The end of corporate corruption in the Middle East?


  • Share via facebook
  • Tweet this
  • Bookmark and Share

The end of corporate corruption in the Middle East. It makes for a strong headline, but scratch beneath the surface and at what point does this phrase move from being an aspirational tag line, to a real statement of truth about the corporate landscape in the region — and can it be achieved?

Whether it is the global business community seeking to invest in the region, or international markets seeking to secure investment from here, the Middle East is considered a prize and a source of capital and liquidity. That being said, the perception of a lack of transparency and accountability in the region is often considered a barrier, not only to inward investment, but also to ongoing business partnership due to increasingly stringent legislative requirements of countries such as the US and the UK.

This perception is certainly not without foundation — five Arab countries were listed in the bottom ten of Transparency International’s 2013 Corruption Perceptions Index. The UAE, one of the most globalised economies in the Middle East, tops the Arab World in the Index, ranking 26th out of 177th. Qatar follows at 28th, with Bahrain, Oman and Saudi Arabia not far behind.

What we need to establish is whether these negative perceptions have grounding, and it would seem that they do. A PwC survey undertaken in March shows why: 21 percent of companies in the region have been the victims of some form of economic crime. 12 percent of this group has suffered losses of $5m over the past two years, half of which have experienced over $100m in losses due to corporate corruption.

When looking for a solution to this, and to deliver on the aforementioned aspiration of ‘the end of corporate corruption in the Middle East’, I see two paths. Firstly, government regulation can play a crucial role in providing a framework for which the public and private sectors can work within. Yet this on its own never fully eradicates the problem, as we have seen in even the most developed markets.

Legislation and regulation when properly administered leads to compliance, or as is often the case undertaking the minimum level possible to meet the proscribed criteria. If we take this ‘box ticking’ route at a corporate level, we may be committing to meet legal requirements but we are not creating a sustainable movement towards greater accountability and transparency.

This is why the second path, one of private sector leadership, is so crucial. Private sector leadership is where business leaders can make the voluntary move to surpass minimum requirements, and embed an ethos of good governance into their organisations and those with whom they engage.

For these best practices to be genuinely embraced, there is a need for recognition that they are directly linked to the bottom line. A company will gain competitive advantages over its peers by embedding these practices into its mode of conduct. Corporate governance can help a business attract capital, customers, business partners and employees. Simply speaking, it is good for business.

Without strong private sector leadership that creates a prevailing culture of internal checks and balances, an environment in which corruption can thrive is made much more possible. Whilst the former provides a preventative measure, checks and balances seek to encourage this with detection and eradication.

It is my opinion that it is not absurd to imagine a scenario in which there is virtually no corporate corruption in our region, with regulation and corporate culture driving the issue. However, is this aspiration enough of an incentive to change behaviour? If greater economic advantage can be established achieved through legitimate and principled means, then the incentive for criminal activity is minimalised leaving only an incentive for ethical behaviour.  Corporate corruption in the Gulf is by no means the norm. It is increasingly becoming the exception. But that does not mean that we shouldn’t seek to permanently eradicate it from the system.

Badr Jafar, CEO of Crescent Enterprises and Founder of the Pearl Initiative.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

Posted by: Dr. AbdelGadir Warsama Gahlib

To control & fight corporate corruption, in the Middle East, or everywhere there is real need for corporate governance system in corporations. Moreover, there is a need for personal governance that comes from within each person in each corporation. The corporate governance & personal governance must go in line together. The rules & the personal will.
If, we are able to achieve this inter-marriage, then corruption will deminish.
Dr. AbdelGadir Warsama Ghalib
BBK
Bahrain

Posted by: Dr Jekyl & Mr. Hyde

Compared to the West, the Middle East is squeaky clean. Let us remind your readers of Enron, Savings and Loan scandal, Bernie "I am in charge' Madoff, Goldman Sachs selling & shorting own sub-prime paper, The lynching of Lehman brothers, 1 trillion reported missing from the Pentagon the day before 911... I can go on ad nausea. My advice to the Corporate Middle East is go slow and implement controls but don't forget to celebrate this region being a Possessor.

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Is this the end of the Gulf’s Indian cash dash?

Is this the end of the Gulf’s Indian cash dash?

From currency woes to taxation loopholes closing and a clampdown...

2
Q&A with Dubai Chamber

Q&A with Dubai Chamber

We spoke with Essa Al Zaabi of Dubai Chamber of Commerce to find...

The politics of big data

The politics of big data

The UAE may be one of the fastest adopters of e-government initiatives...

Most Discussed
  • 23
    World's most pierced man refused entry to the UAE

    Tolerance has its limits everywhere including Dubai and those who considered Dubai a lawless circus were held accountable...so thank you Dubai authorities... more

    Thursday, 21 August 2014 10:51 PM - Khalil
  • 17
    UK looks to close tax loophole on expat landlords

    UK taxes too much and too complicated and time taking and confusing and continuous. Returns, lawyers, HMRC, taxes too much for too little. Not worth the... more

    Sunday, 17 August 2014 12:40 PM - AbdolRahman
  • 16
    Baby NOT on board?

    The people commenting here were all 20 years old when they were born, never cried, never screamed and never ran etc etc.
    more

    Thursday, 21 August 2014 8:30 AM - Amer