There’s plenty of simmering outrage in Riyadh financial circles over the dismissal of Capital Markets Authority chief Jammaz Al-Suhaimi, the highly regarded regulator who has striven to clean up the Saudi stock market. But the decision of the authorities to sacrifice him is hardly a surprise.
In emerging countries like Saudi Arabia, a battle always rages, sometimes unseen, between four forces seeking to control the markets: the public chasing easy money; the government pursuing complex goals, here including wealth distribution; the regulator trying to impose order; and the manipulators, the wealthy and politically well connected who treat the country and its markets as their own.
In Saudi Arabia, maybe two dozen families really know what drives the market and they dominate it.
The stock market crash in Saudi Arabia has unfolded against the backdrop of a fierce battle between the regulator and speculators, with the public feeling cheated and baying for blood. The authorities were always going to have to offer up some sacrifices to an aggrieved population. At one point, rumour even suggested that the job of the finance minister himself, Ibrahim Al-Assaf, might be at risk.
So was it to be the regulator, or the speculators? How about both? Of course, the authorities should have punished only the manipulators and backed the regulator. But this is politics. A couple of high-ranking manipulators have been penalized, more have been warned to submit to the new stock market rules. Now the authorities, by ladling some of the pain onto the CMA, have evened things out and so allowed the big fish to save face. The regulator has won a round, now the manipulators have won a round. Honour is satisfied. As a loyal soldier, Al-Suhaimi himself no doubt understands this.
The regulator’s sacking looks like a setback to the whole Saudi project of reform, privatization of key assets and the development of an efficient capital market. But maybe it’s not a setback. Maybe it’s the blood-letting that marks the end of the first stage in the struggle to develop a properly functioning market and that had to take place before the next stage could unfold.
The authorities have made a brutal, pragmatic choice. But their hands are now freed. They can move forward. In some ways, it is impressive, even remarkable, that Al-Suhaimi was allowed to stand up and lambast the insider traders and manipulators. His efforts to establish a properly regulated market will survive his departure from office. The public will remember his approach; approval for it might even now grow rather than diminish. A benchmark for acceptable market practice has been set, far higher than it was before the formation of the CMA in 2004.
