-oil private sector growth but would continue to witness a slow down in real GDP due to cuts in oil production. “For 2007, we forecast real GDP to increase by 3.7 percent on the back of rising inflation. We also expect non-oil private sector growth of at least six percent, despite the adverse impact of the collapse of the local equity market, and government spending to rise by around five percent. Fiscally the Kingdom is very healthy and spending discipline well maintained.” In the next two-three years, oil prices would be $55 to $65 per barrel for the Kingdom’s economy to advance further. “Nominal GDP will be high, but real GDP will be slow due to the stock market correction,” he said. The severity of the stock market correction the Kingdom witnessed should have brought the economy to its knees, but this did not happen. The economy has been experiencing high growth rates, tantamount to a boom since 2003 and this cushioned the economy against a severe downside. “In 2007, we expect the Kingdom to earn SR645 billion in oil income.
Thus we maintain a positive outlook for the economy for the year despite the effects the stock market had on consumer spending. We believe that the economy weathered the market collapse very well, avoiding either a currency or a banking crisis. Looking forward, we see government spending, buttressed by high oil prices, offering the incentive for non-oil private sector expansion. Our growth projections for the economy are positive through the present decade.”
Discussing the Kingdom’s insurance sector after joining the WTO, Dr. Mugabel Saleh Al-Dhukair, professor of economics at King Abdul Aziz University, said the insurance sector had opened up and there was vast business for companies promoting group insurance at the corporate level, and health insurance for individuals and families.
He said Takaful providers had witnessed a growth of 20 to 25 percent per annum. The Kingdom is the biggest market for Takaful and 20 companies have been licensed by SAMA for this.
Speaking on insurance services in the Kingdom, Faisal M. Al-Kordi, general manager of Saudi IAIC Cooperative insurance Company (Salama), said that the size of the Kingdom’s insurance market was huge.
Any company with a sizable number of employees goes in for group insurance, considered one of the key features these days. “The scope widens with demands generated through education, housing and retirement programs. There is also an increasing awareness for insurance against thefts, accidents and fire,” he added.