LEBANON - Finance
Vice Chairman, Capital Markets Authority (CMA)
Prior to his appointment at the CMA, Firas Safieddine served as the Senior Advisor to the Minister of Economy and Trade and later the Minister of Finance for five years. Along with being the managing director and head of the Investment Committee of a multi-million regional family office, he also served on the Board of Directors of several investment companies in Lebanon, Saudi Arabia, Singapore, the UAE, and the UK. He was appointed an executive board member at the CMA in 2012.
With a prolonged bottleneck in the formation of a government, 2018 presented many economic and political challenges for doing business in Lebanon. In order to minimize the effects of the political deadlock on the market, the Central Bank had to increase interest rates for both Lebanese pounds and USD as a measure to limit capital flight from Lebanon. This turned out to be a major challenge affecting the development of capital markets. Moreover, the lowering of credit rating by Moody’s in 2H2018 also posed a challenge, which was reflected in the price of bonds and the overall performance of the market. However, we are optimistic, especially since the newly formed government has committed to prioritizing the economic situation by focusing on reducing debt refinancing and executing hard reforms. Today, as a direct result of the CEDRE Conference, Lebanon will see an investment of USD17 billion—USD11 billion given through soft loans and grants and USD6 billion through PPPs—into a proper capital investment program (CIP), with around 250 infrastructure projects in the pipeline, so the outlook is positive. Capital markets can play a major role in financing project development within the CIP, which falls in very well with the market development plans we are leading.
CMA is fairly new, though in its six years of existence it has managed to prepare a comprehensive regulatory framework for Lebanon’s capital markets based on best business practices and international standards. CMA is an associate member of IOSCO, which provides international markets assurance that we abide by international standards. CMA’s mandate is to regulate, supervise, and develop the capital markets. All three pillars were created on the notion of investor protection. We do this with the ultimate goal of protecting investors and safeguarding people from systemic risk. We create regulatory requirements for financial institutions and supervise them. We are a compliance-based market, though we seek to shift to a risk-based one. We make sure funds and other financial products offered today have passed through the CMA revision process and are subject to the required approval. Such measures are paramount to boosting investor confidence and therefore attracting both local and foreign liquidity to our capital markets.
The greatest challenge for Lebanon’s capital markets is the low level of capitalization of the Beirut Stock Exchange, which is around 20% of GDP. We would like to see the number of listed companies double by 2025 and reach a capitalization of around 50% of GDP. As it stands, the government-owned stock exchange will not be able to reach that target. The law that established CMA stipulated that the Beirut Stock Exchange be privatized within a year. As technical issues have delayed the this process, CMA will be moving forward with licensing an ETP, in essence complementing the role of the BSE by providing the ability to trade securities that are not offered by the current exchange such as commodities, forex, derivatives, corporate and government bonds, start-ups, and SME listings. In December 2018, we put out the bid documents for the ETP, and nine companies collected the bids. We hope to have offers by the end of May 2019 and award the license to an operator within two months.
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