Doing Business In Saudi Arabia - Bna

Organization for Social Insurance (10%), and the remaining 70 percent will be floated
for public subscription.
The difficulty in obtaining a licence to operate in Saudi means that only 12 banks
operate, dominated by Al-Rajhi bank, the country's most profitable and one of the
world's largest Islamic banks, and the National Commercial Bank the largest by asset
size in both Saudi Arabia and the whole GCC. A number of international banks have
entered the market by taking stakes in domestic firms, such as HSBC's 40 per cent
stake in Saudi British Bank (Sabb) and ABN Amro's 40 per cent stake in Saudi
Hollandi Bank, which could soon be up for sale. Five GCC banks are licensed to
operate in Saudi Arabia, and licenses were also granted to Deutsche Bank, BNP-
Paribas, State Bank of India, National Bank of Pakistan, and J.P. Morgan Chase. So
far, only Deutsche Bank and BNP-Paribas are operational.
Foreign banks are permitted to enter joint venture companies in Saudi Arabia with a
previous foreign equity cap of 40 percent raised to 60 percent. Now, they can also
open direct branches.
As of the date of this report, the Capital Market Authority has licensed 82 foreign and
local companies to provide financial services and brokerage services from dealing and
managing portfolios to arranging and advisory services, including Morgan Stanley,
Ernst & Young, Merrill Lynch, J.P. Morgan, Credit Suisse, HSBC, and Goldman Sachs,
among others. The Saudi Government has also opened up asset management,
advisory and brokerage services to foreign institutions. The U.K.’s Merchant Bridge
and Swiss Bank Frey have also been authorized to conduct business.
The kingdom’s stock market ended 2007 on a confidence note, the Tadawul All-Share
Index (TASI) closed at 11,175 compared to 7,933 in 2006. Trading volumes plunged
by more than half, bringing down the total value of traded shares to $682 billion in
2007 as opposed to $1403 billion in 2006. Overall market capitalization gained in
2007 reaching $519 billion compared to $327 billion in 2006.
The number of operating funds rose by almost two percent in 2007 to 216 with total
assets at $27.3 billion, growing by more than 21 percent in 2007. Foreign assets
represented more than 22 percent of the funds’ assets composition.
Financial sources expect that greater privatization and a further restructuring in the
Saudi capital market will boost the stock exchange capitalization. Banking sources
expect a buoyant IPO market as more family businesses go public and new
companies enter the Saudi market.
The Saudi Arabian Monetary Agency (SAMA), the Saudi central bank, regulates the
Saudi banking sector. Offshore banking and trust operations do not exist in Saudi
Arabia, and there is no legislation to permit the establishment of these operations.
On October 11, 2005, the Council of Ministers instructed the CMA, the Capital Market
Authority and SAMA to establish a secondary market for Government bonds. Banking
sources expect that a secondary market will be also created for bank and corporate
bonds.
5/13/2008