Rastreo de los elementos del Dispositivo de Subjetivación “Relación Cuerpo-Escuela-Subjetividad ” “Relación Cuerpo-Escuela-Subjetividad”

The debt markets regulations in the GCC countries are currently at their developmental stages. It is important to highlight that the GCC regulatory authorities are putting more emphasis on properly regulating the debt market in the region. With the creation of the Capital Markets Authority (CMA) in 2004, Saudi Arabia demonstrated its intention to provide a modern and regulated capital market. For any sukuk issuance, a private placement notice must be sent to the CMA to inform it of the intention to release the financial instruments, although the regulator is not responsible for the accuracy of the document. The CMA stores issuer prospectuses on its website, and is responsible for authorizing any public offering. The CMA is also responsible for ensuring that any issuance abides by the companies law and listing rules, and has the right to remove or suspend the listing of sukuks, if necessary. Conversely, Saudi Arabia’s companies regulations 1965, restricts the issuance of bonds to joint stock companies with maximum size of the bonds issued by a company to not to exceed its paid-up capital. Also, the expected aggregate market value of the issue must be at least US$13.3 million for any debt instrument (Alsaeed, 2012).

Beside, the regulator in Saudi Arabia has increasingly shown itself to have control over the market. In the second quarter of 2010, Saudi Arabia established sukuks market on Tadawul (market for listing, order submission, trade execution, clearing and settlement, and prices information dissemination of sukuks) as part of its aim to regulate the debt market in the economy (Tadawul, 2011). These developments are improving the prospects of sukuks

becoming attractive investment alternative, especially for the local and cross-border investors. Besides, Saudi Arabia is working on launching its first mortgage and finance law expected to publish in 2012. However, the issuance of sukuk in Saudi Arabia is regulated by the offer of securities regulations, issued by Saudi CMA. The regulations do not provide any specific framework for the issuance of sukuk. Currently, sukuks are being issued under the broad definition of debt instruments in the regulations.

The UAE bond market is regulated by the Dubai Financial Services Authority (DFSA) under the supervision of the UAE Securities and Commodities Authority (SCA). In late 2008, the SCA issued a circular stipulating that any listed company (It excluded government institutions) must obtain credit rating from a reputed authority before issuing bonds. The UAE commercial companies law 1984 as amended restricts the issuance of bonds to a minimum paid-up capital of US$9.5 million for the domestic bond issuer, whereas the foreign bond issuer should have a minimum paid-up capital of US$10.0 million and must appoint a representative in the country to handle all matters related to the registration of the bonds, distribution of interest, submission of required reports to regulatory authorities and any other relevant matters (DFSA, 2011).

The CBB regulates the debt securities market in Bahrain. The issuance of government debt securities is executed in coordination with the Ministry of Finance. The domestic bond issuer must be regulated by the commercial companies’ law in Bahrain (21/2001). The issuer must obtain the approval of the CBB if the debt securities are either denominated in foreign currency or local currency, however, are being offered for subscription in international markets. Whereas, the foreign bond issuers should be issued in accordance with the laws of their countries of origin, and should have a minimum paid-up capital of at least US$10 million with appoint a representative office in Bahrain to handle all matters related to the registration of the bonds, distribution of interest, submission of required reports to regulatory authorities and any other relevant matters (BHB, 2011).

The other GCC countries are also persisting with the out dated regulatory frameworks for debt markets and they do not have exchanges debt market at all. In countries like Kuwait are regulated by the Ministry of Commerce and Industries. Thus, the governments and regulatory authorities of these countries need to take additional measures to accelerate the development of these markets (Al-Sultan, 1999).

Though capital market authorities in the GCC have issued their own corporate governance codes, the regulators need to give more emphasis on their implementation. It is important to note that sukuks trading is not strictly limited to the Islamic world, and that

external interest in the instruments has increased. The UK Finance Act 2007 removed certain tax barriers that limited the benefits of sukuk issuance (HM Treasury, 2008), and the 2009 Finance Bill provided further relief from capital gains and stamp duty for organisations that chose to issue sukuk. A brief summary of the debt market regulatory framework in the GCC is presented in Table 4.9.

Table 4.9: Summary of the debt market regulatory framework in the GCC region.

