Overseas investment sparks corporate standards clean-up

Dubai: Downward corrections in GCC stock markets and increased corporate activity by regional companies in Western markets are driving improvements in corporate governance standards, according to a report released yesterday by Hawkamah, the Institute for Corporate Governance, and the Institute of International Finance (IIF).

The report comes at a time when the GCC corporations have conducted $25.9 billion of acquisitions in the UK, Europe and North America so far this year. This trend is expected to continue as the private sector in the GCC continues to expand through the acquisition of foreign assets.

The report is part of a strategy toward the harmonisation of corporate governance standards in the GCC and their alignment with international best practice.

Dr. Omar Bin Sulaiman, Governor of the Dubai International Financial Centre (DIFC), said: "The findings of this survey will help GCC policymakers identify key areas for reform and promote awareness of the benefits good corporate governance brings to companies and markets".

Capital market regulators are using the recent price correction in GCC stock markets to 'upgrade' corporate governance frameworks. While authorities recognise that price corrections were not directly related to poor standards of corporate governance, there was public pressure to intervene.

Corporate governance codes are being drafted and introduced by capital market authorities in the GCC. The Muscat and Abu Dhabi exchanges have introduced codes., while regulators in the UAE, Saudi Arabia, Bahrain, Qatar and Kuwait have draft codes expected to be ready 2007.

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Step forward

Called 'Corporate Governance in the GCC An Investor Perspective', the report 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.