Lack of transparency, governance still dogs Gulf

Lack of transparency, governance still dogs Gulf

There had been some improvement but still not enough-says head of asset management firm Mashreq Capital.

October 19, 2010 9:14 by Reuters

Poor corporate governance and transparency still dogs the Gulf Arab region with some entities only providing key information to investors when they need to tap credit markets, the head of asset management firm Mashreq Capital said on Monday. Abdul Kadir Hussain said a risk appetite among investors, particularly towards emerging markets, meant the lack of clarity would not deter investors in pursuit of high yields.

“Right now, people are chasing yield, they’re happy to take on risk and in that environment it’s much easier to get by,” Hussain told the Reuters Middle East Investment summit.

Mashreq Capital is the asset management and investment banking arm of Dubai-based Mashreq Bank .

“If risk appetite declines and we found ourselves in a situation akin to 2008 or in the first half of 2009, where international investors were much more careful as to how they were spending their investment dollars, then it could be a much bigger issue,” Hussain said.

“Corporate governance and transparency continues to be an issue. The sooner that is handled and tackled … the better it is for all concerned.”

Hussain said there had been some improvement but still not enough.

“You’ve seen a lot of new issuance this year, a lot of sovereigns, quasi-sovereigns and corporates come to the market to raise debt,” he said. “You still generally have a tendency of seeing these issuers when they are coming to raise debt. You don’t have a lot of guys who conduct ongoing forays into the investor community in terms of providing information.”

A recent deal between troubled Islamic mortgage lender Tamweel and Dubai Islamic Bank served as a recent reminder that the Gulf region still lags behind developed economies on transparency.

Dubai Islamic Bank raised its stake in Tamweel to 57 percent last month, scuppering long-touted plans to merge Tamweel with another troubled lender, Amlak

Few details of the Tamweel deal were made available and there has been no public announcement yet on what the government plans for Amlak.

“There’s still not as much as clarity as to the economics around that transaction, given that Tamweel was a publicly listed company and that DIB is a publicly listed company and both have public debt instruments outstanding,” Hussain said.

“If such a transaction was taking place in a global developed market you would probably have a lot more disclosure and interaction with the public stakeholders in both these entities,” he said.

(Reporting by Amran Abocar, Jason Benham, Dinesh Nair, Rachna Uppal and Shaheen Pasha; Editing by Greg Mahlich)