Corporate Governance in Arab Countries Dr. Najib Harabi Professor of Economics UAS Northwestern Switzerland

Contents Introduction Corporate Governance and Economic Development State of Corporate Governance in Arab Countries Summary and Conclusions

Introduction Big challenges facing Arab economies and societies Heavy involvement of the State in economy Poor development of private sector: skewed size distribution of Arab firms Multiple causes: investment climate and inadequate corporate governance

Corporate Governance and Economic Development Increased access to external financing by firms. Lowering of the cost of capital and associated higher firm valuation. Better operational performance through better allocation of resources and better management. Reduced risk of financial crises. Better relationship with all stakeholders.

State of Corporate Governance in Arab Countries two sets of empirical data, both of them are of qualitative nature 3 case studies on corporate governance in Morocco, Egypt and Jordan. The second source of information is the regional roundtable (focus group) discussions, organized by international and regional organizations

State of Corporate Governance in Arab Countries One major key finding is that the legal and regulatory frameworks of the assessed Arab countries are largely compliant with the OECD Principles of corporate governance. However, practices are not. The difficulty of the assessments is to reflect properly the discrepancies between the letter of the law and compliance

State of Corporate Governance in Arab Countries Corporate governance issues have not been ignored in public debates in the MENA region. Practitioners from capital markets, banks, public and private sector representatives and other civil society groups have accepted the need to address corporate governance reforms as one of the crucial topics affecting the economic growth and development of firms, industries and whole economies in their region.

State of Corporate Governance in Arab Countries Several meetings and conferences at the national and regional level have taken place. Appropriate and up-to-date recommendations regarding corporate governance reform in the MENA region have been adopted in those events. It is now up to the decision makers at all levels to implement those recommendations.

Corporate Governance in Arab Countries: Policy conclusions Better governance in general: Political, economic etc. (political and institutional reform) Enhancing the principle “rule of law” Better competition policy in product and factor markets Better regulation of financial markets and institutions