BOND MARKETS AND SME DEVELOPMENT ON CMA AGENDA

C O N F I D E N T I A L MUSCAT 001371

SIPDIS

SIPDIS

STATE FOR NEA/ARP, NEA/PI, EB/IFD/OMA
ABU DHABI FOR MGRIFFERTY AND MHOPKINS

E.O. 12958: DECL: 09/16/2016
TAGS: ECON EFIN EINV PREL KMPI MU
SUBJECT: BOND MARKETS AND SME DEVELOPMENT ON CMA AGENDA

Classified By: Ambassador Gary A. Grappo, reasons 1.5 b and d


1. (U) This is an action message. Please see paragraph 7.


2. (C) On September 11, the Ambassador discussed the recent
rise in Oman's securities market with Capital Market
Authority (CMA) Executive President Yahya al-Jabri. Al-Jabri
commented that the 140-firm Muscat Securities Market (MSM)
had so far performed well in 2006, in contrast to the weaker
performance of other GCC markets. Noting that Oman
experienced a similar slide in 1997, al-Jabri highlighted
that government actions in separating the market's
regulatory, trading, and depository functions had buttressed
the market's 6% rise this year. He believed that excess
Saudi liquidity had resulted in the "sacrifice of the quality
of assets," and remarked that the Saudis' minimal presence in
the MSM also insulated it from the declines experienced by
other GCC markets.


3. (C) On efforts to create a bond market, al-Jabri pointed
out that the concept ran counter to the GCC's culture of
investing only in the equities market. Nevertheless,
al-Jabri mentioned that the CMA's relationship with the U.S.
Treasury regional office in Abu Dhabi was important to its
bond market development efforts, as was the support the CMA
has received from the World Bank. Al-Jabri further commented
that Oman would participate in a bond market development
study, but that the CMA still needed to convince the Ministry
of Finance that creation of such a market would be a positive
development.


4. (C) The Ambassador inquired about the formation of a
unified GCC exchange, to which al-Jabri replied, "We are
dreaming sometimes. Sometimes dreams become realities." He
continued that the GCC was not actively working toward a
common exchange, preferring to concentrate its efforts on
developing a single currency. In the interim, al-Jabri
explained that the CMA had signed an agreement with its UAE
counterparts to link the markets in Muscat, Abu Dhabi, and
Dubai, where brokerage firms in any of the three markets
could place an order with firms in the other two.


5. (U) Al-Jabri predicted that the upcoming U.S.-Oman Free
Trade Agreement would provide across-the-board benefits to
foreign investors, private sector interests, and labor, among
other beneficiaries. He also signaled the CMA's interest in
participating in a proposed FTA promotional tour of the
United States, as well as its interest in co-sponsoring, in
conjunction with the USG and the Oman Development Bank,
technical assistance efforts to develop small and
medium-sized enterprises (SMEs).

6 (C) Comment. Al-Jabri's interest in promoting
transparency, supporting additional investment vehicles, and
developing programs to assist small businesses shone through
during the meeting. Under his leadership, the CMA has issued
a series of disclosure regulations that require companies to
disclose their investment portfolios and publish financial
results in the press. The CMA is currently in the process of
adopting additional disclosure requirements, including
regulations governing dealings on an insider basis.
Al-Jabri, who is chairman of a microfinacing bank in
Pakistan, is also keenly interested in promoting programs
that assist Omanis in starting their own businesses. End
Comment.


7. (U) Action request. In light of al-Jabri's interest in
promoting the development of SMEs, Embassy would appreciate
the identification of relevant MEPI-funded technical
assistance programs.
GRAPPO