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A Response To Changing Business Environment Finance Essay

These are exciting times for the bond markets in the GCC. Rarely a day goes by without a mention of the bond markets. Even as the region is still coming to terms with the after effects of the financial turmoil the need for a developed bond market has come to the forefront. A lot of activity is being done by the authorities in the region to establish a stable bond market. A stable bond market is an important component in the economic architecture of any country as they provide additional liquidity and more importantly brings in a sense of discipline to the whole financial world.

As has been learnt from the experience of the East-Asian crisis well developed bond markets can act as cushions during the crisis reducing the impact of them. GCC countries after going through a crisis of their own have embarked on a journey to building an effective bond markets. Where does this journey lead to, no one really seems to know. Even as the authorities are working on improving the markets, there are a lot of issues in their current structure and a lot of work needs to be done in order for the markets to play a significant role in the economies of the GCC countries. This research addresses both these dimensions:

Issues in current markets

What should be done to overcome them

The research was carried out using both primary and secondary sources of data. A qualitative review of the literature was done to understand the various dimensions of the bond markets, the disadvantages of underdeveloped bond markets and the steps being taken by the authorities to improve the markets in the region. A primary qualitative research was done using in-depth interviews with experts from various fields of bond markets. The insights provided by them were correlated with the extensive data analysis done on the data about the bond markets in GCC taken from secondary data sources like Reuters. Comparison of the GCC bond market was done with that of Indonesia , which has consciously build its bond market since the 1997-98 East- Asian crisis, to come up with a list of findings with respect to the current markets. The key findings include:

Less participation of sovereigns in the bond markets

Local currency bond issuances by all the entities, sovereign and non sovereign is very less

Lack of transparency is a major problem in the region

These findings were all analysed using the SWOT framework basing on which recommendations to improve the bond markets in the region are given. Some important recommendations given are:

Conscious and concerted efforts for making a market so that an environment where bonds get traded is created

Increased government participation in bond markets


Historically the companies in GCC have stayed away from the bond markets for their funding needs. In the past, about 85 per cent of the GCC’s outstanding corporate finance came from the banks, compared to about 33 per cent globally, according to a 2005 study by the International Monetary Fund. However, the financial crisis has changed all that. In 2009, for the first time since data has been available, GCC companies have raised more money through bonds than they have borrowed from banks. Despite this the bond markets in Middle East are relatively under developed when compared to bond markets in other regions.

The authorities in the region have realized the importance of developed bond markets and started to take steps in that direction including the issuance of bonds by Abu Dhabi and Qatar. The two governments were swiftly followed by several state-backed corporate entities. This has signalled to the world that GCC is consciously trying to build the markets. While banks remain nervous about lending after the global crisis, bond issuance is an attractive option for GCC companies.

Despite several actions being taken by the authorities the bond markets still have a lot of issues and hurdles that are stopping them from becoming a major force in the economic architecture of the region.

Governments in the region should now look at issues within the bond markets and address them in order to build a good investor base which is essential for a bond market. New investors will help to ensure efficient pricing in the market, particularly as they will tend to have deeper knowledge of the region and the risks associated with investing in it than US and European funds. As the bond markets in the region embark on a journey towards betterment, it is a good time to understand the issues within the current structure that are stopping the region from achieving its potential.

Evolution of Bond Market in GCC


The steps followed in the Research methodology are as shown below, followed with the detailed description of each.

Problem Definition & Discovery

Bond Markets in the GCC are at a very nascent stage. The recent economic crisis has brought this issue to the fore front and re-iterated the importance of having a developed bond market in the region. This research report attempts to understand the reasons why the bond market in this region have not developed and attempt to provide steps which can be taken to develop the bond markets in the GCC region.

Scope of the research

For quantitative analysis the data up to 2009 has been considered. As we don’t have complete data for 2010 it has been avoided as including that would give misleading trends.

Benefits of the research

This research helps anyone who is planning to enter the bond markets in GCC. It will help them give the following perspectives:

An understanding of the current issues

Steps than need to be taken and are being taken by the authorities

These perspectives will help them deal with the bond markets in an effective manner.


Research Design

Secondary Data source

Quantitative – Data related to the bonds in the GCC region and Indonesia was collected from various databases such as Reuters,zawya, asiabondsonline, S&P

Qualitative- Various articles were referred to for understanding the Sukuk structures and the current scenario of the GCC bond market. Also newspaper articles were referred to for understanding the steps taken by the governments in recent years to develop the bond markets.

