Interview: Mohammed Al Rumaih

What steps are required to deepen the participation of the private sector in Saudi Arabia’s economy?

MOHAMMED AL RUMAIH: The private sector and investors – both foreign and local – have been increasing their participation in the economy. Our strategy moving forwards is to connect firms with the international market, attract additional global investors and boost liquidity.

We recently launched a range of initiatives to develop the post-trading infrastructure and increase its efficiency, which represented a substantial improvement for the wider industry. These enhancements are the most significant in the history of Saudi Arabia’s capital markets, as they provide investors with increased opportunities, and access to a diverse range of financial instruments and new products.

We also work closely with small and medium-sized enterprises (SMEs). New generations of business owners are creating or heading smaller companies, bringing a new mentality to the business environment – often with an international perspective. As a result, more SMEs are looking to the capital markets to boost their liquidity. As of June 2022 the Exchange had an excess of 55 applications related to SMEs, including tech unicorns that are capturing the attention of international audiences. We expect this number to grow.

Which strategies are being implemented to encourage companies to adopt environmental, social and governance (ESG) reporting?

AL RUMAIH: ESG is one of the most important investment topics today, and the Covid-19 pandemic has shed light on how adopting ESG principles can minimise the impact of external shocks and ensure business growth. Promoting ESG adoption and reporting has become a strategic goal for the Saudi Exchange, especially given its role in attracting investment, encouraging alignment with global best practices, and strengthening disclosures, transparency and stakeholder engagement. ESG builds on the concept of sustainability that has been a part of Saudi Arabia’s various strategies in support of Vision 2030. Many companies are now following suit and learning more about what they need to do to improve their application of ESG principles.

Institutions such as the Saudi Exchange are assisting companies by providing the necessary resources to reference. Based on our experience and relationships, we have made plans to encourage and better assess ESG adoption. The result of these efforts will be seen over the next few years in companies’ performance and in their access to capital and foreign investors.

To what extent might the Saudi Exchange’s restructuring in 2021 aid Saudi Arabia’s broader strategy to enhance the competitiveness of its capital markets?

AL RUMAIH: We have been working over the last decade to promote the Saudi Exchange internationally and attract more investors, and one of the topics we were frequently asked about was our potential initial public offering (IPO). The Saudi Exchange changed from a private entity to a holding company in 2021, and then to a publicly listed group in December of that year in order to increase transparency and access new capital.

Through this evolution, we sought to grow the Saudi Exchange’s shareholder base and, in turn, boost activity on Saudi Arabia’s capital markets. This transformation is expected to make the Saudi exchange more efficient and agile, as well as help its leadership develop high-quality services. We live and work in a global market, and our IPO was an important step in a long-term plan to connect Saudi Arabia to international markets and showcase the investment opportunities available.

How did the capital markets adapt to the pandemic?

AL RUMAIH: It was important for us to showcase our resilience, flexibility and capability in facing challenges amid the pandemic – especially in the first year. We took swift action to make the necessary changes for the market to continue operating with minimal disruptions.