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PSMEC - Private Sector - S2 Michael Grifferty

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The Private Sector Middle East Conference, Riyadh, Saudi Arabia, Dec 3rd, 2013. Hosted by the Saudi Chambers of Commerce -- Session 2 - President of the Gulf Bond and Sukuk Association

The Private Sector Middle East Conference, Riyadh, Saudi Arabia, Dec 3rd, 2013. Hosted by the Saudi Chambers of Commerce -- Session 2 - President of the Gulf Bond and Sukuk Association

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  • 1. Bond Markets and Private Sector Growth Riyadh, Saudi Arabia December 3, 2013 ‫جمعية الخليج للسندات والصكوك‬ The Gulf Bond and Sukuk Association
  • 2. A Fully Functioning Bond/Sukuk Market is a Prerequisite for Private Sector Growth in KSA and the Region • Benefits for the countries Bond markets require greater disclosure and higher levels of corporate governance Bond markets allocate resources better by favoring sustainable investment projects Attract interest from regional and international investors beyond the debt issues, leading to direct investments by foreign companies stimulating private sector growth
  • 3. A Fully Functioning Bond/Sukuk Market is a Prerequisite for Private Sector Growth • Benefits for Companies  Facilitates growth by lowering cost of capital  Permits longer tenors to match investments  Increase ROI without dilution  Reduces over reliance on funding by local banks, thereby protecting corporates and banks from concentration risks  Reduces systemic liquidity risk by reducing mismatch between long term assets and short term funding  For banks, the availability of highly rated and highly liquid bonds denominated in local currency aids in Basel III compliance
  • 4. A Fully Functioning Bond/Sukuk Market is a Prerequisite for Private Sector Growth • Benefits for Local Investors Provides a new asset class – an alternative to equities and real estate Bonds are lower risk than equities and are typically more liquid than real estate
  • 5. ‫جمعية الخليج للسندات والصكوك‬A The Gulf Bond and Sukuk Association GBSA is the regional trade association representing the Arabian Gulf Bond and Sukuk market.
  • 6. International and Regional Partners
  • 7. GBSA Committees and Working Groups Steering Committee Trading Regulatory Affairs Government Issuance Investor Relations Asset Management Islamic Finance Practice Group Basel Implementation Group Project Finance Group Green Sukuk Working Group National Working Groups
  • 8. The Gulf Bond and Sukuk Association Challenges specific to the Region • Hesitancy by oil producers to create local benchmarks • Direct government hand in major investments • Persistence of Relationship Banking • Capital markets focused on equities • Family businesses resistant to IPO debt or equity • Archaic companies laws work against leveraging • Low level of market integration but mostly… • Shallow institutional investor base
  • 9. The Gulf Bond and Sukuk Association But opportunities abound •Growing consensus around bonds and sukuk •Access to huge pools of liquidity •Massive investment and infrastructure requirements (Energy, transport, social, etc.) •Growing acceptance of private sector role - PPPs •Islamic finance creates new opportunities •Basel III implementation •“Professionalization” of family businesses
  • 10. The Gulf Bond and Sukuk Association Thank you