Primary Data Source

Quantitative- No quantitative primary research was done, as this research is about bond markets in which the retail investor participation is negligible, also the players operating in the bond market are very few in the region.

Qualitative – Face to face, in-depth interviews with Industry experts were conducted using qualitative questionnaire. Following were the respondents.

Data Processing and Analysis

The Analysis framework used is as follows:

The secondary data about the bond markets in the GCC was analyzed and where relevant comparison was made with the data from the bond markets of Indonesia to understand the various dimensions of the problems in the current bond markets. The reasons Indonesia was chosen in particular for comparative analyses are:

Both the regions GCC and Indonesia have large Muslim populations

Both the regions have similar bond market instruments example : conventional bonds, Islamic sukuk etc

Indonesia also had an underdeveloped bond market prior to 1997. After the East Asian crisis of 1997 conscious effort was put to improve the bond markets. So in a way east Indonesia also went through the learning curve that GCC region is currently going through

Among all the south east Asian countries GDP of Indonesia is comparable to that of the GDP of GCC nations. Though Indonesia is a smaller region compared to GCC the data given in the following notes shows that the bond markets in Indonesia are much more mature

For each dimension in the bond markets, the Inferences from data analysis are coupled with the insights received from the analysis of the data collected from interviews conducted with the experts to come up with findings about the issues persistent in the current scenario. Once the issues are identified clearly, SWOT analysis was done to zero in on the areas of focus.


The weaknesses and threats from SWOT analysis were used as the basis for coming up with recommendations to develop the bond markets.


Literature review was done to

Understand various aspects of the bond markets so that we can examine each and every aspect in detail to find out the issues related to that aspect. The various aspects involved in the bond market are

Market structure

Primary Markets

Secondary Markets

Issuance by currency

Corporate Vs Sovereign issuances

Regulatory and legal frame work

Ratings issues

Understand the nature of products available in GCC bond markets and sukuk in particular as the understanding them would help us understand the issues in a better way

Understand why bond markets are important in an economy and the disadvantages associated with an underdeveloped bond market so that we can understand the depth of the issues involved

Understand the steps taken by authorities in the region to develop the bond markets to help us gain insights into the issues perceived by the government

The literature review frame work adapted is given below:

Why Bond Markets are required?

Problem with an under developed bond market

The effects of misdirected government credit allocation get magnified with over dependence on the banking system. Governments wishing high degree of influence, generally use banking system as their most effective weapon. With changing governments the policies can change and thus can hinder growth. Bad loans can be kept from being written down for long periods with the government’s approval, thus this result in decrease of accountability.

With excessive reliance on banking system, the credit decisions are in the hands of relatively few decision makers compared to when a well developed bond market is present. Bond markets help corporate access other channels of funding other than loans for long term funding requirements. A well developed bond market will also provide the investors with another avenue for investment.

From Asian crisis and US crisis it can be inferred that bond investors have a better record than bankers in assessing risk, as bond investors have a more direct stake and thus have more motivation for risk assessment compared to banks. Thus, with an active bond market, corporate governance will be given more importance.

As banks are more levered than a typical bond investor, the systemic risk component is greater with heavy dependence on banking system for long term funds.

Banks with high liquidity, but insufficient demand tend to ease the norms of credit which in turn relaxes the borrower investment criteria, resulting in low returns. This may also lead to high delinquency rate, as was seen in the East-Asian crisis. Thus, the overall efficiency of an economy is reduced. With the presence of a bond market, a margin of funds will be directed towards bonds, reducing liquidity with banks. Thus, the liquidity in the system can be controlled with the presence of bond market.

Lack of bond market leads funds to end up in investments in foreign securities which otherwise would be invested in local bonds, this may sometimes lead to nations basic investments to be delayed.

Infrastructure required for a bond market

Regulatory framework in place for financial reporting by companies and governments which is reliable and relevant. This helps investors to make decisions. The investors will be in a better situation to assess the risk associated with a bond and make sound decisions, also this will help build investor confidence and trading interest, which are important for building a bond market.

A strong community of financial analysts and rating agencies is required to help build the market for the bonds. Coupled with sound reporting of companies and presence of financial analysts raises the quality of recommendations and thus the quality of the overall market. Presence of financial analysts also provides awareness about bonds, as it is seen that generally trading interest in any bond or stock is created when an analyst picks it up to analyse it and give recommendations on it. Thus a trading interest is evoked among investors.

A bond market should provide opportunities to smaller companies to place private placements as they do not have sufficient liquidity for a public issue.

