SOEs have room for improvement

Dubai Improving transparency in state-owned enterprises (SOEs) has been a global challenge. The disclosure practices of the Middle East and North Africa (Mena) SOEs should be seen in the context of the evolution of the overall corporate reporting agenda in the region, the OECD said in a report.

Improving disclosure has been particularly challenging in the region, both in non-listed companies, which shy away from disclosure, and in listed companies, which are attempting to absorb the pace of regulatory change.

"The general interest of GCC jurisdictions to continue developing their capital markets through flotations of minority stakes in SOEs and listings of SOEs' debt or sukuk is likely to continue having a positive effect on transparency of listed SOEs," said Alissa Amico, OECD Manager, Middle East And North Africa, Corporate Affairs Division, Directorate of Financial and Enterprise Affairs.

Experts said the recent socio-political uprising in the region, popularly known as the Arab Spring, has its roots in the overall poor governance standards including the governance of SOEs.

"Public governance generally, and SOE governance in particular, has not been seriously addressed in the business climate reforms introduced during the course of the past decade. This is particularly striking given that a number of countries in the Mena region that have undergone important political transitions were ranked as top reformers for the past five years in the world," said Nasser Saidi, Executive Director, Hawkamah Institute for Corporate Governance.

Requirements

The OECD study calls for improved transparency of SOEs at par with the regulatory requirements mandated on listed private sector companies.

"The Gulf SOE model based on privileged "pockets of efficiency" has in some cases run its course, as the once underdeveloped private sector has caught up with public industry, and as separate regulatory regimes, as well as legal and financial privileges, have lost their developmental justification," said Steffen Hertog Lecturer, the London School of Economics and Political Science.

According to him the GCC faces the challenge of transitioning to a more regulatory model in which all players, no matter their ownership structure, operate under the same rules.