Unlike the past, where only a handful of local banks operated, today 12 foreign banks hold licences along with 79 investment companies authorised through the Capital Markets Authority, including global names such as Morgan Stanley Saudi Arabia and JP Morgan Saudi Arabia.
The world’s largest oil producer and economy in the region, conservative by nature, is slowly but surely opening up, shunning the suitcase bankers and establishing itself as a major financial centre as well as being a massive oil and wealth powerhouse. With Goldman Sachs establishing a joint venture with local giant National Commercial Bank and six economic cities, including the new King Abdullah Financial District in Riyadh, now well under way, the kingdom is quietly transforming its financial infrastructure.
The key to change in Saudi Arabia is maintaining stability and for veteran SAMA governor, Sheikh Hamad Al-Sayari, managing the process smoothly is critical. With GDP forecast to reach $375bn in 2007 and foreign exchange reserves well in excess of $250bn, the kingdom is a natural beneficiary of high oil prices but there are also major challenges in curbing inflation, and creating jobs in an economy where unemployment is estimated at 12%.
Balancing the opening up of the sector, the regional boom and key issues, such as regional currency union by 2010 and volatile international markets, requires careful judgement. Well aware of how overheating and mismanagement can damage fragile positions, Mr Al-Sayari has helped steer a conservative but expansionary course with the kingdom developing a much more sophisticated financial infrastructure than in the past.