A bond market should have proper framework and enforcement laws in place in case of default or bankruptcy by companies. The presence of a framework helps in building investor confidence in the market.

Few Steps taken by the GCC Countries to Build the Market

Since 2001 Bahrain has been making conscious efforts to develop its Islamic bond market and has been issuing cumulative government sukuk. Qatar also has been issuing Sovereign bonds in recent years. [1] 

On Jan 24th, 2010 the GCC countries established a regional trade association Gulf Bond and Sukuk Association (GBSA). The main aim of the association is to adopt best practices for the development of bond and sukuk markets in the region. [2] 

Although Abu Dhabi and Dubai government have issued government bonds at the Emirate level in order to improve the bond markets, UAE does not have a standardized debt market. The UAE government plans to issue its first Sovereign Bond at the end of 2010 [3] . This is in effort to build a risk free yield curve for UAE. These bonds have helped form a preliminary yield curve.

Instruments in GCC Bond Markets

The following figure gives an idea of different products and their classification on a broad level

Conventional Bonds - It is a debt security, capital market instrument which provides the borrower with external funds to finance long term investment. Like any other region elsewhere in the world the conventional bond instruments in the GCC markets include:

Senior Note

Subordinated Debt note

Unsecured Note

Complex floats

Sukuk – Sukuk is an Islamic bond which complies with Shariah law. Conventional bond holders own debt and bonds obligate the issuer to pay interest and principal to the bond holders. Meanwhile Sukuk represent ownership of real assets, and Sukuk holders are entitled to share the revenues generated by the sukuk assets and the proceeds from the realization of the Sukuk assets. In Islamic teachings, “money now for more money later” is widely held to fall within the scope of riba (the giving or receiving of interest), which is forbidden in Islam. Between money and return should stand an asset and/or an enterprise—hence, the emphasis on ownership of assets in sukuk. [4] 

Below shown is a basic Sukuk Structure.

Sukuk Process




Most Common Uses of Sukuk


Types of Sukuk

According to Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Bahrain-based Islamic financial organization which is the standard setter for Sukuk there are 14 eligible types of Sukuk. The most popular types of Sukuk are listed below.

Mudaraba Sukuk

In Mudaraba Sukuk, Investor (rabb- ul- maal) provides the capital to the other (mudarib) for investment in a commercial enterprise . Mudarib collects regular profit payments and final capital proceeds from project activity for onward distribution to investors. The structure is as shown below.

Musharaka Sukuk

Unlike in Mudaraba, where the SPV provides expertise and manages funds, in Musharaka Sukuk, the SPV just contributes cash received from the investors to the Musharaka. A committee is formed from the sukuk holders by the Sukuk issuer. The committee is referred to for investment decisions. The issuer of the corporate is just an agent to develop the asset. In return the issuer/corporate get a variable incentive fee plus an agency fee. There is an agreement between the SPV and the corporate to buy the Musharaka shares on a periodic basis. The profits generated from the assets are distributed among the sukuk holders.

Below shown is the structure of Musharaka Sukuk

Ijara Sukuk

An Ijara Sukuk is a hybrid between a finance lease and operational lease. The issuer sells assets to the SPV, and the SPV issues Sukuk certificates to the Sukuk holders equivalent to the Asset value bought. This is passed on to the issuer. An agreement is signed between the SPV and the issuer where in the issuer leases the assets for a fixed period of time and SPV gets rentals from the issuer. These are distributed to the Sukuk holders and on maturity the assets are sold back to the issuer at a pre determined value. Below shown is a pictorial depiction of the Structure of the Ijara Sukuk.

Murabaha Sukuk

Murabaha Sukuk cannot be traded on the Secondary market. In Murabaha, the SPV issues sukuk to the investors and with the proceeds buys the commodity from the commodity supplier . SPV then sells the commodity to the borrower profit margin which is payable in instalments over a time. The borrower then sells the commodity to the commodity buyer and the investors receive the final proceeds and profits.

Istisna Sukuk

Istisna Sukuk are issued to raise funds to produce products that are required by the sukuk holders. Generally the manufacturer is the issuer.The SPV issues certificates and pays the contractor/builder to build the project. On completion the property is sold or leased to the end user. The end user pays monthly instalments to the SPV and the returns are distributed among the Sukuk holders.


