The process of opening the country’s market to foreign direct investment has positively affected the financial sector and the stock exchange.

Ziad Aba AL KHAIL Managing Director and CEO AL JAZIRA CAPITAL

in figures

Value of Saudi Arabia's stock marketUSD 580 million

Minimum investment for oil and gas industry projects

Open market boosts industry

January 20, 2016

Ziad Al Khail, CEO and managing director of Al Jazira Capital, talks to TOGY about the importance of technology in financial markets and the oil and gas industry, as well as the attractiveness of the petrochemicals sector to foreign investors. Al Jazira Capital is a Saudi closed joint-stock company operating under the regulatory supervision of the Capital Market Authority.

What has been the impact of opening the Saudi market to foreign direct investment?
The process of opening the country’s market to foreign direct investment has positively affected the financial sector and the stock exchange. Competition is not a concern, as it will only improve the quality of services in this sector. Opening the market will boost and increase business for all financial players. This is very beneficial, especially for the oil and gas industry with its large-scale projects, considering the minimum investment size for these projects is $5 billion.
The banking sector aside, opening up the country’s market will also improve infrastructure, tools and facilities for related industries. Additionally, this will provide liquidity and recourse for the hydrocarbons derivatives industry and its expanding projects.

 

How attractive is the Saudi market to foreign investors?
Doing business in petrochemicals in Saudi Arabia is much cheaper than in other GCC countries. The kingdom has the lowest prices for the oil and natural gas feedstock required for petrochemicals. Saudi Arabia is not only the biggest market in the region but also has some of the cheapest duty fees in the world.
The Capital Market Authority, a Saudi Arabian government agency, is a very strong regulator. It is on the companies’ side but monitors the market and is meticulous about making changes. Investors rely on this agency and its reports when making decisions. Saudi Arabia is generating strong interest and is very active with its $580-billion stock market.
The addition of US stock market index provider Morgan Stanley Capital International in mid-2017 will only improve the situation and will create even better background for brokers and investors. The company provides a world index and is accepted as the industry’s gauge of global stock market activities. This will multiply the number of financial activities, which are the main sources of income for traders and investors. The volume of trade will also improve the instruments and tools as it has over the past 10 years.

What is the outlook for Saudi Arabia’s petrochemicals industry?
In May 2015, most of the actors in the financial sector became more active in petrochemicals after the government announced its drive for diversification and concentration on promoting the industry. Petrochemicals producers are looking to expand with the help of foreign direct investment and introduce new products to the market. Many in the country are keen to produce and work in the value-added petrochemicals industry. The latest technological developments in integrating refinery-petrochemicals processes in the country give an advantage to Saudi petrochemicals producers over their competitors.
Key decision makers in the petrochemicals industry developed their expertise working for state-owned oil company Saudi Aramco. They are now taking advantage of it to set up their own companies. Combining their experience with foreign partners, they are able to make better decisions about enlarging the country’s petrochemicals sector.
Saudi Arabia has the world’s largest supply of feedstock, and there are no signs that oil and gas will be replaced by other sources of energy. Since the downturn in oil prices, solar companies in China have lost 50 percent of their value on the stock exchange and declared that they may no longer be viable entities. The oil and gas industry as well as the petrochemicals sector will be here for another half century. It will continue bringing returns to producers.

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