Video: A corporate ownership revolution in the GCC?

Wed 21 Nov 2018 10:55 AM GST
However, corporate ownership structures are on the brink of a quiet transformation in the Gulf. This could serve as a model for the wider region as it seeks to redress the wealth and opportunity gap.

Unlike the rest of the region, the corporate ownership structure in the Gulf – where wealth concentration is also high – was premised on a different model whereby strategic enterprises were owned by the state and merchant families either from the start or as a result of nationalisations.

This ownership configuration has effectively guaranteed de facto rents to states and private family conglomerates, an equilibrium which was first disturbed by the establishment of free zones across the Gulf. While the majority of foreign companies have set up shop within the borders of free zones in the UAE and other Gulf countries, their ability to distribute products outside them has hereto been restricted.

But this is also changing. The fiscal pressure on governments across the region resulting from a decline of oil prices has not only prompted the introduction of value added tax in some countries earlier this year, but has also triggered a quite corporate ownership revolution, the implications of which are significantly more profound than first meets the eye.

Bahrain, the first in the region to allow full foreign ownership of “onshore” companies earlier this year was recently followed by the UAE which has promised to do the same by end of the year. At the same time, both the UAE and other Gulf countries have announced schemes to grant longer residencies to those who can significantly contribute to the respective economies.

In this edition of Inside AB, Shayan Shakeel and Jeremy Lawrence take a look these developments that are being accompanied by a fundamental restructuring of capital markets in the region. Herein lies the next frontier of the Gulf’s economic transformation and one which may have consequences for the broader Middle East region.

(Source: YouTube channel)