Revamping Jordan’s ailing financial market

Published November 1st, 2000 - 02:00 GMT

Jordan’s King Abdullah endorsed on Sunday a working paper designed to revamp the ailing financial market. The project comes in line with ongoing work of the Economic Consultative Council (ECC), formed last December by King Abdullah to spur the economy, diagnose financial and administrative flaws and prescribe potential cures.  

 

Compiled by an ad hoc committee headed by Naser Amad, the working paper suggested 28 recommendations to breathe new life into the 22-year-old stock exchange market. Amad, one of 20 members in the council, said the committee found a pervasive “lack of confidence” in the market. Therefore, it called for “promoting timely and accurate transparency, fairness for all participants and liquidity and efficiency in the market.”  

 

The committee envisaged a host of administrative, judicial and financial reforms within timetables ranging from “immediately to one year.” Prime Minister Ali Abul Ragheb, however, asked the King for ample time to set up a “task force and executive committees” from the private and public sectors so as to translate the working paper into action.  

 

Head of the Economic Unit at the Royal Court Bassem Awadallah noted that the committee had prepared “background work” on the path to reform, and said “more focus is needed” to streamline its work into legislation and a course of action. Hence, the ECC agreed to form a follow-up committee co-chaired by Deputy Prime Minister and Minister of Economic Affairs Mohammad Halaiqa and Amad from the private sector.  

 

In general, the working paper suggested to widen the scope of the Amman Stock Exchange (ASE) to handle more than just stocks and bonds. The envisaged operations include “splits, opinions, mutual funds, treasury stocks and buybacks.” The committee also suggested the creation of Islamic instruments at the ASE to broaden the base of investors and brokers.  

 

Another proposal called for giving employees in public companies the opportunity to retain “a certain percentage of stock” in their respective privatized firms. Likewise, stock privatization “should take place on the ASE to help initiate more interest in Jordan's market.”  

 

Other recommendations include setting up an association to govern auditing and accounting sectors and encourage brokerage firms to break their traditional pattern and offer a full range of services including financial consultations, analysis and portfolio management.  

 

In this field, the committee underlined the need to build a financing structure, which would set margins and finance investors via repurchase agreements, under the supervision of the Jordan Securities Commission (JSC). The committee called for adopting sound implementation of the current disclosure and transparency bylaws in order to avoid misleading statements or transactions.  

 

It also recommended a revamping of the investment division of the Social Security Corporation (SSC), whose equity exceeds $1 billion. “The SSC needs to recruit qualified employees and increase its proficiency as well as revise its buying and selling strategy,” stated the report.  

 

This cash abundant corporation also needs to update its 20-year-old policies to “maximize investment opportunities, especially during volatile times in the market, the report said. Founded in 1978, the ASE witnessed two “golden eras” between 1981-1983 and 1991-1993. Regional instability, whether in the Palestinian territories or the Gulf region, resulted in a downward trend since mid-1990's. — ( Jordan Times )  

 

By Saad G. Hattar 

© 2000 Mena Report (www.menareport.com)

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