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Arab Capital Markets Come of Age
Today’s Arab Middle East faces challenges like no other time in its recent history. The list includes issues pertaining to natural resource management, democratic practices, economic development (poverty, employment, and equal opportunity), and religious and cultural reformation. How such challenges are defined and managed will determine the future of this region for decades to come. How the Middle East’s challenges are managed will also impact its geographic neighbors and economic and political partners and allies. The choices are stark - political development and economic prosperity versus terrorism, migrations, and wars. The financial system of the Middle East is a critical part of the local economies. This financial system can be viewed as two parts: commercial banks, which take deposits and make loans, and are regulated by central banks; and, capital markets composed of issuers of securities, investors in said securities, and intermediaries. In more ways than one, capital market institutions and stakeholders in the Middle East are at the heart of addressing the region’s economic and political challenges. Well-functioning capital markets can play three important roles: 1. facilitate access to finance and growth capital for companies (including SMEs, which account for most of employment and GDP growth in the region); 2. provide mechanisms that enable citizens to store wealth; and, 3. create viable markets so that financial assets and securities can be bought and sold. Capital markets can also play an important role in enabling the average citizen to have a vested interest and stake in the economic development of their country, thus contributing to the peaceful political development of the region. The Middle East’s capital markets are by no means homogenous but that should not restrict an interested observer’s ability to view them synergistically through a common regional prism. From a capital markets perspective, the region is practically four sub-regions with varying degrees of development – the Gulf Cooperation Council countries, the Levant, and the Maghreb. Egypt is a sub-region in its own right. The region’s capital markets share common challenges and aspirations, and some of these include: • How to catalyze and maintain liquidity on the region’s exchanges? How to amalgamate and stitch together otherwise discreet liquidity pools across borders – both geographic and product-specific boundaries? • How to increase IPOs (family companies, state enterprises, SMEs) with sufficient free floats and market capitalizations to attract international investment funds? • How to rise up to international best practices when it comes to disclosure and corporate governance, particularly as these relate to related party transactions? • How to arrive at viable benchmark yield curves and catalyze the growth of secondary markets for corporate bonds? • How to spur the development of the insurance sector to facilitate the issuance of long dated securities? • How to convert stock markets into public shareholding companies and list their shares on their own, and other, platforms? How to arrive at regional and quasi regional stock markets? The vested interests in catalyzing further development and growth of the region’s capital markets transcend stakeholders within the region – • how can the Middle East’s capital markets become an engine of economic growth, utilizing financial resources from within the region and from outside, facilitating domestic investment, FDI, and international portfolio investment? • how can the region’s capital markets contribute to financing the development of needed infrastructure to support critical sectors – water, power (including green energy), education, transportation, and health? • how can the region’s capital markets contribute to employment generation at home, addressing migration pressures on host countries? • how can the region’s capital markets solidify their role in combating money laundering and terrorism finance? Over the past few years, the Middle East capital markets have undergone impressive developments. We have seen upgrades from frontiers to emerging markets, corporatization of stock markets, more inclusions of listed firms in international indices, a visible increase in IPOs and a trend towards listings on international exchanges, wider use of ETFs, and upgrades of legal and regulatory frameworks to international best practices. Local governments, bilateral and multilateral development organizations, and international financial institutions have all contributed to this, as well as the efforts of listed firms, shareholders, investors and intermediaries, and regulators. In addition to building on these successes, the next phase of this coming of age will also rely on the timely, reliable, and relevant delivery of data and information about the region’s capital markets, available to all stakeholders, local and international.
Jul 26, 2022 · 4 min read
The Power of Ideas
In the mid 1980s, Bill Moyers, the former White House Press Secretary, conducted half hour interviews with thinkers and specialists of various disciplines. The series was entitled A World of Ideas and ran on PBS. Interviewees shared thoughts and perceptions specific to their specialities in ways that made it easy for the average person to relate to complicated fields of knowledge, and in manners that illustrated how powerful ideas have cross cutting applications. Powerful ideas are not only relevant to specific fields of knowledge. Because of their compelling philosophical underpinnings and deeply embedded logic, powerful ideas transcend sectoral boundaries and are of use in multiple settings and contexts. Over the years, I have come to think not only of ideas but also of the utility of ideas. How a powerful idea that I have come to know can help me better understand the world, myself and those around me. And how this improved understanding can make my existence in this life more effective, to me and to others. Some ideas and concepts I learned of more than 30 years ago are still strongly with me. Maslow's concept of self actualization and Naisbitt's high tech/high touch formula are amongst these. I do not know who first said that one’s freedom ends where the freedom of another starts, but I first heard this phrase in high school in the 1970s in Jordan, in an Arabic literature class. The idea of how different individuals and cultures manage boundaries and relate to the space around them (all kinds of space - physical, political, economic, intellectual, cultural, etc.) is a powerful one. I leaned on this idea in a previous posting on this scribe entitled Why Immigration, As We Have Come To Know It, No Longer Works. Perhaps the most powerful idea I have learned of so far is the way Joseph Campbell viewed religions. Campbell was one of Moyers’ interviewees and that series was entitled The Power of Myth . Campbell’s rendition of religions sharing common powerful ideas led him to the conclusion that there is basically one religion explained to different peoples using different metaphors and parables. I think it was Czesław Miłosz who said that a powerful idea is stronger than all the machinations of the state. It is also stronger than all the machinations of the self. We do not always welcome the encounter of powerful ideas, especially when they challenge our assumptions about reality. But if reality is constantly changing, aren’t we supposed to utilize powerful ideas to adjust our assumptions about reality, so we do not crash into a wall?
