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Mpact of changes in capital market of Saudi Arabia in 2003 - Essay Example

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Mpact of changes in capital market of Saudi Arabia in 2003

This was the first effort to set up a share market, and this committee was the first group which was given the responsibility for market regulation and development. Considering the position of the country as a rich country, the process of development was fast and it became the first country of the world with a fully electronic market in the beginning of 1990s. This market permitted trading, clearing of settlements and depository services. The infrastructure of the market was further developed in 2001, and this was of interest to the people as the market had grown in volume during the intervening period. (Saudi Arabian Capital Markets law passed)
The growth of the market has continued, and before the new act of 15 June, 2003 came up, the capitalisation of the market was to the level of SR477 billion or US$ 127 billion. This made it the largest market in the area and one of the largest among the developing countries in the world. At the same time, the market is limited by the number of companies that are listed on the market, which are only 65. Even the trading for the shares of these companies is limited to only nationals of the country and citizens of countries which are members of the Gulf Cooperation Council. For the citizens of other countries, the participation in the market is through investments in the open ended mutual funds that are being offered by the Saudi Arabian banks. (Saudi Arabian Capital Markets law passed) While part of this process is essential as there are has a number of monarchies, yet the spirit of participation by average citizens is growing, and since the banks in the area cannot offer interest on deposits due to Islamic tenets, it is certain that investments in stocks are bound to develop.
There are quite a few indications that there has been progress towards diversification of the economy of the country and this is also reflected in economic indices which show that gross domestic product has had an average annual growth rate of 4 percent, the growth of the non-oil GDP sector is even higher at 6.9 percent and for the private sector it is at an even higher level of 9.2 percent over the last thirty years or so. The importance of contribution of the non-oil sector in the economy is understood as their share in the economy has increased from 33 percent in the year 1972 to 69.1 percent in the year 2002, and there has also been a growth of the private sector in the non-oil sector of gross domestic product by about 50 percent during the period. It is clear that the importance of growth of the economy in sectors other than oil is desired by all concerned, and certainly there will be participation in the process by all concerned. The government is also supporting the process of development through incentives. (Investment and Trade Opportunities in Saudi Arabia)
Commodities coming into the country for industrial productions as also basic foodstuff are not charged with customs duties; even on other products the duty is only 5 percent; there are easy loans available from Saudi Industrial Development Fund on both medium and long term basis for half of the total cost of the projects and with paybacks of 15 years which starts from two years after the start ...Show more


While the general view of Saudi Arabia as a country with high personal incomes and a resultant high potential investment capacity is certainly true, it is also a country which has started having large surpluses only after 1973 when the price of petroleum reached sky high levels due to a variety of reasons…
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Mpact of changes in capital market of Saudi Arabia in 2003 essay example
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