The Business Year

H.E. Abdullah Al Salmi

OMAN - Economy

H.E. Abdullah Al Salmi

Executive President, Capital Market Authority (CMA)

Bio

H.E. Abdullah Al Salmi, Executive President of Capital Market Authority (CMA), talks to TBY about the development of Oman’s business environment over the past two decades, and expectations for the coming year.

Could you give us a brief introduction of the history of the CMA in your own words?

The CMA was established in 1998, but it started functioning on January 9, 1999. In 2001, supervision over public listed companies was transferred from the MoCI to the CMA. And in 2004, insurance supervision was transferred to the CMA. Over the previous 23 years, the CMA witnessed great developments in terms of accession to IOSCO and IAIS, digitizing its operations and services, and becoming an attractive employer for young Omani talents.

Since its inception in 1998, what changes has it brought about in the business environment in Oman?

As a financial regulatory authority overseeing two of the most influential financial industries in Oman (capital market and insurance), it had a lot to offer to the economy and business environment, especially in the fields of market integrity, transactional transparency, and operational resilience. The CMA is continuously updating its regulatory frameworks in partnership with all stakeholders in order to keep abreast of development and match the global pace of financial sector developments as they serve Oman. Throughout the interesting and fruitful journey the CMA has undertaken in the past two decades, we introduced concepts such as CSR, applied key paradigms such as corporate governance and risk-based audit, and facilitated the establishment of key securities products such as REITs, and Crowd Funding. Perhaps the most significant of our achievements is the close cooperation and dialogue we have with the regulated entities as well as our commitment to conduct public consultation on almost all legislation and bylaws that the CMA issues. Digitization of our services and information has been a priority with the objectives of reaching out to consumers as well as market participants. Finally in this regard, we have managed to facilitate access of the public and investors to financial data both as raw material and as processed financial ratios for the inexperienced investors through a specialized platform employing XBRL.

What are some of the latest developments taking place in the CMA?

In the Capital Market sector we have recently issued the new Securities Law which will be more facilitative and will replace the current Capital Market Law. A new Executive Regulation for the Securities Law will be issued soon. With the underlying Securities Law, we are currently developing the virtual assets or digital assets industry in Oman including establishing the regulatory framework for security tokens, crypto assets, crypto exchanges and initial coin offerings, amongst others, in addition to the regulatory framework for virtual assets service providers which would include the licensing and market supervision of capital market professional licensed entities. We are also in the midst of establishing new regulatory frameworks for Sustainable Bonds & Sukuk which will promote the issuance of sustainable, green, blue, social bonds and Sukuk, including waqf Sukuk, new Bonds & Sukuk Regulation which will allow a faster filing and issuance process, Venture Capital & Private Equity Funds Regulation, Exchange-Traded Funds (ETF) Regulation to enhance liquidity on the MSX, new Collective Investment Schemes Regulation, Fintech Sandbox Regulatory Framework, Securities Borrowing & Lending (SBL) and public shareholding spread requirements to enhance liquidity on the MSX, and Special Purpose Acquisition Companies (SPAC) Regulation, for both conventional and Islamic instruments. The CMA is also a member of the Oman Government Steering Committee for the Local Currency Bond/Sukuk Market Development which includes the Central Bank of Oman and the Ministry of Finance. This committee aims to draw up a masterplan to enhance and develop further the local bonds and Sukuk market in Oman. At the end, the more products being offered in the capital market, the more attractive the market becomes for potential issuers and investors who prefer variety and more choices. With a broaden and deepen capital market due to the offering of a variety of investment instruments, this would attract more foreign investors into the Oman capital market, with the expectation of enhancing the liquidity of the overall capital market. In the Insurance Sector, the Dhamani platform (a compulsory health insurance project) is completed and has been launched softly. Negotiations are in progress for a new health insurance law that will provide the regulatory bases for its full launch and implementation. In a new development, we are expecting the jurisdiction and competence vis-à-vis regulating and supervising accounting and audit services in the country to be transferred from the MOCIIP to the CMA. This will be a major step forward for the national economy and business environment. Needless to say, the challenges and demands it brings are quite taxing, but certainly not unsurpassable.

What is your assessment of the current performance of Oman’s capital market and insurance sectors?

I would strongly encourage you and the readers to read our annual report for 2021 by clicking here. We take special interest and keenness in engaging the public and sharing with them all our activities and plans, especially as protection of market participants including policy holders is at the top of our priorities. Overall, and taking into consideration the post COVID-19 situation, I would say we are doing well, but could have done better if it was not for the moving sands of geopolitics and oil prices, which introduced an additional macroeconomic variable: imported inflation. It has impacted consumers choices as well as their disposal income for investment. Furthermore, we were expecting to have more issuances either in terms of government assets coming to market as well as sovereign and commercial bonds and sukuk. Leaving that aside, we have had a great 2021 and six months of 2022. The corporatization of MSM and creation of MSX has proven to be successful and of great interest to institutional investors and foreign trade partners. We have also experienced a heightened appreciation for the role of the capital market and insurance sectors in the fulfillment of Oman Vision 2040 from several state and non-sate actors. This has also resulted in intensifying our collaboration with the CBO and Ministry of Finance primarily, as well as other major stakeholders.

What steps are being taken to promote the financial markets in Oman and attract more institutional investors?

