Page 95 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Here to Stay: GCC Market Attractiveness and Risks 79

been engaged to rehabilitate and operate airports and seaports. An
astonishing 100 private firms were established to handle postal
services. Studies are under way regarding privatization of some
roads and railways. And the strategically crucial health care sector,
in which rapid change and expansion are expected, has been priva-
tized to some extent through management contracts with private
firms. Management contracts are also being explored in the educa-
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tion sector. As the private sector is, by nature, more open to global
firms than is the public sector, expanding the private sector means
growing the set of opportunities for multinational firms. The com-
panies that win mandates to run formerly state-owned enterprises
will seek to learn from the best practices of global firms: hospital
operators, for example, will actively pursue the latest technology,
methods, expertise, and personnel. Multinational firms that
identify this trend can develop relationships with such clients and
play a pivotal role in enhancing both their own business and the
performance of the privatized companies. Privatization may also be
seen as a crucial first step toward greater openness in the economy:
a time may come, for example, when management contracts for
some formerly public assets are awarded to international firms.
Already being on the ground and having local relationships will be
important for winning this type of business.

Other Forms of Regulatory Reform

Deregulation in the GCC economies has by no means been limited
to international trade and privatization. Changes in regulation are
taking place in a wide range of areas, as governments are recogniz-
ing the benefits of liberalization in stimulating the economy. One
area of extensive deregulation has been capital markets, in which
guidelines are evolving rapidly. Since 1999, non-Saudis have been
able to invest in the Saudi stock market through Saudi mutual
funds. In 2006, a further relaxation of ownership rules allowed non-
national residents of Saudi Arabia to directly own individual
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stocks. In the UAE, deregulation seeks to create more flexibility
while enhancing shareholder protection. When the IPO boom was
getting out of hand in recent years authorities introduced a law
requiring companies to have a three-year track record before list-
ing—thereby protecting individual investors from fly-by-night