Reuters Achange of personnel in two of Saudi Arabia's top economic posts suggests the Kingdom may be preparing to invigorate its economic reform program. A surprise decree by King Abdullah, the Custodian of the Two Holy Mosques, on Tuesday shifted Muhammad Al-Jasser from the top position at the central bank to head the Economy and Planning Ministry, which oversees economic development. He was replaced by Fahd Al-Mubarak, formerly head of investment bank Morgan Stanley Saudi Arabia. Analysts do not see it as an effort to alter the conduct of monetary policy or the conservative way in which the central bank manages the country's vast oil wealth; the bank has over $500 billion of net foreign assets, much of it in the form of US Treasuries and overseas bank deposits. Instead, some analysts see the switch as a move to accelerate economic reforms in key areas such as capital markets, industrial policy and domestic energy prices. Jasser is respected by Saudi bankers and economists and has previously spoken of the need to address long-term structural challenges facing the Saudi economy. “One issue Jasser has talked about is the increasing domestic consumption of energy and the economic implications of that. He's also talked a lot about sukuk (Islamic bond) markets and potential linkages between that and infrastructure,” said Jarmo Kotilaine, chief economist at National Commercial Bank in Jeddah. “So he has a very broad economic vision and his new appointment will give him ample opportunity to develop and implement this vision.” The Kingdom embarked on a broad program of economic reforms more than a decade ago, using deregulation to open the country to private and foreign investors and strengthen the financial sector. The effort aimed to reduce the country's dependence on volatile oil revenues and create jobs in private companies. “There is a definite recognition in Saudi Arabia of the need to accelerate reform, and this may be part of that shift,” said Simon Williams, Middle East economist at HSBC in Dubai. Opening the stock market to foreign investment, which the government has been considering for several years, could help to strengthen the industrial sector by increasing market discipline. Saudi Arabia is also believed to want to reform its corporate bond market and encourage companies to issue more bonds, which would reduce their excessive reliance on bank loans — a reliance which can be awkward for the companies and risky for the banks. A desire to speed up capital market reforms may be a reason for the appointment of Mubarak as the new governor of the Saudi Arabian Monetary Agency. While Jasser is a career bureaucrat who has risen through the civil service, Mubarak draws on a long career in the private sector and is familiar with financial markets from his stint at Morgan Stanley Saudi Arabia. He has also served as chairman of the Saudi stock exchange. “One of the virtues of Fahd Mubarak is that he has direct market experience at a high level and with an international dimension, so he comes well qualified to the role of banking regulator,” said Kotilaine. Kotilaine said that might give Mubarak a more market-oriented approach. “Going forward one of the key challenges is making sure the financial sector plays a critical role in driving economic development, so adding the market dimensions will be very valuable,” Kotilaine said. __
