Most read articles
Transparency in the Middle East
Last week, The World Bank published a report entitled “A New State of Mind: Greater Transparency and Accountability in the Middle East and North Africa.” A main premise of the report, the link for which is at the end of this article, is that “poor governance, and, in particular, the lack of government transparency and accountability, is at the root of the region’s development failings—including low growth, exclusion of the most disadvantaged and women, and overuse of such precious natural resources as land and water.” When put in a legal context, “transparency” becomes “disclosure.” And, depending on which context disclosure is being applied in, we get different manifestations of it. For public shareholding companies listed on stock markets, there are rules and regulations that require accurate, timely, and complete disclosures. Nowadays, capital markets cannot function and thrive without this. External auditors play a critical role in safeguarding proper disclosure of listed companies. To paraphrase Captain Ramsey in the movie Crimson Tide, external auditors constitute the front line and the last line of defense as far as investors and shareholders are concerned. How external auditors are licensed, accredited, and monitored is critical to safeguarding shareholder interests and maintaining investor confidence, particularly in markets where legal recourse is not readily available - which is the case in many Middle East and North Africa markets. Listed companies typically engage in two types of legally required disclosures: routine regular disclosures, such as those pertaining to quarterly, semi-annual and annual results; and, immediate disclosures of information related to events that may have a material impact on the share price, such as a fire in a production facility or the gain or loss of a major contract to sell products, or an acquisition. An area that receives little attention in the Middle East and North Africa markets is related to “related party transactions.” A listed company may have legitimate reasons to, say, purchase goods and services from another company that happens to be related to a board member, a major shareholder, or a member of its senior management. However, such transactions need to be conducted on an “arm’s length” basis, making sure of the quality of goods purchased and that the price paid is a fair market price, without unfair markups. A related party transaction should also be disclosed to the market, along with the rationale for entering into it. Several international organizations, including the OECD, have issued recommended best practices that can be followed in such circumstances. An acquisition of a related company by a listed company at a price that includes a high markup of goodwill needs also to be fully explained and disclosed to shareholders. Monitoring proper disclosure by listed companies is the responsibility of the capital market regulator. The capital market regulator has three main functions: enforcement of the securities law and related regulations; market reform - updating existing rules and addressing market deformities; and, market development - introducing new financial products, for example. The ability of the capital market regulator to enforce disclosure is paramount. Otherwise, investor confidence in listed companies will be lost, leading to dwindling liquidity and a migration away by investors and companies from the afflicted stock market to greener pastures. The days of investor and company “capture” by national exchanges are gone. This “ability” of the regulator has two main aspects to it: top notch knowhow of the intricacies of capital markets, and freedom from political interference. The ability of the capital market regulator to recruit, retain, and remunerate qualified talent is critical. Political freedom for the regulator means financial independence, with its allocations enshrined in successive government budgets, and a reporting line to the highest political authority in the land - not to cabinet minister, for example. The regulator cannot take part of the trading or depository fees that accrue to exchanges and depositories to finance its operations - a clear regulatory conflict of interest that will lead to a loss of investor confidence. It may seem, at first sight, a forgone conclusion that taking care of one’s capital market is good for on’e economy. After all, the national capital market, with the stock market at its core, plays an important role in facilitating access to finance for small, medium, and large enterprises and corporations, which use funds raised to undertake capital investments that lead to economic growth and create jobs - much relevant points for the fast growing populations of the Middle East and North Africa region. But that is now always the case. And, as The World Bank report implies, the ability of the capital market regulator in some countries of this region to enforce proper disclosure rules and regulations requires a shift in the enforcement matrix. And in such circumstances, the “state” has to provide the political cover and support to the entities undertaking enforcement actions. https://openknowledge.worldbank.org/handle/10986/38065
Oct 10, 2022 · 4 min read
Bertrand Russell and Freedom
I don’t usually quote other people but the state of affairs in the world these days necessitates a reminder of Bertrand Russell’s thinking. "...freedom is not the panacea of all things. I think there are a good many matters in which freedom should be restrained. Some of them things in which it is not sufficiently restrained at present. In the relations between nations; there ought to be less freedom than there is, I think." "...I think that freedom must have very definite limitations, where you come to things that are definitely harmful to other people or things that prevent you yourself from being useful, such as lack of knowledge." "...I do like clarity and exact thinking and I believe that very important to mankind. Because when you allow yourself to think inexactly, your prejudices, your bias, your self interest comes in in ways you don't notice, and you do bad things without knowing that you are doing them. Self deception is very easy. So that I do think clear thinking immensely important.." https://www.youtube.com/watch?v=xL_sMXfzzyA
Sep 27, 2022 · 1 min read
