Paul Gordon Collier
Major news comes out of Riyadh today that could foreshadow a shift in Arab policy going forward. The Saudi exchange, the Tadawul Index, is now open to direct investment by foreigners for the first time ever. The index was only available to foreign investment indirectly, through derivatives and also through investment and mutual funds.
The move was made by the Saudis in a growing effort to diversify the Saudi economy so that it is not completely dependent on oil exports.
“The market will be open to eligible foreign financial institutions to invest in listed shares during the first half of 2015, with God’s permission,” stated Saudi Arabia’s Capital Market Authority.
The Saudi Exchange is the largest exchange in the Middle East. It is also the second-largest closed exchange in the world (closed off to foreign investors) next to China’s exchange.
Whether this action will telegraph more moves towards openness and integration with the outside world by the Arabs in general remains to be seen. Many within Saudi Arabia applaud the move and hope that it does indeed telegraph a shift in cultural isolationism prevalent throughout much of the Middle East.