The CMA together with the MCD has collaborated with Euroclear Bank based in Belgium to establish a new Euroclear international central securities depository account in Oman which will be operated by MCD. This new Euroclear account will provide Omani issuers and investors easier access to the global financial markets and Europe’s biggest settlement house for securities, while providing global connectivity to the MSX and MCD through the Euroclear Bank system. In addition, we have been working closely with the MSX on being promoted to an emerging market. They have been conducting roadshows. We have been liaising with regional and players to bring into effect the requirements and conditions to make MSX an emerging market. That will attract foreign institutional investors to Oman. As I have mentioned earlier, the CMA is working on diversifying products in the market and enhancing MSX liquidity to guarantee easier and faster movement of capital to and from the market.

What mechanisms are being put in place to bolster SMEs and enabling them to tap the capital market for the funding requirements?

The crowdfunding platform initiative by the CMA is part of our continuous efforts in enhancing and developing Oman’s capital markets. It aims to provide an alternative financing platform for companies, especially SMEs, to raise funding directly from global and local investors without going through a financial institution intermediary, while enhancing financial inclusion by providing an easier financial access to all segments of society. In addition, it is in line with the e.Oman 2030 Digital Oman Strategy and Oman Vision 2040 as an enabler to develop and diversify the economy through digital transformation and innovation, and attracting foreign investors into Oman. The crowdfunding regulatory framework which we have established in Oman is the 1st in the GCC region to allow global cross-border fundraisings and investments where most countries do not provide. We had recently approved 2 crowdfunding platform operators, EthisX and Beehive. EthisX is the 1st Islamic global crowdfunding platform operator and will be offering both equity and peer-to-peer (P2P) financing crowdfunding platforms. Beehive will be offering P2P financing and collaborating with Ahli Bank SAOG through their Tamkeen crowdfunding platform. These approvals came after the CMA had recently issued the new Rules on Crowdfunding Platforms on 21 November 2021. With the new regulation, the CMA will be regulating all crowdfunding activities for companies in Oman, including donation-based, rewards-based, equity based and P2P financing. Since then, the CMA had attracted overwhelming interest from both international and local crowdfunding fintech players, as the new regulation had been made very facilitative. This represents another major milestone for the CMA in developing the capital market and fintech area for the financial industry in Oman, as crowdfunding platforms are driven by fintech. It is also another milestone in the development of Islamic finance in Oman with the approval for Ethis, since a key component of Shariah-based financing is enhancing financial inclusion to the society. The CMA is also expecting to have a few more crowdfunding platform operators, both conventional and Islamic, to be established and licensed in Oman soon.

During 2021, a new Real Estate Investment Trust (REIT) fund was successfully floated on the stock market. What has been the outcome of this decision?

Since the issuance of the new REIT Funds Regulation for both conventional and Islamic REITs, there has been 2 REITs listed on the MSX, with one being an Islamic REIT. This is part of the CMA’s initiatives in developing the capital market, particularly the fund management industry, and one of the priority projects under the government’s Tanfeedh initiative in diversifying the economy, looking at alternative financing for economic development and attracting foreign investments into Oman. The growth of the fund management industry, including the launching of more REITs, will create additional demand for more capital market instruments as investment avenues for the funds, and develop the real estate sector for economic activities. This will create more opportunity for issuers and companies to raise funds from the capital market due to the demand, while adding more depth and breadth to the capital market in Oman. It will also widen the investors base and hopefully enhance liquidity in the secondary market of the MSX. The growth of investment funds including REITs alongside bonds and Sukuk issuances, will see the channeling of funds and investments into infrastructure development and other economic activities, while diversifying the financing base and systemic risk away from the traditional banking sector.

The Capital Market Authority has taken a number of measures that contribute to improving the work environment in the insurance sector (e.g. Tamkeen initiative). How important is developing human capital and promoting local talent within the CMA?

It is essential to preface my answer by emphasizing that Tamkeen is an initiative that seeks to build local capacity and upskill Omanis working in the Insurance sector. This has been providing insurance companies working in Oman with a feed stock of skilled and talented local workforce. For the CMA, developing human capital and promoting local talent is crucial for growth and stability of the industry. Moreover, the insurance sector has proven to be an attractive working environment in two terms at least. Firstly, it has been providing quality jobs, which allow young and mature Omanis to engage in a core economic activity. Secondly, working in the insurance sector offers a great access to progressive sophistication of knowhow, both acquired and gleaned. The CMA has also been exploring replicating this leading initiative in the Capital Market sector. As far as developing human capital and promoting local talent within the CMA, we have a comprehensive training and human resource development programme, where employees join highly specialized training courses or pursued professional certifications or academic degrees that are relevant to the CMA tasks and responsibilities. We have also been coordinating internship as well engagement opportunities for our own staff and young graduates with similar regulatory authorities in the region as well as international bodies.

What are your expectations for the CMA for the coming year?

As a regulator for the capital market and insurance sectors, we are planning a series of forthcoming laws and regulations, such as, but not limited to the following New Health Insurance Law, several unified insurance policies providing coverage for fishermen, entrepreneurs, personal loans, etc., as well as regulating new insurance products such as bancassurance. Also, revised and expanded fixed Bonds and Sukuk regulation, venture capital fund regulation, virtual assets regulatory framework, and a revised and expanded Corporate Governance Code. The CMA is also working closely with the insurance companies operating in Oman regarding the implementation of amended IFRS 17, which is coming into effect globally on or after January 1, 2023.

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