GAC needs to reintroduce itself with more mergers expected in Saudi Arabia
I do not believe that many of us in the private sector have dealt with the General Authority for Competition (GAC). I only dealt with it recently when we, BMG Financial Group and Alinma Investment, applied for approval of our clients’ mergers; Enaya and Amana insurance companies respectively. GAC’s mission includes the adoption of competition-stimulating policies, combating illegal monopolistic practices to improve market performance to support business sector confidence, contributing to investment flow, and enhancing sustainable development.
The enforcement of competition law and policy includes preventing the abuse of dominant position in markets, prohibiting horizontal agreements (cartels) aimed at restricting competition, and monitoring mergers and acquisitions exceeding certain limits or leading to a dominant position that highly decreases competition opportunities after the transaction is complete. Post-pandemic economic hardships, many small and medium-sized companies in different sectors are exploring mergers as a strategic option for either growth or simply for survival.
In my opinion, many of us in the private sector know little about GAC, its mission, rules and regulations. Considering the important role it plays in the national economy, coupled with its new leadership under Dr. Ahmed Al-Khulaifi, an awareness campaign is needed to make its strategy known to participants in the banking, insurance, industrial, petrochemical and other sectors.
One of the financial sectors in which we will witness multiple mergers is the insurance one. This sector was under the watch of Dr. Al-Khulaifi during his previous post as governor of SAMA, where we anticipate more than two thirds of the listed insurance companies will merge after receiving no objection from GAC.
The announcements of GAC are made public, stating that it either has no objections to proposed mergers or the penalties for violators of its rules and regulations. Recently, GAC announced that it had no objection to the merger of 32 local exchange companies.
According to GAC, this decision was one of the largest mergers in terms of the number of facilities in a single transaction. GAC concluded that the foreign exchange market is one of the most liquid, transparent and stable markets, making it impossible to manipulate. The merger would increase economies of scale and reduce variable costs, thereby contributing to investment in innovation, development and upgrading of the new entity.
What is interesting about GAC is its leadership. Both the former and newly appointed presidents were former governors of the Saudi Central Bank (SAMA). I believe their previous mandates in regulating different financial segments, including banks, insurance and financing companies, made them perfect for the post in leading such an important government agency.
• Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.