Bonds Vs Other Sources of Funding

Sources of funding for corporate and sovereign entities in the GCC:

The three major kinds of sourcing for corporate and sovereign entities are:

Bank Loans



The global average for the proportion of funding accessed from these three types of sources is given below:

The average proportion of funding accessed from these three sources in GCC is given below:

It is clear from the above charts that banks are the major sources of funding for the corporate and sovereign entities in the GCC region when compared to the global average. When compared to Indonesia also the share of bonds is significantly less. This suggests that there is over reliance on one source of funding. Though this situation changed a bit in 2009 when for the first time corporate raised more money through bonds than through loans [7] there is still a lot of reliance on banks for the funding needs of the companies. This also shows the enormous opportunity that bond markets have in the region.

The primary reason for this is the enormous liquidity available with the banks in the region and due to a high number of banks in the region. For example UAE alone has 51 banks.

The world economic crisis of 2008 and the Dubai World crisis of 2009 have made the banks introspect their lending practices and started tightening their loans to the entities here in GCC. This has prompted the corporate entities to look at other sources of funding beyond banking. As the bond markets in the region are underdeveloped this has limited the alternative sources funding and this has highlighted the importance of developing a mature bond market.

Bond Markets in GCC

The Current Bond Markets Snapshot in GCC

The GCC countries in the recent past have raised capital using bonds in the local currency as well as international currency. The listing of most bonds is done on local country exchanges or on international exchanges, major listing being done on London Stock Exchange and Luxemburg Stock Exchange.

Primary Markets

Sukuk Vs Conventional bond Issuances

The bond issuances from GCC region are very less when compared to that of Indonesia. The difference between Indonesia and GCC is huge pointing to the undeveloped nature of bond markets in the region

Except for 2008 there has been a general increase in the amount of bond/sukuk issuances in the region. This suggests that bonds/sukuk are becoming popular

The issuances of Bonds are more than issuances of Sukuk in the region. Actually sukuk issuances would attract a wider investor base as they appeal to both Islamic and non Islamic investor base. But issuance of sukuk is a complex process involving clearance by the AAOIFI (Accounting and auditing organization of Islamic Financial institutions) in addition to the clearance by the normal regulators. Also there have been controversies regarding compliance of sukuk to the sharia law raised by several scholars. These issues have damaged the market sentiment for sukuk.

Issuances according to currency

The volume of local currency issuances as a proportion of all issuances is very less in GCC when compared to that of Indonesia. This shows that for a mature bond market, local currency issuances should be more

Most of the bond issuances are happening in international currencies. Both sovereign and corporate entities are looking to tap international investor base. One of the reasons is inactive secondary market which makes them less attractive in the region. Since the bond market is in a nascent stage here the regulations and the institutional frame work is not yet fully developed. This discourages bond issues in the local currencies

As the issuers cross borders to raise money there is very little interest in the region, and this is one of the reasons why bond markets are not developing as fast as they should be

From investors point of view since most of the countries in the region have fixed exchange rate regime which minimizes the exchange rate risk (at least with respect to US dollar) even the investors from the region invest in foreign currency issuances. For issuers with international issue they are able to tap both the GCC investors as well as the international investors, hence there is a lesser incentive to issue here

As the countries in the GCC don’t have a stable and a mature yield curve, pricing becomes an issue when entities try to issue bonds in the local currency. The reason for the lack of yield curve for the countries is that countries in the region traditionally had oil money and did not require to borrow money from the markets. As there is no active issuance and trading of the sovereign securities there is no yield curve for the countries in the region. Without a yield curve which gives expected risk free return on the bonds in the country, accurate pricing becomes difficult. Now the situation is improving at least in the UAE as Dubai and Abu Dhabi have their own yield curves. Hence entities in Abu Dhabi are able to price off Abu Dhabi yield curve and Dubai entities off Dubai yield curve

Sovereign Vs Corporate Issuances

Note: Corporate entities include government owned entities

In Indonesia government is the major issuer of bonds where as in GCC, government issuance of bonds as a proportion of total bond issuance is relatively less. This is because traditionally the governments in GCC were cash rich hence were not required to approach the bond markets. But from countries having advanced bond markets like Indonesia shows that Governments have a major role in bond issuances and need to lead the way in the bond markets. Because only if the governments issue more bonds can a yield curve can be formed. So lack of government’s major participation in the bond markets is one of the reasons for the under developed bond markets here.

Until 2007 corporate issuances were more than sovereign issuances. This changed in 2008 and in 2009 sovereign issuances dominated the market.

