Interview: Nayef Al Hajraf
To what extent have external forces impacted the Kuwaiti private equity markets?
NAYEF AL HAJRAF: The global financial crisis of 2008 and the recent sharp decline in hydrocarbon revenues have greatly impacted Kuwait. Our world is now truly globalised – there are no isolated markets able to weather downturns. We live in an interconnected age, and this trend will only continue. In light of this, a public debt issue is now being considered, which could create new opportunities.
Will the sukuk (Islamic bond) segment continue to grow, providing an investment alternative?
AL HAJRAF: Islamic finance has grown significantly from its inception. Many now consider it to be a viable alternative to the conventional banking system, especially in turbulent macroeconomic environments. In response to the increasing interest in the sharia-compliant segment, we have put together a comprehensive set of by-laws that will enable investors to consider either conventional bonds or sukuk when financing their debt needs.
How will the new governance laws beginning in June 2016 impact the capital markets sector ?
AL HAJRAF: In order to move from frontier market status to emerging market status, we must introduce and standardise a set of corporate governance laws. In a less-vibrant economy, only efficient and transparent businesses will survive. This has prompted us to issue new corporate governance laws, which will become effective in June 2016, following a two-year postponement. We are now undertaking a final review in collaboration with all the relevant parties. We are also working to raise awareness further afield for anybody directly affected by the new code. In March 2016 we held a corporate governance forum for a diverse audience to showcase the impact of similar laws.
The new governance code will implement best practices in the capital markets sector just at the time the sector is undergoing restructuring. Bringing the laws up to international standards will give more confidence to potential investors in Kuwaiti capital markets. Our aim is to improve the efficiency and competitiveness of the sector.
What incentives have been put in place to attract foreign corporates to Kuwait?
AL HAJRAF: The CMA Law and CMA Executive Bylaws outline several incentives, which include favourable tax rates for foreign investors and protections for minority investors, and a rule allowing a foreign operator to own up to 44% of the stock exchange, which helps enhance the exchange’s operations and bring it up to international standards.
After the partial floatation of Saudi Aramco, will GCC governments be selling off assets?
AL HAJRAF: I am a big advocate of economic diversification and the emergence of a greater free-market system. These moves are not just under way in Saudi Arabia – in Kuwait there has been talk of privatising state assets as well. By at least partially listing an asset, the government will give depth to the marketplace, and enhance liquidity. As Kuwait is an oil-driven economy, it might also be said that it is right for these assets to be publicly traded. Listing a company is not an aim in itself, but it would provide access to capital whenever it is needed. Capital markets are not only a place to raise money, but also to generate more capital. In addition to oil companies, we would also like to see family-owned businesses list. There have been some success stories in the past few years, adding to the overall market capitalisation. We are also working to establish a platform that helps small and medium-sized enterprises to grow and thrive.
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