OBG talks to Sheikh Abdullah Al Salmi, Executive President, Capital Markets Authority (CMA)

Sheikh Abdullah Al Salmi, Executive President, Capital Markets Authority (CMA)

Interview: Sheikh Abdullah Al Salmi

How can the CMA encourage more listings?

SHEIKH ABDULLAH AL SALMI: The most important objective of the CMA in Oman is to support the national economy and to assist its growth and diversification. This can be accomplished by increasing the number of listings. In our efforts to achieve this, the CMA is taking two main initiatives. The first is to review listing regulations. In doing so, we could ease barriers to entry by reducing transactional costs, by lowering the required free capital flow level from 40% to 25%, a percentage that is the norm throughout the region, and by improving investor access to supply capital. Secondly, there is also an emphasis on encouraging family companies to list. In part, this involves explaining to them the benefits of going public, particularly the advantages of improved company performance arising from corporate governance. This concept is often misunderstood as a form of policing; however, its purpose is in fact to drive companies to become more productive and efficient in their management practices. Therefore, the CMA will adopt a multi-faceted approach to increase listings, focusing on enforcing regulations and also attending to broader issues such as improving company productivity.

Which economic sectors are currently under-represented on the Muscat Securities Market (MSM)?

AL SALMI: Capital markets are useful for observers, as they are often indicative of the state of play in the economy in general. However, some of the key economic sectors in the sultanate are not currently listed on the MSM. In particular, the oil and gas, tourism and real estate sectors do not possess a strong presence on the MSM. There is room for improvement, and introducing these sectors would benefit the capital markets, as well as provide new opportunities to all parties involved.

For example, the oil and gas sector has seen major investments on the part of the government, leading to considerable activity in terms of exploration and services. By listing on the MSM, the companies that are operating in the oil and gas fields, and are benefitting from this increased activity, can both enhance the MSM and provide new opportunities for investors.

These companies can also benefit, as they will be able to share the risks that they incur with investors. However, we also understand it is a significant decision for any government to list some of their companies on an exchange. There is a natural sense of caution and care with which a government approaches a sensitive question of this nature. However, we can only hope that the private and public sector unlisted companies learn from the successful examples of other GCC countries, where such companies have been successfully listed.

What could be done to improve the environment for small and medium-sized enterprises (SMEs)?

AL SALMI: The development of SMEs is very important for the success of any economy. SMEs are a major generator of new jobs and new areas of wealth. In several countries, SMEs have accounted for nearly two-thirds of the jobs that have been created in the past 10 years. The MSM and CMA fully recognise the importance of developing this sector, and we are currently investigating ways to better assist its growth. For instance, SMEs are viewed as risky and non-transparent business counter-parties. The CMA and MSM can help address this challenge, for instance by providing SMEs with more assistance beyond listing their shares for trading, for instance by providing audited and other information to SME counter-parties. In addition, a broker who shares some of the risk of SMEs could also potentially bring plenty of benefits to both sides.

We are constantly discussing a range of options and are considering rolling out a new structure to provide support for SMEs. One feasible suggestion would be to start a separate exchange for SMEs, as is already the case in markets such as London and Singapore. The SMEs of today will become Oman’s large companies of tomorrow, so it is vital to incubate and streamline them to help support the economy. It remains a work in progress and so should be approached as a long-term cycle.

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The Report: Oman 2014

Capital Markets chapter from The Report: Oman 2014

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