Jul 19, 2022 · 3 min read
When the first shadows of the evening caught up with him, Khursheed was sprawled on the floor of his mud-and-stone hut trying to write a love poem. Getting one’s hands on ink and paper in 10th century Persia was no easy task but, being a saqi, Khursheed made sure to offer the first morning's helpings of fresh water from the large clay pot he hauled daily on his back to the imam of the neighborhood mosque. That helped. It did not hurt his pockets either to chase men on their way home after a night at the pub. Shiraz was known for its good, strong wines and a sip of cool, fresh water after a night of drinking was handsomely rewarded. But for this, he had to hurry to the spring he frequented to fill his zeer before it got dark. Early on, when Khursheed took over the trade from his father, he chose the furthest watering hole from their village to service his clients from. His father berated him saying that by the time Khursheed got around to bringing his haul into town, all the other saqis would have sold their water and no one would be thirsty anymore. But Khursheed knew better. He had discovered that water spring many years ago while still a young boy. He was at that age when young boys long to discover the world and throw down markers for future reference. And that discovery served him well. It was a summer day and he had strayed away from his friends, walking aimlessly. Khursheed was getting tired and looked around for a place to rest when he noticed a deer treading carefully towards a clearing between mounds of sand and stone. He followed it, quietly, and saw the watering hole. Khursheed waited until the animal had its fill and then approached, shooing it away. It was hot and he was thirsty but that water tasted like no other. Khursheed was not smart but he knew people would pay money to drink it. And he became the town’s best saqi. But now it was beginning to get dark and he had to hurry. He did not want a repeat incident with Ghafla. The ghoulah typically frequented the spring after sunset to have her last drink before going to sleep till dawn. Once, Khursheed was late and she caught him filling his zeer. She lurched at him and with one swoop he was in her mouth struggling to free himself from between her massive teeth. After what seemed to Khursheed like an eternity, she spat him out and he flew for two and a half hours before he fell into a green lush. Khursheed thought that the ghoulah must have felt sorry for him and did not eat him, what with his bad leg and one good eye. He knew that monsters have a certain empathy for human frailty; after all, they were not always monsters. But still, better not test his luck twice with Ghaflah. Khursheed’s hand began to tremble as he started writing his poem to Najla, his beloved: Gentle breath of dawn, smiling eye of sunrise, whose heart will it be today when a whiff of your jasmine hair dances along your footsteps in our narrow streets? How many stars follow you home every night and how many moons beg your pardon every time their light touches your cheek? Khursheed folded the paper carefully and shoved it in his sharwal. He will show it to the imam first thing in the morning when he hands him his cup of fresh water and solicit his input and advice on future action with Najla. Hopefully, it will not earn him a smack on the head like last time. ----- Saqi -an Arabic word denoting the old profession of someone who hauls water on his back in a large clay pot and sells it to passersby by the cupful. Zeer -an Arabic word describing a large clay pot used to store and cool water. Ghaflah -an Arabic word for negligence and heedlessness, also means short nap, used here as a name for a female ghoul. Ghoul -a mythological monster or demon that dwells in burial grounds and other uninhabited places (ghoulah is the female noun). Najla -an old Arabic name for a female with wide, beautiful eyes. Sharwal -loose fitting and baggy cloth trousers.
Jul 12, 2022 · 4 min read
The Muslim Feast of Sacrifice
Next week marks the days of the muslim Eid al-Adha, the feast of sacrifice, and many will be sacrificing livestock, mainly sheep, as alms to feed the poor. During Muhammad's times, 1500 years ago, one's wealth was measured by few yardsticks, one of which was how much livestock one owned. Back then in the Arabian Peninsula, livestock (camels, horses, sheep, cows, etc.) were a key element of one's wealth and it made sense to measure giving to the poor in terms of how many sheep or camels one donated to feed them. In this day and age, especially in our new COVID 19 world order, and the other diseases that are expected to afflict us with varying degrees of intensity, the less well off and the poor have different needs. It could be paying rent for a humble abode, buying medicine or clothes, paying a utility bill to keep warm and keep the lights on, meet a loan obligation or school tuition, or other essential needs - it is not always food, and if it is food it is certainly not always meat. We need to re-define what makes for an appropriate almsgiving during Eid al-Adha in our day and age. Perhaps it makes sense instead of sacrificing a sheep to donate the price of that sheep into a national fund that would, in turn, give financial support to the poor and the needy as their needs may be. Happy Eid...
Jul 5, 2022 · 2 min read
My Friend The Tailor
In a game of five-card draw poker, a player is dealt a hand of five cards and he can only change two of the five; the other three cards, well, the player is stuck with for the rest of the game. I said this to my friend the tailor, trying to make an argument for altering one's clothes when they don't fit. He raised his eyes from the cloth he was measuring, gave me a stare with pressed lips and said nothing. My friend the tailor knows when to hold them. Words, that is. I was standing in front of my friend's long, narrow mirror trying to fit into a jacket that was tight in the shoulders area and long on sleeves. I wrestled with it for a few moments, taking constant looks at the reflection of an image I was certain was of my own making. Why did you buy this one, my friend the tailor asked. I am sure there was another jacket in the same shop that would have fit you much better, may be even perfectly. It was probably hanging on the same rack. You just did not see it. I frowned and puffed my cheeks. I thought of going back to the shop to try and return the jacket or exchange it for another. But the sale was probably over by now. And the other jacket, which I did not see, was probably taken by another customer and is probably making him a bad fit at this very moment. And it was snowing outside. The words of my friend the tailor kept ringing in my ears as I walked out of his shop in the freezing cold: whatever you wear, make sure it makes you happy!
Jun 28, 2022 · 2 min read