A few years ago, I moved back to an apartment in Amman that I had lived in some years previously. When I had rented this apartment the first time, I asked a friend to help install a fireplace. My friend, who was an officer in the Jordanian Armed Forces Royal Corp of Engineers, did a great job. Workers came in and out drilling through a concrete ceiling, putting up a tall chimney, and stone-casing the mantel. A couple of weeks later, and after profuse apologies to the neighbors who bore the construction noise in silence, I had a fully functioning wood fireplace and those Amman winter evenings were never better. My friend passed away some time after that from cancer. He was a member of a small minority in Jordan called Circassians (or Cherkess). The Circassians are an ethnic group that has inhabited the Caucasus Mountains for millennia. A valiant and proud people, they were forced to leave their lands in the 1880s during the Ottoman-Russian wars. Some migrated into inland Russia and some into Ottoman territories. Today, Circassians can be found throughout the Middle East – in Turkey, Syria, Lebanon, Israel, and Palestine. The Circassians settled Amman, which was a mere old ruin with no permanent inhabitants, in 1878 and built it up from scratch. Both of my grandmothers are Circassians. Russia has recently, and quietly, allowed Circassians to return to their old territories in the Caucasus, granting citizenship to those who wish to resettle in their ancestral homelands. Surprisingly, or not, large number of Circassians are applying for and receiving such privileges, and are gradually moving back, leaving the Middle East. This is driven by more than one factor. The headwinds facing the Middle East in the coming years and decades are expected to be rough and it is prudent to hedge one’s bets. We see this not only where Circassians are concerned but also in the numbers of Arabs applying for residency and citizenship in Western countries that would take them – the US, Canada, and some European countries. Australia and New Zealand are also destinations. When I moved back into that Amman apartment, I was pleasantly surprised that the fireplace was still functioning well. Which brings me to one particular winter evening. The temperature was close to zero Celsius and I had piled a few large logs on top of each other to make a fire. I tried to light the fire but it kept going out. After about an hour or so of trying, I had one last twig to use as kindle and I inserted it amongst the pile of large logs thinking that its small flame would die out along with the rest of the pile. Lo and behold, that small twig, for no apparent explanation, lit up the whole pile and I had a roaring fire brining back memory of friends, past and present. The roaring fire of that evening also started me thinking about small twigs and how unexpected they can be – a small, scrawny, dried up twig can make a big fire out of a pile of old, lazy, dried up bunch of logs, piled on top of one another.
Sep 20, 2022 · 3 min read
The US and Jordan
“The Asia Scotland Institute is delighted to be joined by Bruce Riedel, of Brookings, and Majd Shafiq to discuss his latest book, 'Jordan and America: An Enduring Friendship. This is the first book to tell the remarkable story of the relationship between Jordan and the United States and how their leaders have navigated the dangerous waters of the most volatile region in the world. Jordan has been an important ally of the United States for more than seventy years, thanks largely to two members of the Hashemite family: King Hussein, who came to power at the age of 17 in 1952 and governed for nearly a half-century, and his son, King Abdullah, who inherited the throne in 1999. Both survived numerous assassination attempts, wars, and plots by their many enemies in the region. Both ruled with a firm hand but without engaging in the dictatorial extremes so common to the region. American presidents from Eisenhower to Biden have worked closely with the two Hashemite kings to maintain peace and stability in the region--when possible. The relationship often has been rocky, punctuated by numerous crises, but in the end, it has endured and thrived. Long-time Middle East expert Bruce Riedel tells the story of the U.S.-Jordanian relationship with his characteristic insight, flair, and eye for telling details. For anyone interested in the region, understanding this story will provide new insights into the Arab-Israeli conflict, the multiple Persian Gulf wars, and the endless quest to bring long-term peace and stability to the region.” https://www.youtube.com/watch?v=u4RAkVYqgMM
Sep 13, 2022 · 2 min read
Life is sacrifice. As we go through life, we tend to give up something for another. Whether we are aware of this or not is another story. The practice of sacrifice is found in the oldest human records and is common to most religions and cultures. Our ancestors used to offer animals, plants, material possessions or human life to deities in exchange for some gain or benefit. As such, the act involved the surrender or destruction of something precious for the sake of attaining or retaining another that enjoyed a higher value - material or otherwise. Somewhat surprisingly, or perhaps not, the Latin origin of the verb sacrifice means to make something sacred. Joseph Campbell’s explanation of marriage in terms of sacrifice is noteworthy. Campbell states that the main objective of marriage is not the birth of children or the raising of families. He invokes the image of marriage as being an ordeal in which the ego is sacrificed to a relationship in which two become one. This, he states, is a mythological image that embodies the sacrifice of the visible for a transcendent good. On this, Campbell does not depart much from Iris Murdoch. Murdoch says that god can and should be found in the ability of one human being to fully and unapologetically accept another. It is difficult to imagine life without sacrifice. We give up from and of ourselves to support, elevate and nurture the existence, maturation and prosperity of another, or some other - a partner, child, business relationship, friend, protégé, country. In doing so, we lose and give up not only privileges but cherished items like our time on this earth, our energy, reserves of patience, tolerance and love, in the hope of attaining that transcendent good - or finding god. And sometimes we succeed at this, but many times we fail. And when we fail, perhaps we will not miss what we sacrificed and lost in the immediate. But once we reach another fork in the road and we have to take a new turn in new company (personal or professional), our accumulated losses become theirs; they bear part of our cross and we part of theirs. Sometimes, what does not kill you does not make you stronger; it makes you a different person, with less and more to offer. And it is the latter that makes all the difference.
Sep 6, 2022 · 2 min read