Saudi Arabia Bahrain UAE Kuwait Qatar Oman

Regulator Capital Market Authority (CMA) Central Bank of Bahrain (CBB) Securities and Commodities Authority (SCA); Dubai Financial Services Authority (DFSA) Ministry of Commerce and Industry Qatar Financial Markets Authority (QFMA) Oman Capital Markets Authority Regulatory Law or Reference Work Offer of Securities Regulations, Capital Market Law, 2003 Article 4 of the Central Bank of Bahrain and Financial Institutions Law 2006; Commercial Companies Law (No. 28/1975) The UAE Securities and Commodities Exchange Law, 2000 Capital Market Law 2010 QFMA Law, 2005 (amended in 2007)

Capital Market Law promulgated by Royal Decree No.80/98; Executive Regulations issued by Ministerial Decision No. 4/2001 Minimum Capital Requiremen t for a Bond Issuer The expected aggregate market value of all securities to be listed must be at least SR50 million (US$13.3 million) for debt instruments Paid-up capital of not less than US$10 million Minimum paid-up capital of Dh35.0 million (US$9.5 million) for domestic issuer, US$10 million for foreign issuer Not Available Not Available For listing in regular markets, paid-up capital shall not be less than RO2 million (US$5.2 million)

Source: Respective capital market regulators in Bahrain, Saudi Arabia and the UAE; Press release.

4.4 Conclusion

The economic indicators of GCC countries demonstrated that these countries have steadily shifted their economic activity from the public to the private sector. Their efforts diversified the economy away from dependence on oil revenue, promoted human development and enhanced the effectiveness of employment from an Islamic perspective. These achievements are in line with the spirit of sharia, as it achieves equity and justice in public policy and provides welfare. Moreover, the pegging of the local currency to the US

dollar by major GCC countries is an important factor in stabilising exports as well as government revenues. GCC governments require huge funds in their privatisation plans to facilitate their booming projects, which are handled by the private sector.

The attractiveness of debt instruments as a financing or investment option in GCC markets was a result of the high volatility in capital market returns, where the average annual return in the equity markets has been -5.9 per cent during 2006–2010. This volatility coupled with their associated risks has led to the growth of the GCC debt markets in the past eight years. These markets have a very low investors’ participation rate perhaps because the active investors in these countries are on average less than three per cent of the total adult population, in comparison to more than 20 per cent in developed countries. There are a relatively small number of listed companies on the GCC financial markets, and the GCC governments own a large number of the more attractive companies in the region. This contributes greatly to lower market liquidity because the governments tend to hold onto their shares for longer periods.

The above discussion demonstrates that Islamic funds are one of the main sources driving the debt markets in GCC countries. The five foremost sectors that have attracted the lion’s share of Islamic funds are real estate, governmental institutions, financial services, power & utility, and oil and gas (including manufacturing). Most sukuks issuances have maturities of three-to-five years, which reduces their competitiveness compared to bank funding and acts as a disincentive to institutional investors with long-term liabilities. After the financial crisis highlighted the limitations of these short-tenure bonds, GCC markets have needed to focus more on issuing bonds with long-term maturities. Sukuks originators in GCC region rated by one of the following rating agencies: Moody’s, Standard & Poor’s or Fitch.

As secondary bonds and sukuks trading platforms exist only in Bahrain, Saudi Arabia and the UAE, the secondary debt market in the GCC is still in its infancy. Consequently, the secondary debt market is characterised by lower trading activity and the lack of money market instruments and hedge tools.

In conclusion, the GCC debt market is characterised by a lack of breadth, depth and liquidity, a low investor base and the absence of a clear legal and regulatory framework. Other critical issues are the lack of a credit-rating culture and benchmarks, unsatisfactory market transparency, the dearth of long-term debt instruments and the absence of a derivatives market for managing interest rate and credit risk. To overcome these impediments, the GCC debt markets need to increase the participation rate of national investors by offering more diversified investment options such as bonds and sukuks instruments, increasing the level of

transparency, strengthening their regulatory structures and disclosure requirements, harmonising the regulatory and supervisory frameworks that govern these markets, minimising transaction costs, and reducing the implicit barriers to flow funds between GCC countries.

Chapter 5: Methodology