The Middle East is an emerging region. Whereas once it simply provided the world with hydrocarbons, like other emerging regions of the world, it is becoming integrated into the global economy. Vital to this process is the import and export of capital and the associated expertise. In all emerging economies, for capital to flow freely and efficiently, good corporate governance - the system by which corporations are directed and controlled - is critical. The recent financial crisis bought into question the solvency and creditworthiness of any number of institutions, companies and even governments. This has accelerated the need for effective corporate governance, particularly in the Middle East, where historically opaque government sponsored institutions and privately owned companies have dominated the region.
Corporate governance is not new to the region and dedicated professionals have been employed there for over twenty years. Their employment, however, has not generally been part of a systematic process but has been piecemeal as only certain institutions and international groups appreciated their value. The financial services industry in the Middle East has historically been fragmented and has often been dominated by state owned institutions. Whilst previously substantially unregulated, during the last fifteen years, regulation and enforcement have improved. However inconsistencies remain.
Many corporate governance departments have lacked the effectiveness that the resources devoted to them should have achieved. This was caused in some instances by a lack of expertise and in others by the necessary executive support not being made available.
It is now widely recognised within the Middle East that good corporate governance is essential not only to the effective operation of business but of also to diversify and globally integrate their economies. Governments are determined that corporate governance is accepted as part of the region’s business culture. This is reflected in the enactment of regulation that meets international standards, the active promotion of corporate governance and a strong response to corporate or personal indiscretions.
Bodies such as the Organisation for Economic Co-operation and Development (OECD) and Hawkamah, the Dubai based The Institute of Corporate Governance, have been central to the development of such initiatives.
Whilst it is the responsibility of individual governments to promote and implement these recommendations, the relevant central banks, regulators and financial exchanges are now emphasising the necessity of openness and transparency.
Whilst Western standards are unlikely to be achieved in the short term, the tide of developments is now firmly towards effective governance. This can only enhance the requirements for experienced corporate governance staff.