Secondary Markets

Listing Data:

Fewer GCC bonds are listed in the regional stock exchange compared to the number listed on international stock exchanges like LSE and Luxembourg stock exchange. This signifies the under development of secondary bond markets

The reason many of the bonds are getting listed on the international exchanges are:

Lack of developed secondary market

Getting listed in international exchanges gives better exposure in the financial markets for the corporate as the interest in the international exchanges is more than local exchanges

Another reason why issuers go for international listing is that turnaround time for listing is less in international markets than for the listings in the region. This is because of the administrative and regulatory complexities that arise out of the fact that this region has not seen many listings and hence the learning has not been there to perform the activities efficiently. For example in LSE under the MTN program a second listing can be done within 24 hours. Where as in GCC this would take several days in the GCC stock exchanges


Few of the issuances in 2009 were not rated. Yet they are able to raise money out of the markets primarily because most of these entities are state owned entities example Emirates airlines and they have the backing of the government which gives confidence to the investors to put money in these entities

In our discussion with experts we came across that most of the entities here are not yet rated. This is because ratings are a long term commitment and involves many disclosures and most entities are not yet ready to make such kind commitments as they don’t have the necessary infrastructure and culture to make such kind of disclosures on a continual basis

For getting a rating, entities need to know where they are going to be in the next 10 to 15 years, but the entities in the region are not certain about these prospects

Rating agents are active in the region. They are bullish in the region because there is a lot of opportunity in the future

Earlier this year Dar-Al-Arkan a Saudi based real estate company was rated below investment grade. Yet it went ahead and issued the sukuk which was a success. This was seen as an achievement by the rating agencies. Earlier entities who thought they would not make investment grade never used to go for ratings. But as the times changed and money became hard to come by the attitude has changed towards rating and entities are willing to go for rating even if they have bad rating as they want to be seen as organizations having some rating rather than not having a rating at all. This was reinforced by Dar-Al-Arkan issue

Regulatory and Law Framework

The regulatory frame work in the region is present but it is not well equipped to respond quickly to the changes in the markets. One of the experts pointed out that regulation changes here need to be accompanied by changes in law. This causes the regulation to respond slowly to changing market realities. In countries with developed capital markets the regulators are generally autonomous and can change the regulations themselves.

One of the experts referred to the maze of laws and regulations in the region. For example the UAE has three tiered law structure. Due to this multi layered law structure, in case of disputes investors are not sure how and which law will be used for settling disputes.

Another problem which is particular to Dubai is that the regulator of DIFC which is Dubai financial services authority (DFSA) has bench marked its regulatory structure for bond markets to that of the regulatory authorities of UK and USA. But unlike the FSA in UK which has a dedicated desk for debt instrument related issues DFSA does not have one. Thus DFSA takes more time to process listing requests.

The corporate governance standards of the entities in the region are not up to the international standards. The entities in the region are not very transparent and are not forthcoming to reveal financial information to the outside world. The fact that there is no significant corporate tax in the region and hence no tax disclosures required has further complicated the problem. This causes difficulties for regulators to enforce regulations.

As per one of the experts, UAE is a tax free county with lot of foreign investors investing in the region who have taxes in their country. This causes ambiguity for the investor regarding taxation

One of the market participants pointed out that Dubai Financial Markets had regulations which are in tune with the region, which have lesser disclosures required, lesser financial information to be published etc. This was not liked by the international investors because they were unsure about the safety of their investments under such regulations. So Dubai came up with Nasdaq Dubai which was modelled on LSE with tighter listing and disclosure requirements. This was not liked by the regional entities as they were not used to such stringent norms. So Dubai is planning to have two market structure just like LSE’s professional securities market and main market whereby DFM would be for investors who like to take on more risks just like PSM and Nasdaq Dubai would be modelled for more cautious investors like the main market

Recently for Sukuk, contradictory statements about the compliance of the structures with the Sharia law have been made by scholars and Sharia boards. As sukuk are important instruments in the bond markets in the region this regulatory problem has a huge bearing on the sukuk markets in the region

Settlement and clearing procedures in the region have become in line with international standards

Investor base in GCC

Direct retail participation in bond markets is almost zero. This is in line with most international markets. Even Europe with an advanced bond markets has direct retail participation of around 5% [8] 

Direct HNI participation in the region. However banks buy the bonds from the primary issue and then later sell them down to the HNIs

Retail participation is generally through bond funds whose participation is around 10%

The investors from this region like any other region are biased towards the issuances from this region as they would know more about the local entities

One of the relation-ship managers said that around 30 to 40% of HNIs who come to him generally prefer bonds as a means to balance their portfolio

As per an expert HNIs in the region look at the following in the order:

