Mohammed bin Abdullah Al-Jadaan, Minister of Finance, opened here yesterday the two-day Euromoney Saudi Arabia Conference 2019 as well as the accompanying exhibition, organized by Euromoney International Foundation, in partnership with the Ministry of Finance. The event, which takes place at Four Seasons Hotel, was attended by a number of ministers, heads of financial sectors, officials, and specialists in the financial and economic sectors at the local and international arenas.
In a keynote speech, Al-Jadaan said the conference took place after three years of positive progress resulting from the comprehensive reforms witnessed by the Kingdom of Saudi Arabia’s endeavor to accomplish the targets of Kingdom vision 2030. The conference also confirms the commitment of the government to achieve the goals of the vision which will conduce to a comprehensive economic transformation and a great leap in the structure and performance of the Kingdom's economy as well as in the private sector's contribution and the acceleration of using technology in a great deal of fields and increasing the level of services provided by the financial sector, explaining that the financial policies of the Kingdom focus on achieving equilibrium between financial stability consistency and enhancing the economic growth and providing support for economic and social transformation which the Kingdom is currently witnessing as per the Kingdom vision 2030.
Al-Jadaan added that the 2019 budget as well as its preceding 2018 budget have included a number of new initiatives supportive to the economic activity and stimulating and developing the private sector as well as the social support for citizens and progress in other giant and investment projects in a way that supports the overall demand in economy in addition to an increase in the spending on basic services including housing, transport, health, education and other social protection programs, noting that government spending in support of economic and social development had increased during last year. “The total expenditure growth, in both the operational and capital sectors, reached nearly 16.1% in 2018, while the increase in the first half of this year (2019) reached about 6.3%. At the same time, non-oil revenues increased during 2018 by approximately 15.2%. The increase continued during the first half of the year by 14.4% as a result of the economic activity improvement and continued implementation of reforms and initiatives aimed at developing revenues and diversifying their sources.”
The minister of finance said that “The budget deficit during the first half of the year amounted to SR 5.7 billion compared to a deficit amounting to SR 41.7 billion in the same period in the previous year, noting that the government is proceeding with controlling the performance of the general finance in a way that preserves the financial persistence and upgrading the general financial administration quality, especially what is related to the increasing of expenditure skillfulness, including the application of the new government competitiveness and procurement system and enhancement of the principles of financial disclosure and transparency in addition to the inclusion to the standard of special database at the International Monetary Fund.
The minister confirmed the improvement in the indexes of economic performance and participation of the private sector, citing the GDP growth rates in Q1 2019, which reached 1.7%, compared to 1.4% in Q1 2018. Direct foreign investment inflows have also increased at a rate of 23.8 % in the first quarter of last year, in addition to an increase of the investment opportunities available for the private sector whereas the total credit facilities provided for small and medium enterprises by banks and finance companies in the first half of 2019 amounted to SR113 billion, an increase of 11.6 % compared to the same period last year in addition to the improvement of banking performance to bring to SR2.4 trillion the total assets and liabilities of commercial banks during Q2 2019, an increase of 3% equivalent to SR 69.1 billion, compared to an increase of 0.04% in the corresponding quarter of the previous year.
He welcomed the inclusion of the Saudi market in the world's main indexes: FTSE Russel, S&P Dow Jones, and MSCI EM which contributed to attracting foreign financial inflows amounting to SR76 billions, thus expanding the investors base in the financial market and improving the levels of liquidity in it. As many as 18 new licenses have been issued for international financial companies operating in the Kingdom, lauding the great progress achieved at the minority protection index to the seventh world rank according to IMD classification for international competitiveness over last year, advancing 13 ranks compared to last year to occupy the 26th rank.
On the other hand, the demand for investment in domestic and international debt issues increased by more than three times during the first half of the year. The first issuance in Euro was more than four times subscribed. The nominal value of government Sukuk was reduced to SR1,000 in order to diversify the investor segment and enhance trading and individual savings.” In this year, governmental Sukuk have been issued covering a pace of 30 years for the first time. The general debt management office at the ministry of finance has gained a number of prizes, including the best source for debt tools in promising markets prize, and the best source of sovereign debt tools in the Middle East for 2019 prize, reflecting the international appreciation for Saudi financial transparency that administers the State's budget indicating the growth of the great confidence the Saudi economy is enjoying in compliance with the developmental and strategic projects.
“Our financial sector is committed to introducing further reforms in order to expand financial services and implement legislation and measures to combat money laundering and terrorist financing. Our progress in these areas recently led to the Kingdom's inclusion in the Financial Action Task Force (FATF), taking place alongside 37 other countries and it was the first Arab country to achieve membership”, he said.
Al-Jadaan confirmed that boosting the financial sector requires a quick matching with the FinTech. He highlighted the transformation of financial institutions in the Kingdom including how emerging technologies are driving the explosion of FinTech fueled by digitally-savvy millennials. It also explored the use of FinTech to enhance database infrastructure and develop customer-centric business models as an important means of enhancing e-commerce-related areas. This include measures of real estate mortgage, experimental environment for financial technology at the Saudi Arabian monetary agency and the Saudi capital market. In this context, seven specialized companies in FinTech have gained license to work in the digital payments sector.
Speaking at the conference the Chairman of the Capital Market Authority (CMA), Mohammed El-Kuwait said the CMA was continuing to make huge advancements and highlighted the importance of new capital markets laws recently approved by the Council of Ministers: “These new laws will have two priorities, firstly to protect investors through improved mechanisms for compensation, strengthening the independence of judicial committees, increasing the scope of reporting, rewarding those who report violations and strengthening penalties to deter violators, and secondly to enhance the capital market by modifying financial organization through the introduction of a depository center and the creation of new categories including the establishment of a ‘clearing house’ to create a new derivatives market.”
He also outlined how judicial procedures in the capital market have been strengthened: “Prosecution processing time to deal with financial disputes has been reduced from 24 to 10 months, with the aim of a further reduction to 6 months. Many other reforms have also been completed including the automation of the judicial processes with everything to do with a claim now dealt with electronically and we are also moving towards the introduction of group claims which will also help to speed up the process.”
El-Kuwait added that there will continue to be a range of positive indicators contributing to the growth of the capital market: “There has been an increase of 49% of investors in closed-end funds, an increase in the index by 6% compared to 2018 and foreign cash flows in the capital market have reached SAR 76 billion.”
Finally, he told the audience that he was proud of the Kingdom's accession to the international indices which he forecasts would contribute to a continued diversifying investor base, which would in turn enhance the stability of the capital market in addition to strengthening the principle of disclosure and injecting liquidity.