Corporate governance key to boosting investment climate in the Arab World
The lack of corporate governance in businesses in the Arab World is one of the factors dampening the investor climate in the region, slowing the conversion of businesses into corporates and impeding access to foreign investments. This state of affairs is reflected in the Fortune 500 list, which features just one or two Arab companies, compared to several from the Asian and neighboring non-Arab countries.
Corporate governance has become a prime requisite for attracting foreign investors. According to the 2002 Global Investor Opinion Survey recently released by McKinsey and Company, nearly 63 percent of investors cited corporate governance as a major factor that would spur investment decisions. These investors were prepared to pay a premium on investment in companies demonstrating high governance standards.
Chief Executive Officer at Injazat Technology Fund Hussein Rifai said, "Arab family businesses need to be converted to business institutions, supported by high corporate governance standards, if Arab businesses are to find acceptance in the global investor community and capital markets."
"Today's corporate scenario demands a complete paradigm change in the attitude and mindset of business houses of the Arab World. It is only by applying globally accepted corporate governance standard in areas like separation of Board and management, elimination of conflict of interest, arms length business and transparency, can the Arab countries boost the investment climate in the region. For example, there should be a clear delineation between any company's management and its board of directors. The board should confine itself to providing direction, contributing to business strategy and monitoring performance though proper guidelines and steer clear from getting involved in the company's day-to-day management," said Rifai.
Corporate governance provides the tools for migrating traditionally run businesses into professionally managed market-driven enterprises, enhancing competitiveness in the global market.
Corporate governance is a key barometer of a mature or maturing economy. It will enhance a company's performance. The performance, boosted by increased investor confidence and triggered by the presence of competent professionals at the helm will facilitate the attraction of capital and ensure that the company command higher value. Accordingly, creditors will reduce the costs of capital, as the business risks will have diminished.
Injazat Technology Fund is a $50 million venture capital fund that was established by the Islamic Corporation for the Development of the Private Sector, an affiliate of the Islamic Development Bank (IDB) and Gulf Finance House, in partnership with Dubai Islamic Bank, Saudi Economic and Development Company and Iran Foreign Investment Corporation. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
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