tax & jurisidiction
Despite instability, terrorist attacks and post-war chaos in the Middle East, Saudi Arabia is pressing ahead with its aspirations to create a financial services centre to capture Saudi retail money in the capital markets and attract inward investment.
After years of consultations and reviews, the Kingdom has enacted a Capital Markets Law, which will pave the way for the creation of a financial services regulatory body, a Western-style stock exchange and non-bank financial intermediaries.
The Kingdom has plans to introduce an insurance law, a capital law and a labour law.
Nick Abbott, first secretary at the British Embassy in Riyadh, said the government has not yet released any draft documents on these laws.
He guessed an insurance law may be fast-tracked by the requirement for expatriates in Saudi to take on mandatory medical insurance beginning from September. 'In order to provide mandatory insurance, the authorities are going to have to legalise a number of insurance companies,' he said.
So far, only one insurance company is legally recognised by the Saudi authorities: NCCI. There are several other insurance companies and many are Saudi with foreign partnerships, which operate in the market, and will need to be authorised under law if they wish to participate in the mandatory medical insurance opportunities which will arise.
Abbott suspected the labour law will take the longest in coming as it surrounds the complex issue of Saudi companies acting as agents to foreign firms.
'It has been around for a few years,' he said.
There are hopes the regulatory body ' to be called the Saudi Arabian Securities and Exchange Commission (SEC) ' will be established by September, which will set the ball rolling for a modern stock exchange. This goal, according to observers, seems overly optimistic. While the country has one of the most advanced stock exchange markets in the Middle Eastern region, it remains in the dark ages of wider financial services provision.
Saudis can currently trade their shareholding in companies with one another. The condition is that the entire shareholding book is traded, and not portions of it, in this way alienating small investors and foreigners. Under new plans, individual shares will be traded, which will open it up to small investors, and potentially to foreigners.
According to Hassan Al-Husseini, head of media at Sagia (Saudi Arabian General Investment Authority), the investment promotion agency in Riyadh, each country is at different stages of modernisation of financial services, and Saudi Arabia is at the early phase.
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