CIAO DATE: 01/2013
December 2012
Norwegian Peacebuilding Resource Centre
Gulf Co-operation Council (GCC) countries’ financial sectors are solid, but not very sophisticated: business is mostly financed through bank lending rather than bonds or stock issues, and banks continue to rely on state support and, in many cases, are directly state owned. Credit markets have suffered from the post-2008 international crisis, but have made a fairly quick recovery on the back of increased state spending. GCC countries have witnessed some innovation in bond markets after 2009, but otherwise remain conservative. Financial markets do not play the integrating and innovating role that they should: While banks exerted some pressures for improved corporate governance on their creditors after the crisis, these have subsided with renewed credit expansion in 2011. Restrictive lending practices contribute to high entry barriers in the private sector and small entrepreneurs have a hard time getting loans. Stock markets have lost their lustre as investment channels for GCC countries’ citizens after two waves of crashes since 2006, contributing to disconnect between GCC citizens and the local private sector.
Resource link: Financial markets in GCC countries: recent crises and structural weaknesses [PDF] - 346K