Issuer Reputation

Credit Ratings



This is because after the Dubai world crisis the issuer reputation and ratings have become far more important to the investors. This also points to the increasing need for entities to go for credit ratings. HNIs are a significant investor base in the region hence in order to reach them building reputation and credit ratings are important

According to an expert in the field, HNI investors can be segmented based on the type of currency held by the investor. This points to the fact that even investors hold assets in other currencies and are willing to invest in bonds in those currencies. This is because UAE has full dirham convertibility and affixed exchange rate. So effectively what is happening is that both the investors and the issuers are operating outside the country. This further delays the development of the bond markets in the region

Most of the investors in the region hold the bonds till maturity. This reduces the liquidity in the markets.

SWOT Analysis


All the countries in the GCC region have good ratings (A or above as per S&P ratings). This would make it easy for the countries in the region to raise money in the bond markets. As has been mentioned earlier Government participation is critical to the development of bond markets.

The region has high amount of investible funds (which includes sovereign wealth funds) which can be channelized into the bond markets easily.

All the countries in the region are monarchies. This would make it easy for the countries to implement any changes in the law or regulations that are required for the development of bond markets.

The stability of the governments in the region could act as a magnet for attracting foreign funds.


Banks in the region have too much liquidity because of which the entities in the region have rarely gone beyond banks for their funding needs. This is an impediment to the development of bond markets

There are very few investors in the region who are willing to trade in the bond markets because of low volumes and volumes are low because there are very few players in the market. This has become some kind of a chicken and egg problem. Because of this there is no secondary market in the region

Most of the primary issuances happen in international currencies. Even the governments and quasi government entities have been issuing bonds in international currency. This is not helping the cause of bond markets in the region

The governments in the region have traditionally been cash rich and thus have avoided bond markets for their funding needs. As there are not enough government bonds issued and traded in the local currencies most of the countries don’t have a yield curve

Most of the entities in the region are not transparent because of which accessing the bond markets is difficult

In most developed bond markets pension funds, insurance companies and mutual funds are the majority investors in bonds. Pension funds are relatively small in the region, bond mutual funds are relatively non-existent and insurance companies don’t have the expertise and regulation to actively participate in the markets (to be referred)

Investor awareness in the region is very low concerning the bond/sukuk instruments

Entities in the region have not had enough experience with bond issuances and thus involves the learning curve

Regulations and law enforcement in the region are not yet up to the international standards

Loss of credibility in the entities from the region because of recent Dubai crisis and other crises.


The recent crisis reinforced the importance of local currency bond markets. This changed the attitudes of the investors and the issuers to relook at the development of bond markets with much more enthusiasm. So in a way this is the right time for the emergence of bond markets

As the GCC is contemplating a monetary union, the development of bond markets becomes crucial

GCC has the opportunity to become the bond market hub of the whole MENA region

Growth of world-wide sukuk market presents an opportunity for the GCC countries to expand their sukuk base


Due to the recent financial turmoil in the region the international investors are wary about entering the GCC markets. This might turn out to be a problem for the development of the markets as international investors are critical for the same


Market Making - Every bond issuer should take up the responsibility of market making. This should be done by earmarking certain amount of the capital raised for market making. This amount should be used by the fund managers to trade in the markets with a two way price(buy and sell) similar to stop trading that happens in equities. Example, The trader buys a bond at 100 Dh, at the same time quotes a selling price of say 101 Dh. This should be done by all the players in the market. This will create both buy side and sell side in the market, hence will lead to improved liquidity in the market and thus lead to building of a secondary market. Governments should incentivise this by reducing transaction fees.

Increased Government role in the local bond markets- To develop the local currency bond markets the governments should take proactive steps to issue bonds in the local currencies on a regular basis for a range of maturity periods. This will help in building a long term yield curve and provide private players with a benchmark to price the bonds and assess the risk. The government should also direct the Quasi- government agencies to raise money through local currency bonds first before issuing bonds in international Currency.

Regulatory Framework –The regulations should be improved to match the International Standards. This will give more confidence to the investor communities and lead a way to a developed bond market.

Separate Desk for Bond Listings - All the stock exchanges in the regions should have separate desk for handling bond listings and bond trading on the lines of London Stock Exchange. This will lead to faster turnaround time and hence more listings in the regions.

Use of Information Technology - The GCC countries should have a database with all the relevant bond information like the ASEAN+3 counterparts (AsianBondsOnline). This will also lead to availability of information and increases awareness about the bond markets.

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