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Pressure builds up for change

Saudi Arabia's capital markets will require reform and liberalization if the kingdom is to build a dynamic economy on what is left of its oil wealth. The Saudi authorities are as aware of this as outside observers and their own bankers, but have been ultra-cautious about implementing change. Philip Moore reports on signs of a quickening pace.

Given that Middle Eastern capital markets are among the last to open up to international finance, it's unsurprising that analysts' research bulletins on the region often conjure up images of inertia. Consider the headings given to two reports published last year. Robert Fleming entitled a study on Egypt "The Sleeping Beauty". ING Barings chose "The Sleeping Giant" as the title for the section on Saudi Arabia in its Arab Stock Markets Review.

The authorities in Cairo could justifiably take offence. Egypt is wide awake when it comes to opening capital markets, privatizing with gusto and providing international investors with a steady stream of GDRs. Saudi Arabia, by contrast, is still snoozing. Although it has stepped up its encouragement of foreign direct investment, non-GCC (Gulf Cooperation Council) nationals are still excluded from its stock exchange, the region's biggest.

Saudi Arabia might argue that its economy does not need the drastic repairs introduced by president Hosni Mubarak's government over the last few years. The most basic macroeconomic indicators for 1996 do indeed make encouraging reading: GDP, boosted by higher than expected oil prices, is estimated to have risen last year by 8.6% in nominal terms, compared with 4.3%

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