The UAE is about to lose its dubious distinction of being the only GCC country without a formal stock exchange. After almost seven years of review, the federal government is putting the final touches on legislation to create a formal national stock market
The United Arab Emirates plans to launch a stock exchange within the next year, raising the number of equity markets operating in the Gulf to seven. The decision marks a policy shift for the Emirates, which had, as recently as three years ago, planned to favour development of an off-shore banking sector. The shift reflects the growing public support for formalised share trading, and the importance such a market could play in the UAE's claim to be the financial as well as transport hub of the Gulf.
The market, expected to be up and running by the first quarter of the year 2000, will take over from an unregulated informal market which has existed since the early 1970s. It will consist of 36 companies with a market capitalisation of around $27 billion larger than all other Gulf markets except that of Saudi Arabia.
The move to formalise the market represents a shift in government policy, which had until recently been favouring the development of off-shore banking. "The increase in the number of companies in the UAE, and the increase in the number of equities being unofficially traded has prompted the government to move first on a stock exchange," says Ahmed Al-Banna, assistant director general of the Dubai Chamber of Commerce and Industry. "It's a means of regulating the securities industry, preventing excessive speculation."
The Emirates Stock Exchange is expected to be an electronic 'floor-less' market. Government planners have concluded that the UAE has the high-tech infrastructure and a well-educated, young, indigenous population well versed in and attuned to the technology involved. Moreover, an electronic bourse could be operated from anywhere, obviating the need for physical trading floors in different parts of the country and the political tussles that would go with it.
Government officials studied electronic exchanges in India, Sri Lanka, Singapore, Turkey and elsewhere, paying particular attention to the Over-the-Counter Exchange of India (OTCEI), NASDAQ (USA) and Tradepoint (UK) as examples of institutions and systems to emulate. Officials concluded, too, that leading international accounting and consultancy firms in the UAE are well geared to give advice on systems, controls and...