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Traffic is back to boom year levels and the Dubai Metro has become increasingly popular amongst the emirate's residents, with 30 million passengers used the blue painted wagons since its opening a year ago. The Dow Jones DFM Titans Index, which measures the performance of Shariah-compliant stocks listed at the local exchange, posted the largest gain in September (up 18.24% as of the close of September 27) among all global Dow Jones Islamic Market (DJM) Indices.
The quest for transparency
Nevertheless, the traces of the worst economic crisis since the Second World War are nowhere else as visible in the GCC as in Dubai, with a number of projects having been cancelled. Real estate developer Limitless, a unit of Dubai World, is to delay repayment of a $1.2bn loan for six months, Bloomberg reported on September 28. The tramway project has been delayed to 2014. And the Dubai courts have been flooded with cases, dealing with issues of responsibilities, alleged fraud and defaults.
This puts regulators in the financial sector in particular into the spotlight, and visible signs of action are needed. After Tawhid Mohammed Taher Abdulla Almohtadi resigned in October 2090 as CEO of Nasdaq Dubai-listed jewellery giant Damas International, amid allegations of unauthorised payments of $165m, discussion on how to improve corporate governance standards in the GCC gained pace.
Family businesses are the backbone of the Middle East economies, as nine tenth of all firms are run by such groups. But there is a flip side to the coin. "Generally speaking, if a director is responsible for irregularities, bankruptcy he or she has to be held accountable", Dr Nasser Saïdi, Chief Economist of the DIFC Authority tells AMEinfo.com, without referring to a specific case. "The model that a board member enjoys a de facto 'immunity' just because he is a brother, uncle or cousin of the CEO cannot be kept anymore", the former Lebanese Minister of Economy adds.
The DIFC aims to give an example in upgrading Corporate Governance. Its CG institute, Hawkamah, which Dr Saïdi founded in 2005 and has been leading since then as Executive Director, tenaciously promotes more transparency in the GCC. According to a Hawkamah study from 2008, only 3% of the firms in the Arab Gulf states comply to good governance guidelines. According to the study, only a quarter of banks and listed firms provide information on their dividend policies online, and just 12% have online information on key executives' remuneration.
The DIFC currently encompasses 247 authorized banks, insurers and asset managers, along with two internationally accepted markets (the Nasdaq Dubai and the Dubai Mercantile Exchange), 50 ancillary service providers and 16 registered auditors.
Risk-based regulation
What can the DIFC regulatory body, the Dubai Financial Services Authority (DFSA), do to increase transparency? "We certainly cannot pick board members, this is up to the firms' shareholders", says Paul M.
Gérard Al-Fil, Financial Journalist
