State of Corporate Governance in Arab Countries: An Overview

The purpose of this paper is to assess the state of corporate governance as a major factor affecting the growth performance of the private sector in MENA countries. For this purpose both country-specific assessments, carried out by World Bank-IMF teams (so-called ROSC’s assessments) and focus-group discussions that took place in four regional conferences have been synthesized. Strengths and weaknesses of corporate governance in selected Arab countries have been highlighted. 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. It should be emphasized that the World Bank-IMF assessments focus on listed companies. No-listed firms, especially SME, family-owned firms and State-owned enterprises that make up to 98% of all firms, are not subject to assessments. Another key finding that emerged from our reviewing of the regional conferences on corporate governance is that 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. 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