Sheikh Abdullah bin Al Salmi, Executive President, Capital Market Authority (CMA): Interview

Interview: Sheikh Abdullah bin Al Salmi

How is the CMA working to further involve capital markets in development project funding?

SHEIKH ABDULLAH BIN AL SALMI: Since the establishment of the CMA we have focused on ensuring that the regulatory framework is sound, transparent, effective and stable. We are now working to transform the sector into a meaningful engine for economic growth, as seen through the success of Oman’s capital market in recent years. Indeed, twice as much business funding is now done through the capital market as through the banking system.

The CMA’s goal now is to leverage the capital market to achieve greater economic growth. This will require both society and businesses to understand the core function of a capital market, which in turn will make it easier to integrate the sector into the country’s development plans. The capital market offers many ways to access funds for development projects, such as bonds, equity, placements and funds. The government already raised OR380m ($984m) in development bonds through the market in 2013. Capital market access and involvement can also help achieve economic diversity.

What role does the CMA play in encouraging and enforcing a culture of good corporate governance?

AL SALMI: Oman has long recognised its importance, which is why the CMA was the first regulatory authority in the region to introduce a corporate governance code and establish the Oman Centre for Corporate Governance. The importance of the field is further highlighted by board and management decisions that have led to company failure. Approaches to decision making, the development and implementation of systems and procedures, and the preservation and protection of shareholder rights are all at play here.

Corporate governance will continue to focus on disclosure, fraud prevention, and conflict of interest management between managers and shareholders. Far from being an end in itself, it is about safely achieving high performance and continued advancement while providing investors with the confidence to invest.

By what means should the CMA encourage more listings and include more sectors in the bourse?

AL SALMI: Capital markets should ideally be a clear and balanced representation of the economy. Although the majority of national revenue comes from hydrocarbons, the sector is not represented on the Muscat Securities Market (MSM). Institutions and individuals alike should be able to share in the growth and prosperity of all companies. For now this can be achieved via privatisations and by keeping initial public offerings affordable and accessible to the general public.

Our role as regulators is to promote and explain the benefits and requirements of listing to prospective issuers in order to foster an environment that benefits both listed companies and potential investors. Interestingly, over 25% of listed companies are owned by foreigners. As the highest level of foreign ownership in the region, this reflects the high degree of comfort that international investors have with our market’s structure, rules, operations and oversight.

How do recent changes to the insurance law influence the way insurance companies manage risk?

AL SALMI: The insurance sector is expanding quickly, up 16% in 2013 alone. Alongside this growth and potential we must ensure that the proper framework is in place to support and sustain the sector. Notable amendments to the law in question include raising minimum capital requirements for insurance companies and requiring new insurance entities to list on the MSM.

As the basic building block of the insurance industry, capital provides the basis for companies to fulfil their contractual obligations to customers. By raising capital requirements the law will encourage the market to develop stronger financial institutions that will have the capacity to retain more acceptable risk on their books, as opposed to simply transferring said risk to reinsurance companies. To this end, going forward we plan to introduce capital requirements that are closely correlated to the risks that are being covered by insurers.