What Factors are Affecting the Underdevelopment of the Debt Capital Market in the GCC Region

Abstract

For decades, the GCC countries have been dependent on an oil rentier economic model that supported its growth plans. Moreover, the region has enjoyed budget surpluses during that time and considered a net exporter of capital with its petrodollars. However, as the importance of oil as a source of energy diminishes, so does its value. After oil prices dropped over 75% within 20 months in 2014, the GCC countries faced substantial deficits. Consequently, the majority of GCC regions had to learn how to import capital and tap into the debt capital markets both conventional and Islamic. The present research has focused on academic and practical issues relating to the underdevelopment of the GCC debt capital market to establish itself as a viable source of funding both for sovereign and corporates borrowers. The study has adopted action research design to locate a model through which GCC can develop their debt capital market by examining market ecology, the process of persuasion and legitimation exploring organisational ecology and Institutional theory for sharper understanding of the motives. The impact and benefit on various debt capital market stakeholders in the GCC region as regulators, banks, investment companies, rating agencies, investors and the public are also investigated. Finally, a change plan, methodology and approach are recommended for development of the GCC debt capital market.