Privatization of government companies and corporatisation of family-owned national conglomerates are the keys to mobilising the private sector contribution to the Abu Dhabi growth and success story, according to Mr Hareb Al Darmaki, chairman of the Abu Dhabi Securities Market (ADSM).
Mr Al Darmaki, speaking in the opening session of the Privatisation of Infrastructure and Facilities Conference in Abu Dhabi (today), said: “Using the abilities of the private sector is a very effective way to provide for market growth, while creating greater choice.
“For Abu Dhabi, the benefits of privatisation are clear and there are few – if any disadvantages. The country is growing at a rate well ahead of its natural ability to provide the resources required by this rate of growth. “We simply do not have all the skills, technology, expertise, human resources and associated intellectual and non-financial capital to manage and implement the growth on the scale that is the vision for the country.”
Partnering with the private sector is the most efficient way of achieving the capital’s growth and development plan, he said.
Mr Al Darmaki stressed that the private sector should mirror the diversification of the public sector by encouraging the listing and corporatisation of private family companies.
“There is a growing need for private family companies to adopt a model driven by corporate governance to ensure continuity in (management) succession and the maintenance of generated wealth.
“Faced with new competition in local markets, family companies will see increased benefits through private placement or converting into public joint stock companies. “They will share risk with other investors, gain access to capital to finance growth and retain market share as WTO, FTA, and other international obligations reduce the domestic level of protection currently available to family businesses.”
Mr Al Darmaki recognised that government ownership and family ownership of the major enterprises of this country during its early development phrases have served well to nurture a fully functioning, globally integrated, developed economy in the UAE. “But the time is right for privatisation to fuel the next stages of our expansion,” he concluded.
ADSM is continuing to support the government and encourage major shareholders in companies with narrow shareholding base to increase the amount of stock available for public shareholding, as well as the percentage of company stock that may be held by anyone.
With the growing demand for securities traded on the Abu Dhabi Securities Market and the exposure provided by ADSM linkages, the proposals of the government to privatise and joint venture a growing number of companies is set to lend considerable depth and liquidity to the market.
Since its inception in 2000, ADSM had grown into the second largest bourse in the region by the end of 2005. Turnover has grown 200 times to more than US $28 billion, while trades have grown 100 times to more than 565,000 per annum. Market capitalisation has multiplied by 20 to $130 billion (as at the end of 2005). Shareholder numbers have grown 860 times to 750,000.
