With bumper oil revenues at home and sustained global economic growth, Saudi Arabia is continuing to seek out new investment options for its surplus revenues. Diversification was one of the main topics of debate at the Jeddah Economic Forum on 24-27 February, but Saudi firms are already managing to seek out new market opportunities, while foreign investment in the kingdom itself is becoming more diverse. One area of particular interest for Saudi and foreign firms alike is the banking sector.
The Saudi banking sector has long been heavily state regulated and foreign investment tightly controlled. Although foreign banks have obviously been keen to set up operations in the kingdom because of the vast oil revenues, they have been forced to set up joint ventures. Partly as a result, the number of new players in the sector has been strictly limited.
Yet there are signs that the situation is beginning to change. Not only is investment in Saudi Arabia increasing, but Saudi banks themselves are becoming increasingly active overseas.
In February, the biggest Islamic banking group in the Middle East, Al Rajhi Bank, announced massive expansion in Malaysia. Its Malaysian operations were launched in October 2006 and 12 branches have opened to date while the bank's chairman and chief executive Abdullah bin Sulaiman Al Rajhi, has revealed that man more branches will be opened over the next four years. In the longer term, it is hoped that Islamic banking services can be offered to citizens of other countries in Southeast Asia, although it is unlikely at present that actual branches will be opened outside Malaysia.
Al Rajhi commented: "We would like to achieve 50 branches [in Malaysia] by 2010. We look at Malaysia as a platform to do more business in this region but we are not going to open branches in other countries. We believe growth in the region is there and Malaysia is in a good position because it is a leader in Islamic banking." Apart from nine Malaysian Islamic banks, Al Rajhi is also competing against Asian Finance Bank and Kuwait Finance House in the Malaysian market.
Another Saudi bank, Samba Financial Group, is in the process of taking over Crescent Commercial Bank Limited of Pakistan (CresBank). The Pakistani bank is only 15 years old but already has share capital of Pakistani Rupees (PR)2.77bn ($45m).
In a statement at the end of 2006, a Samba spokesperson commented: "Samba will take control of 68% of CresBank through the issue of 600m new...