By Bashir Yusuf Kahlout
Last week, I noted that the strong performance of Qatar Exchange witnessed during the second half of this year may not continue with the same force in 2014 as the factors caused these achievements were temporary, or with temporary stimulating nature in most cases. For a sustainable growth, the QE requires a review of different factors, including the terms and conditions led to lack of issuing licences for new companies within the past four years, and not introducing new products other than shares and permissions that traded exclusively on the banks only.
Fortunately, this article coincides with the announcement made by Qatar Central Bank for the strategy of the watchdog of the development of the financial sector, with the operational plan for the period of 2014-2016. The strategy emphasised that a strong financial sector contributes to job creation, encourage investment in the economic environment characterised by variety and competition and achievement of these require to achieve six goals, including strengthening of monitoring system through by developing a framework for overall precaution based on risks, expansion of the overall prudential supervision and to promote oversight cooperation.
This means that the above-mentioned strategy seeks to unify the principles and criteria of control over the various actors in the financial sector, while retaining the supervision and control of all three bodies over their members. This may lead to the fact that the current situation of the Qatar financial market may remain as it is for the near future, without substantial changes on the factors I mentioned in the previous article.
The question that could rise in this context about the reason behind the structural rigidities of the financial market, as the Arabic daily of Al Sharq published last week entitled: “The lack of companies inclusion: as the premier event of the QE in 2013.” Since the licensing process, however, is under Qatar Financial Market Authority, the question on the delay of listing new companies could be directed to it, to provide the public with clear answers about its plans in this area.
I asked this question to some officials in the investment institutions to get their opinion regarding this issue and the reason for not activating the law of investment units, as long as the Qatar Securities Company had approved the law and published it on its website. At the beginning, I thought that these authorities are not willing or not interested in this issue, but surprisingly I just found the opposite. Many entities had applied to get a licence from the authority, but they did not get the required approval despite waiting for a long time to get a response.
The problem with the law on establishing investment units and their inclusion is that the law gives the right to the authority to reject applications submitted for licence without explaining the reasons for rejecting. Such a provision in the law makes applications hanging for long periods, and it causes frustration among investors, as the terms or their proposals do not get amended or developed to commensurate with the requirements of the authority.
It can be concluded that the real problem that facing the development of Qatari financial market is authorising Qatar Financial Markets Authority with combined powers of licensing, and the power of supervision and inspection over the work of companies listed at Qatar Exchange. This makes the inspector usually suspicious over the performances of the bodies who are under his monitoring, and this in turn discourage him or weakens his ability to issue licences for new companies. Monitoring and inspecting make the authority prefer to make applications subject to further study and scrutiny and this lead to take a longer time. Whenever research and study period has been prolonged, there are new factors emerging with the time and this may lead to further delays.
It may be an appropriate solution to consider the separation of powers of issuing licences for all financial institutions, including banks, insurances and investments, financing and brokerage, by make it under one independent body, which is run by board of directors of the three authorities. This may accelerate the licensing processes for financial institutions in order to achieve the ultimate goal of the strategy referred to above, which include creating jobs and encouraging investment. In line with the directives of H H the Emir; in his speech at the opening of Advisory Council sessions, when ordered for activating the role of the private sector and reduce barriers that hindering the private sector from playing his role and contribute effectively to the development of Qatar.