What are some of the latest developments taking place at the CMA?
It is essential as a regulatory authority to continually review existing rules and regulations. Our intention is to protect investors in the capital market and policyholders, with regards to the insurance sector. We are members of IOSCO and IAIAS, the global regulatory bodies for capital markets and insurance respectively, and operate in compliance with their principles and requirements. We work hard to make sure players in both markets comply with the rules, regulations, and international best practices that we have adopted. We have been working to amend the capital market law, in particular Article 60, to facilitate investigation of any wrongdoing in the capital markets. We have amended a law on the basis of a signed MoU with IOSCO, whereby all members of IOSCO are required to provide any and all information upon request. Since the law was passed in November of 2014, it has allowed us to work on the internal regulation of sukuk. We have also been working on the takaful law, now in its final stage, which will ensure it is compliant with necessary requirements. Once the law is passed, we will additionally work on further related regulation, and we have already licensed two companies to operate in this area. In regard to SMEs, we are working to find a platform for these companies to assist them not only in raising funds for operations, but also to give them supervisory assurance and other support, thereby increasing their credibility, and ease of doing business with potential clients and third parties. We hope to integrate SMEs into the Muscat Securities Market (MSM), not merely as special or separate exchanges, and to create more activity. We have also been working to enhance and develop our corporate governance code, even though we were the first country in the Middle East to introduce a corporate governance code in 2002. We are now in the process of issuing a new code, which will be offered to the public for review. Once we receive feedback, we will endeavor to incorporate it into the code and introduce a new corporate governance code before the end of the year.
Is there a mechanism in place to facilitate cooperation among GCC markets? What would better integrate regional markets?
There is a mechanism in place today. The Supreme Council of the GCC has resolved to integrate the GCC market. A committee has been formed consisting of the presidents and CEOs of the capital regulators in the GCC, and we meet quite regularly to discuss the issues. We have been trying to unify and bring rules and regulations closer to each other in order to ease integration and collaboration. It is challenging, but working nonetheless, and we are moving slowly but steadily toward integration. The idea is not to create one exchange, but to build linkages between multiple exchanges to render the market more attractive, liquid, and accessible to investors in the region and internationally. We also need unified or similar regulations. Second, when it comes to operations, it is important to have proper infrastructure for these exchanges to integrate. I would say the currency is still hindering this integration. If you want to settle a transaction in Saudi Arabia for example, funds first need to be transferred from Omani to Saudi riyals through a banking transaction in Oman. Also, we need a central clearing house in the GCC. This will take some time, but progress is being made.
Looking internally, what is the mechanism in place for utilizing capital markets in funding economic projects in Oman?
This is a vital issue, and indeed, one of the roles of the capital markets is to finance large economic projects. These kinds of projects are needed in Oman in order to grow and diversify the economy, to move away from a dependence on oil and gas, and to create jobs for Omanis. The main instrument to finance such projects is the capital market. We are not lacking financial liquidity, but we need people who can initiate projects. Funding from investors can be channeled through the capital market in order to finance these projects. This is the central role of the capital market, and is a key part of our strategy for the coming years—to focus intently on activating and enabling the capital market to play its natural role in the national economy.
What are your expectations for the CMA for the coming year?
My expectation for the capital markets and insurance sectors is for the markets to assume a fuller role in the economy. In terms of the total capitalization of the market we are talking about 30% of GDP. There is still considerable room for growth, although we will need to further activate the capital market in order to better serve the national economy. In the insurance sector, a major component is motor insurance, which is mandatory. We now need to encourage people to consider additional coverage for non-mandatory lines of insurance. Health insurance is a very promising sector, and currently growing at 35% per year. Life insurance, on the other hand, remains small and is growing relatively slowly. We need to make people more aware of the importance of life insurance and how savings work to their benefit. Having more people using and benefitting from insurance products will also add to the pool of insurance funds, and the capital will help finance a good portion of the economy. Overall, we are working to make sure the capital and insurance markets are credible, liquid, stable, and thus attractive.
© The Business Year - June 2015