His Magesty King Abdullah's personal support for reforming Jordan's capital markets is very welcome. His decision to assign a committee to examine new ways to review Jordanian capital markets could have not come at a better time. Such a decision undoubtedly demonstrates that the King is in touch and gives credence to mounting professional concerns over the poor performance of Jordan's securities markets.
Such a Royal move, which is clearly based on a non-exaggerated assessment of Jordan's capital markets, breathes hope and optimism, which for long was stifled by the heavily outdated Jordanian regulatory practices. For, Jordanian officialdom has often had the propensity to paint a much rosier picture at the expense of objectivity and truth.
In this respect, member of the Consultative Economic Council, Naser Amad (to whom the King assigned the chairmanship of such a committee) needs every future support in the face of the stifling bureaucratic backdrop. Amad is among a few young energetic Jordanians with considerable professional experience to their credit. Their fresh, down-to-earth understanding of the Kingdom's regulatory shortfalls adds credibility to Amad's chairmanship. So does their participation in any major review of the direction of Jordanian capital markets.
Indeed, what the sagging capital markets need at this delicate stage is the goodwill and consorted contributions of the country's young professionals, whose attitudes are not tainted by exaggerated bureaucracy and officialdom. But let's not be too optimistic about what Amad and his young colleagues can achieve.
Their recommendations yesterday need solid political backing from the government, especially as the bureaucratic hold over the regulatory process is seriously ossifying a supposedly vibrant process. In this respect, any reformist task won't be easy, as it will have to grapple with many entrenched “old ways.”
The report presented to King Abdullah yesterday included very important recommendations. Specifically in mind is enhancing the role of the Amman Stock Exchange (ASE) in the privatization process — in a primary or a secondary capacity. For the experience of Arab countries (especially in Kuwait) has shown that such a task can be done with success. Of urgent importance is also the restructuring of the Social Security Corporation in a manner that enables it to play its full role as Jordan's most influential institutional investor. And quite rightly the role of mutual funds, due to partial prohibition on foreign ownership, needs to be fully utilized.
But, in many respects, the report was more diplomatic than is justified. It is clear that a substantial part of the failure is due to the country's outdated regulatory approach. Indeed, such an approach still hasn't articulated clearly the difference between systemic, prudentially based, ba0nking regulation and capital markets regulation that differs in terms of remedying market-failure. In this sense its whole modern premise is an institutionalized “open regulatory approach,” consultation and accountability to concerned “stakeholders.”
The experience and philosophy of the newly-established British Financial Services Authority (FSA) is relevant, especially supervision standards over its own work that guarantee clear lines of accountability (ie: annual open meetings, annual reports to the British parliament, accountability to the Select Committee, a Practitioner Panel, Consumer Panel, non-Executive Board, the Treasury's oversight, ad hoc consultations, etc.)
We still need a more structured Jordanian regulatory approach that tackles headlong our regulatory failures with clear lines of accountability that don't in the end get diffused by too many “committees.” An insider in the Jordanian financial services industry recently put it, and he is quite right: We in Jordan need to become more committed and less “committee-ed.” — ( Jordan Times )
© 2000 Mena Report (www.menareport.com)
