It may be of little interest to the average citizen of GCC countries, but the agreement this week by GCC market regulators on a common standard for stock market listings is hugely significant. If the GCC's Supreme Council accepts the experts' recommendations, a major step will have been taken toward the creation of a powerful regional financial bloc. The GCC's Securities and Commodities Authority has agreed a two-year trial project whereby all securities on all GCC markets will operate under unified rules. After being tested for 24 months, the regulations will be adjusted as necessary and then become mandatory. One of the key issues that has been agreed is the issue of corporate governance, From this flows the transparency which, in the parlance of financial markets, “gives comfort” to investors. Companies that wish to issue their shares on a stock market for the first time, in an Initial Public Offering (IPO), simply have to provide as complete a statement of their finances and their business prospects as is humanly possible. There should not, nor can there be, any trusting merely of personalities or expansive assurances. What is needed is the nitty-gritty details of the business until the date of issue and a realistic assessment of its prospects once it has raised more capital from investors. To be sure, this is not as easy as it sounds. One has only to look at the debacle of Facebook's IPO last month in the United States, to see how, even when companies are advised by some of the world's supposedly top investment banks, an IPO can go seriously wrong. Nevertheless, the GCC's unified rules ought to give far greater transparency to investors, enabling them to compare apples with pears. It will also hopefully have the effect of encouraging individuals and investment entities to take a longer view of a company's prospects, looking to earn returns from dividend income rather than merely seeking to profit from an early appreciation in the value of a stock or share. “Short-termism” has been the bane of other markets around the world, particularly in the West, encouraging executives, (whose remuneration is too often tied to their company's share performance) to seek immediate profits this year and the next, rather than taking a more considered view and investing for the long-term benefit of their company and its shareholders. It would be unrealistic to expect that as GCC markets draw together around a single set of regulations, there will not be investors who will look for instant gains rather than a secure income over several years. However the current limitations on direct foreign investment in GCC markets provide a unique opportunity for the development of an altogether wiser and sounder growth in our capital markets than has been seen elsewhere. Readers should not imagine that the proposed unified stock market rules add up to an arcane subject that does not concern them. For the GCC countries, not least the Kingdom itself, to develop strong alternative economies to the hydrocarbon sector and to fulfill their potential as a regional economic powerhouse, requires the efficient mobilization of capital, which the GCC market regulators have helped to provide. __
