Dubai: If the global financial crisis had setbacks in store for Dubai — which has been charting a steady recovery over the past few months — it also had lessons on full disclosure and good corporate governance for the emirate and the region, according to a senior London academic. And this applies not just to state-owned enterprises but also private majority-owned companies.
Talking to Gulf News over morning coffee last week, Mezaine Lasfer, professor of finance at Cass Business School at the City University of London, said that with borrowing or raising funds still a difficult exercise, it is these two factors of transparency that would be of utmost consideration by investors. Lasfer was in Dubai to teach students at the school's UAE chapter.
The cost of borrowing or debt pricing has gone up not just because of the risk premium, but also because the lack of liquidity has added to the increasing competition among borrowers.
"You have [a] small pot of money now," Lasfer says. "There is so much demand for that pot and investors will provide money to those that they can trust."
The solution to the problems arising from the difficult borrowing situation for any country or company is to provide much more information to the investor, he says.
Last November, Dubai World shocked the world when it announced a standstill on its debt of $26 billion (Dh95.48 billion). Over the last few months, the conglomerate has been talking to its creditors and recently a deal was formally reached to restructure the debt of $25 billion.
Transparency checklist
According to Lasfer, the full disclosure and transparency checklist includes credible financial statements based for example on international accounting standards, and audited by an independent auditor; timely release of results; and good corporate governance by guaranteeing a board of directors that will not only have members of the executive but "more importantly" non-executive directors.
"All those factors will reduce all the uncertainty cost for investors and the gain that you are going to get from the investors with so much competition will be tremendous," the finance professor says. "It will be probably more important for this region because in the past information may not have been disclosed."
