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Downward corrections in Gulf Co-operation Council (GCC) stock markets and increased corporate activity by GCC corporations in Western markets are driving improvements in corporate governance standards, according to a report released today by Hawkamah, the Institute for Corporate Governance, and the Institute of International Finance (IIF). The report is part of a co-ordinated strategy toward the harmonization of corporate governance standards in the GCC and their alignment with international best practice.
The report, ‘Corporate Governance in the GCC – An Investor Perspective’, is the first study to benchmark standards in the region. It is the result of a series of meetings held with senior officials from capital market authorities, central banks and stock exchanges, local fund managers, lawyers, experts, accountants and management consultants involved in corporate governance in the GCC.
His Excellency, Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC), said:
“Hawkamah and the DIFC are dedicated to improving standards of corporate governance in the region, thus supporting sound financial markets development. The findings of this survey will help GCC policy makers identify key areas for reform and promote awareness of the benefits good corporate governance brings to companies and markets”.
Dr. Nasser Saidi, Executive Director, Hawkamah, said: “The Hawkamah-IIF survey shows that corporate governance in the GCC is generally at an early stage of development. However, it also notes that real progress is being made as countries amend existing company laws, strengthen accounting frameworks, and introduce corporate governance requirements for companies. Good corporate governance is a key factor in sustaining economic growth and development in the GCC. Policy makers are taking the lead and committing to secure significantly higher standards of corporate governance in the member countries of the GCC (UAE, Saudi Arabia, Kuwait, Oman, Qatar and Bahrain)”.
Charles Dallara, IIF Managing Director, said, “We welcome this first joint report with Hawkamah. We are encouraged by the co-operation we received across the GCC while collecting information for this report. Corporate governance practices across the GCC are lagging behind global standards in a number of areas. However, there appears to be considerable agreement that a stronger equity culture needs to be fostered and that high priority should be assigned now to programs to enhance corporate governance. We are encouraged by the determination of Hawkamah, the DIFC and national authorities in this area.”
Developments have been largely driven by four key factors:
Mr. Edward Baker, Chairman of the IIF’s Equity Advisory Group (EAG) and Chief Investment Officer of Global Emerging Markets, AllianceBernstein Ltd., noted: “In the case of the GCC report, as has been the practice in all EAG reports, we have reviewed corporate governance frameworks through the lens of professional investors active in global markets, with assessments based on the IIF Code of Corporate Governance. From an investor perspective, it is important that there is visible movement in the right direction across the region, which can contribute to building confidence. We are hopeful that the public and the private sectors in the region can work together in the period ahead to secure improvements in the GCC’s overall corporate governance framework.”
Mr. Ibrahim Dabdoub, Chairman of the IIF’s Equity Advisory Group (EAG) Middle East Task Force, a member of the IIF Board of Directors and Chairman of the National Bank of Kuwait, S.A.K, said, “This new report is based on a landmark IIF-Hawkamah survey of corporate governance practices, which will serve as a vital benchmark to measure progress towards higher international standards, which are needed and which the IIF and Hawkamah are encouraging.”
While corporate governance standards in the region are being raised, the report highlights a number of recommendations to bring the GCC into compliance with the IIF’s corporate governance code:
The report is the first part of a co-ordinated effort by Hawkamah and its partners to harmonise corporate governance standards in the GCC and the greater MENA region. The GCC survey will be followed by a survey of corporate governance regimes in other MENA countries. Once a clear assessment of overall standards in the region has been achieved, recommendations will be presented to policy makers to create a single set of standards for the private and public sectors in the region.
“While today’s report shows corporate governance standards in the GCC are improving, more needs to be done. Strong leadership and tough enforcement is required by authorities if corporate governance in the GCC is to meet international standards and bring with it increased FDI and market efficiencies. We believe the political will is there to achieve this and expect further developments in the coming years”, added Dr. Saidi.
Hawkamah provides co-operation and technical assistance to a number of countries in the GCC, including in the UAE, Oman, Kuwait, Bahrain and Saudi Arabia.
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