IDEAS home Printed from https://ideas.repec.org/a/bpj/rmeecf/v10y2014i3p24n2.html
   My bibliography  Save this article

Financial Services and the GATS in the GCC: Problems and Prospects

Author

Listed:
  • Samman Hatem

    (Saudi Arabian General Investment Authority, P.O. Box 5927, Riyadh 11432, Saudi Arabia)

  • Shahnawaz Sheikh

    (Economics Department, California State University, Chico, CA 95929, USA)

Abstract

One objective of the General Agreement on Trade in Services (GATS) of the World Trade Organization is to achieve financial services liberalization in member countries. We assess the implications of such liberalization commitments in the banking sectors of the Gulf Cooperation Council (GCC) countries. After providing an overview of the GCC banking sector, we discuss the GATS provisions relevant to financial services. Liberalization commitments and exemptions of these countries under the agreement are also presented. Using the observation that spikes in oil prices are accompanied with expansion in credit availability, we develop a simple model to formally explore the consequences of opening up the banking sector. Our analysis considers the possible policy impact on the domestic banking industry as well as a non-tradable sector that is driven by local entrepreneurship. Our investigation suggests that while high oil prices facilitate credit availability, they also enable governments to more easily and better subsidize employment in the public sector. This more attractive outside option then serves as a deterrent to risk-taking entrepreneurs which could stunt the growth of the non-tradable sector. A liberalized banking sector could mitigate this outcome as well as other institutional inefficiencies in lending, but also brings with it the vulnerability to global financial crises.

Suggested Citation

  • Samman Hatem & Shahnawaz Sheikh, 2014. "Financial Services and the GATS in the GCC: Problems and Prospects," Review of Middle East Economics and Finance, De Gruyter, vol. 10(3), pages 293-316, December.
    • Handle: RePEc:bpj:rmeecf:v:10:y:2014:i:3:p:24:n:2
    DOI: 10.1515/rmeef-2013-0050
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/rmeef-2013-0050
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/rmeef-2013-0050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Dario Focarelli & Alberto Franco Pozzolo, 2005. "Where Do Banks Expand Abroad? An Empirical Analysis," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2435-2464, November.
    2. Poonam Gupta & Kalpana Kochhar & Sanjaya Panth, 2015. "Bank ownership and the effects of financial liberalization: evidence from India," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 8(1), pages 109-138, April.
    3. Thorvaldur Gylfason, 2006. "Natural Resources and Economic Growth: From Dependence to Diversification," Springer Books, in: Harry G. Broadman & Tiiu Paas & Paul J.J. Welfens (ed.), Economic Liberalization and Integration Policy, pages 201-231, Springer.
    4. Wahba, Jackline & Mohieldin, Mahmoud, 1998. "Liberalizing Trade in Financial Services: The Uruguay Round and the Arab Countries," World Development, Elsevier, vol. 26(7), pages 1331-1348, July.
    5. Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
    6. Beck, Thorsten, 2002. "Financial development and international trade: Is there a link?," Journal of International Economics, Elsevier, vol. 57(1), pages 107-131, June.
    7. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-1561, September.
    8. Van Robays, Ine, 2012. "Macroeconomic uncertainty and the impact of oil shocks," Working Paper Series 1479, European Central Bank.
    9. Marrouch, Walid & Turk-Ariss, Rima, 2014. "Joint market power in banking: Evidence from developing countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 253-267.
    10. Beck, T.H.L., 2011. "Finance and Oil. Is there a Resource Curse in Financial Development?," Other publications TiSEM 123f034a-fde0-4c02-b147-c, Tilburg University, School of Economics and Management.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. He, Xinao & Zhang, Chaowen, 2024. "Does mineral resource dependency distinctly impede financial access, depth, and efficiency? The mediating role of digitalization," Resources Policy, Elsevier, vol. 92(C).
    2. Alberto Franco Pozzolo, 2009. "Bank Cross-Border Mergers and Acquisitions: Causes, Consequences, and Recent Trends," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 155-183, Springer.
    3. Yun, Na, 2024. "Resources curse via natural resources utilization: Linking digitalization and resources markets for economy perspective," Resources Policy, Elsevier, vol. 90(C).
    4. Kumar, Nitish & Shaurav, Kumar, 2025. "Do disaggregated natural resources foster financial development? Evidence from linear and non-linear approaches," Resources Policy, Elsevier, vol. 103(C).
    5. Aadil Nakhoda, 2013. "Bank Competition and Export Diversification," EERI Research Paper Series EERI RP 2013/12, Economics and Econometrics Research Institute (EERI), Brussels.
    6. Byung Wook Jun & Sung Man Yoon, 2020. "Foreign Banks Acquisition Strategy and the Business Approach of Domestic Bank: A Case of Standard Chartered Bank," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 861-874, July.
    7. Riccardo De Bonis & Giovanni Ferri & Zeno Rotondi, 2015. "Do firm–bank relationships affect firms’ internationalization?," International Economics, CEPII research center, issue 142, pages 60-80.
    8. Stijn Claessens & Neeltje Van Horen, 2014. "Location Decisions of Foreign Banks and Competitor Remoteness," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 145-170, February.
    9. Hattendorff, Christian, 2013. "The Natural Resource Curse Revisited: Is There a Financial Channel?," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79805, Verein für Socialpolitik / German Economic Association.
    10. Aneta Hryckiewicz & Oskar Kowalewski, 2010. "Why do Foreign Banks Withdraw from other Countries? A Panel Data Analysis," CESifo Working Paper Series 3006, CESifo.
    11. Beck, Thorsten, 2006. "Creating an efficient financial system : challenges in a global economy," Policy Research Working Paper Series 3856, The World Bank.
    12. Ogbeide, Frank Iyekoetin Phd & Adeboje, Oluwafemi Mathew, . "Financial Liberalization and Business Entry Nexus in SSA Model," Journal of Economic and Sustainable Growth 1, Office Of The Chief Economist, Development Bank of Nigeria.
    13. Claessens, Stijn & van Horen, Neeltje & Hassib, Omar, 2017. "The Role of Foreign Banks in Trade," CEPR Discussion Papers 11821, C.E.P.R. Discussion Papers.
    14. Claessens, Stijn & Van Horen, Neeltje, 2013. "Impact of Foreign Banks," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(1), pages 29-42.
    15. Ali, Adnan & Ramakrishnan, Suresh & Faisal,, 2022. "Financial development and natural resources. Is there a stock market resource curse?," Resources Policy, Elsevier, vol. 75(C).
    16. Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2007. "How banks go abroad: Branches or subsidiaries?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1669-1692, June.
    17. Dirk Schoenmaker & Wolf Wagner, 2013. "Cross-Border Banking in Europe and Financial Stability," International Finance, Wiley Blackwell, vol. 16(1), pages 1-22, February.
    18. Damette, Olivier & Kablan, Sandrine & Mathonnat, Clément, 2023. "Firms’ access to finance in resource-based countries and the financial resource curse," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 1031-1047.
    19. Bonfiglioli, Alessandra, 2008. "Financial integration, productivity and capital accumulation," Journal of International Economics, Elsevier, vol. 76(2), pages 337-355, December.
    20. Leo Frey & Ulrich Volz, 2013. "Regional Financial Integration In Sub-Saharan Africa – An Empirical Examination Of Its Effects On Financial Market Development," South African Journal of Economics, Economic Society of South Africa, vol. 81(1), pages 79-117, March.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • F00 - International Economics - - General - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rmeecf:v:10:y:2014:i:3:p:24:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.