By Ed Attwood
Tighter governance vital as firms compete to attract outside capital, says PWC boss
Family-run businesses in the Middle East will need to boost transparency if they want to attract investment capital in the future, the head of one of the world’s biggest professional services firms has said.
Dennis Nally, the chairman of PricewaterhouseCoopers (PwC), told Arabian Business that one of the major lessons of the global recession had been the interconnectivity of global capital markets.
“Investors who are thinking about these issues from a global standpoint, they do want to see more transparency, they do want to see best practices with regard to governance,” Nally said.
“And to the extent that particular parts of the world are not as competitive as other parts places them at a disadvantage with regard to attracting future capital down the road. It’s one of the lessons that we all need to be sensitive to and pay attention towards.”
But Nally also declined to single out the Middle East as a particular area of concern from the transparency perspective, in the eyes of global investors.
“I wouldn’t describe it as a problem, I just think it’s different,” he said. “And I would not even single out the Middle East from that standpoint. In different parts of the world, governance practices and transparency issues have evolved over time.”
Recent research carried out from PwC shows that over 80 percent of Middle Eastern businesses are owned or run by families.
A worldwide study by the firm also shows that a majority of those businesses have seen demand for their offerings increase in the last year, and that well over half have a positive outlook for the future.
“We do a lot of work with a number of the family businesses in the Middle East, and I don’t think, just by definition that if you’re privately held, that’s a negative,” Nally added.
“I think it does get back to, though, the extent that certain family or privately held businesses are looking to stand and grow, and they’re going to be looking for outside capital.”
Regulators around the Gulf are working hard to tighten rules after a spate of cases involving family-run businesses.
Financial houses in the region were left heavily exposed after two major Saudi conglomerates became enmeshed in a complicated legal dispute involving up to $22bn in debt.
Dubai-based jeweller Damas International was also reprimanded by the DIFC’s regulator in March after it emerged its founders, the Abdullah Brothers, had withdrawn $167.2m in cash and gold in unauthorised transactions.
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As long as there is no transparency in the system, the UAE can forget major investments in the coming years. Look at the way they got into a spat with Canada. They are not aware of the repercussions now.