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Corporate Governance in MENA: Building a Framework for Competitiveness and Growth

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A strong corporate governance framework is essential for MENA economies as they strive to boost economic growth, strengthen competitiveness and build prosperous societies. The G20/OECD Principles of Corporate Governance and the OECD Guidelines on Corporate Governance of State-Owned Enterprises are a reference in order to build such a framework. This report assesses the corporate governance landscape in the MENA region by identifying challenges and proposing policy options for reform. The findings of the report are based on an analysis of policies and practices in four thematic areas: boosting access to finance and capital markets, improving transparency and disclosure, achieving gender balance in corporate leadership and enhancing the governance of state-owned enterprises in MENA. Overall, the report finds that MENA economies have made progress in strengthening corporate governance frameworks in recent years, but that the region still faces challenges in adopting and implementing corporate governance measures that support economic efficiency, sustainable growth and financial stability.

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Corporate Governance in MENA: Building a Framework for Competitiveness and Growth

  1. 1. Corporate Governance in MENA: Building a Framework for Competitiveness and Growth KEY FINDINGS
  2. 2. MENA-OECD WORKING GROUP ON CORPORATE GOVERNANCE  The MENA-OECD Competitiveness Programme (supported by the Swedish International Development Co-operation Agency) facilitates co-operation between OECD and MENA economies with the aim to advance inclusive, sustainable and resilient growth.  The MENA-OECD Working Group on Corporate Governance supports the establishment of sound corporate governance frameworks and policies, which are essential building blocks to boost competitiveness.  The G20/OECD Principles of Corporate Governance and OECD Guidelines on Corporate Governance of State Owned Enterprises provide a benchmark for this work.  The Working Group brings together securities regulators, stock exchanges and government from the following jurisdictions: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestinian Authority, Qatar, Saudi Arabia, Tunisia, United Arab Emirates and Yemen. 2MENA-OECD Competitiveness Programme
  3. 3. BUILDING A FRAMEWORK FOR COMPETITIVENESS AND GROWTH  This Report is the fruit of a partnership between MENA and OECD policy makers throughout 2017-2019. It identifies policy options for improving corporate governance in four areas: access to capital; transparency and disclosure; gender balance in corporate leadership; and the governance of state-owned enterprises.  Drafts of the four main chapters were discussed at the 2017 meeting of the Working Group in Rabat, Morocco. In 2018 thematic focus groups with representatives from MENA economies were established to develop the chapters. Revised versions with policy options were discussed at the 2018 meeting of the Working Group held in Lisbon, Portugal.  The objective of this report is to share the rich reform experience emerging from the MENA region and to serve as a useful tool for policy makers in search of effective policy instruments for implementing corporate governance reforms. 3MENA-OECD Competitiveness Programme
  4. 4. DEVELOP STRATEGIES FOR CAPITAL MARKET DEVELOPMENT ALIGN WITH INTERNATIONAL GOOD PRACTICES ON TRANSPARENCY AND DISCLOSURE EMPHASISE THE IMPORTANCE OF INCLUDING GENDER DIVERSITY IN POLICY FRAMEWORKS 4 STRATEGIES FOR CORPORATE GOVERNANCE REFORMS MENA-OECD Competitiveness Programme GATHER AND DISCLOSE INFORMATION ON STATE-OWNED ENTERPRISES TO STRENGTHEN ACCOUNTABILITY AND PERFORMANCE Overall, the report finds that MENA economies have made progress in strengthening corporate governance frameworks in recent years, but that the region still faces challenges in adopting and implementing measures that support the economic efficiency, sustainable growth and financial stability needed to foster development. Based on these findings, the report makes the following overall recommendations:
  5. 5. 5 FACILITATING ACCESS TO FINANCE AND CAPITAL MARKETS MENA-OECD Competitiveness Programme Develop strategies for capital market growth Enhance capacity of key institutions Diversify sources of finance Establish public markets for growth companies Address issuer side factors Develop the investor base Enhance a sound financial ecosystem MENA economies could benefit from deepening their capital markets. Capital market development would increase opportunities for growth companies to access finance and contribute to the region’s overall economic development. Better corporate governance is crucial in this regard. Proposed policy options for reforms are:
  6. 6. 6 IMPROVING TRANSPARENCY AND DISCLOSURE IN MENA MENA-OECD Competitiveness Programme MENA economies should continue their reform efforts with respect to transparency and disclosure practices. Attention should be devoted to the adoption of international best practices and to enhancing supervisory authority capacity and shareholder involvement. Proposed policy options for reform are: International standards and best practice Effective supervision and enforcement Optimal mix of mandatory and voluntary disclosure Better shareholder engagement Full and proper disclosure of ownership Full and proper disclosure of related party transactions Voluntary improved disclosure practice
  7. 7. 7 ACHIEVING GENDER BALANCE IN CORPORATE LEADERSHIP MENA-OECD Competitiveness Programme MENA has made progress in improving gender balance at the workplace, but the region still faces common challenges. Removing the barriers to entry and retaining female talent in corporate leadership requires efforts at multiple levels. Proposed policy options for reform are: Promoting gender balance in corporate leadership Reform legal and policy frameworks Combine measurable national goals with company strategies Improve data collection and use Attract talent and limit pipeline issues Facilitate networks and provide support for women in the corporate world Create a conducive cultural environment
  8. 8. 8 ENHANCING GOVERNANCE OF STATE-OWNED ENTERPRISES MENA-OECD Competitiveness Programme MENA governments have taken steps to harmonise state ownership and governance practices, but these remain dispersed across MENA economies. Establishing a clear overview of the state-owned enterprise landscape is a crucial starting point for designing effective ownership reforms. Proposed policy reforms are: International standards and best practice Structured information on the SOE landscape Clarity on the roles of state ownership, regulatory and audit bodies Well-defined performance objectives for SOEs Data on SOEs' financial and non-financial performance Harmonised governance standards for the SOE sector Aggregate reports on SOEs' operations and performance
  9. 9. This Report is published under the work of the MENA-OECD Working Group on Corporate Governance. More information about the Working Group is available at: http://www.oecd.org/mena/competitiveness/mena-corporate-governance.htm The OECD Secretariat welcomes any questions and comments. Please address these to: Fianna Jurdant Manager, MENA-OECD Corporate Governance Working Group Corporate Governance and Corporate Finance Division OECD Directorate for Financial and Enterprise Affairs Tel. +(33-1) 45 24 79 25 email: fianna.jurdant@oecd.org

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