Public governance

Reinforcing corporate governance in the Arab region for more resilient, inclusive and sustainable growth


Keynote speech by Angel Gurría

Secretary-General, OECD

Arab Regulators Corporate Governance Forum

9 February 2016

Rotana Beach Hotel – Abu Dhabi, UAE

(As prepared for delivery)



Dr. Abdulrahman Al Hamidy, Esteemed colleagues, Ladies and Gentlemen,


I am pleased to join you today at the Forum of Arab Regulators on Corporate Governance. I would like to thank Dr. Al Hamidy, Chairman of the Board of the Arab Monetary Fund (AMF) for inviting me to this event. This is, I hope, the beginning of a strong and fruitful collaboration, including in the area of corporate governance, a topic of great relevance for the region.



The global economic context


We are coming together in a time of heightened uncertainty. According to our November Economic Outlook, we expect the global economy to have grown by around 3% in 2015 – well below the long-run average. In addition, business investment in the OECD remains anaemic at 3.3% over 2015-16, while trade is growing at half speed, and credit has stalled particularly in the euro area and for SMEs.


The outlook for emerging markets economies is a particular source of global uncertainty. The slowdown in China and recessions in both Brazil and Russia are having an impact on global growth and particularly on trade. Thus, we expect a very gradual improvement in the global economic outlook, with growth reaching 3.6% by 2017.


Much like the global outlook, the MENA region is also experiencing slow growth, high unemployment and rising inequalities. Growth in the region has not surpassed 3% in recent years; we also note strong variations between countries. In addition, falling oil prices are depressing growth in oil-exporting economies and are straining governments’ fiscal balances.



A strong OECD-MENA relationship


These complex challenges facing the world economy remind us that we must increase our efforts towards enhanced international co-operation. The OECD is deeply engaged in strengthening global economic governance by supporting the G7 and the G20, but also through regional initiatives with countries that do not participate in those fora.


For more than a decade now, the OECD has been working with the MENA region, helping its governments design effective reforms through the MENA-OECD Initiative on Governance and Competitiveness.


Through this initiative we are promoting the development of capital markets in the region by encouraging initiatives by stock exchanges, institutional investors, regulators and others with a direct interest to establish sound and efficient capital markets. And governments are responding, positioning capital markets as an integral part of the broader financial sector development strategies.


We are also supporting governments to ensure better corporate governance of SOEs. This is essential to enable the listing of SOEs in stock markets, an option that governments are increasingly employing to modernise and commercialise these firms. Our report, State-Owned Enterprises in the Middle East and North Africa: Engines of Development and Competitiveness?, points to the need for co-ordinated or centralised ownership arrangements of SOEs to help improve state ownership efficiency.


Through our work in the MENA-OECD Working Group on SMEs, we are also fostering enterprise growth and entrepreneurship, including for women; improving access to finance for SMEs; and strengthening the monitoring and evaluation of policies and programmes for SME support. This is critical for the region as SMEs account for between half and two-thirds of employment and they have a significant potential to contribute substantially to innovation and value creation.


We are also providing support at country level, in particular by helping MENA countries implement wide-ranging, structural reforms from a whole-of-the government perspective. For example, we are helping to improve the business and investment climate in Jordan and Egypt. Most recently, we joined forces with the United Nations Development Programme to develop a roadmap to build resilience in Syria through better private sector engagement.



Good corporate governance is essential to boost investment and jobs


In the highly interconnected world of global business and finance, creating a business environment of mutual trust, transparency and accountability is imperative. As corporate operations constantly cross borders, regulators, companies and investors need a shared understanding of good corporate governance – a “common global language”.


In this context, the endorsement of the G20/OECD Principles of Corporate Governance last November, was very timely. The principles aim to improve how corporations are directed, how institutional investors manage other people’s money, and how stock markets function. They address issues like board professionalism; transparency and financial disclosure; investor behaviour and stock market practices; the environmental dimension of companies’ decision making process – all crucial areas for unlocking investment, and priorities for the MENA region.


This Forum is an important opportunity to work together and use the G20/OECD Principles to “raise the bar” for corporate governance in the Arab region. Let me mention four concrete ways in which the Principles can help:


  • First, implementing the Principles canhelp corporations access equity capital by improving the functioning of stock markets. Looking at developments over a fifty-year period, our report, Finance and Inclusive Growth, finds that excessive leverage slows growth in most countries, while more stock market financing has the opposite effect on economic activity. This is particularly important in the MENA region where despite all of the demand for capital, private equity remains a grossly under-utilised and under-appreciated asset class.
  • Second, the Principles can help reinforce transparency and integrity of capital markets. This can be done by ensuring proper disclosure of fee structures; promoting equal access to market information; and managing conflicts of interest. Saudi Arabia’s decision to open the Saudi Stock Exchange to foreign institutional investment is a good example of how to increase accountability and build confidence in markets.
  • Third, the Principles can be used to strengthen the governance of SMEs whose external funding sources are mostly short-term credits. This is particularly relevant for smaller companies with strong growth potential, which can have a significant effect on jobs, productivity and innovation, but require long-term financing in the form of equity.
  • Fourth, the Principles are a key lever to boost jobs and foster inclusiveness. The performance and integrity of corporations affect the income of present and future pensioners. Stock exchange listed companies around the world provide for more than 200 million jobs. As the prosperity of both employees and pensioners depends on corporations adopting sound corporate governance rules and regulations, the Principles call for the provision of fair and transparent markets.
  • Finally, through the implementation of these concrete measures, the MENA region can move towards a more dynamic position from which it can better promote reforms focused on resilience and on sustainable growth. In fact, the transparency chapter of the Principles recommends the disclosure of material information on policies, performance and risks related to the environment.


Excellencies, Ministers, Ladies and Gentlemen,


Achieving good corporate governance in the MENA region will be vital for promoting market confidence, business integrity and ultimately attracting much needed investment. In this respect, the OECD stands ready to work with governments, national institutions and international organisations to assess the quality of corporate governance and to support reforms focused on long-term inclusive growth.


I look forward to today’s discussions and hearing more about your priorities. Together we can raise the bar for corporate governance in the MENA region and beyond. Thank you.