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Middle EastMarch 3 2004

Springboard for growth

Hopes are high that laws passed, but not yet implemented, will reshape the financial sector and open up business opportunities for banks in the kingdom. By Stephen Timewell in Riyadh.
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In 2003, the Saudi economy produced an exceptional performance on the back of $85bn in oil revenues, the highest in 20 years. The year was also exceptional because a new capital markets law and insurance law were approved, which could not only radically reshape the entire financial sector in the kingdom but also have a significant impact on financial services in the region, particularly in Bahrain and Dubai.

Saudi Arabia, the largest economy in the Middle East by far with a GDP of $189bn in 2002, has for decades been a magnet that has attracted bankers and financial institutions from across the globe. Given its massive oil wealth, bankers flocked in droves to get a slice of the action from both the government and the burgeoning private sector. The conservative Saudi authorities tried to keep a lid on the financial explosion taking place and, unlike many countries, maintained a strict limit on the number of licensed banks and only allowed some foreign banks entry as affiliates of domestic banks. Limits were also placed on non-bank financial intermediaries thereby limiting official activities in the securities, investment and capital markets areas.

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