Kuwait CMA will be robust in three years


KUWAIT: When law practitioners talk about the deterioration of financial statuses of financial companies and institutions in the private sector, their statements are based on accumulative legal expertise that they have gained at their field of work. In addition to that, legal practitioners are also aware of the fact that most law cases are strongly related to lack of competent management, and the absence of accountability. This triggers financial crises that have rattled the cage of the global economy, and negatively affected the Middle East. When those people talk about the poor level of governmental services offered at various governmental sectors, not to mention the bureaucracy and procedures that drain the public, whether people living in Kuwait or foreign investors, they highlight the loopholes that must be plugged, in order to allow Kuwait to move forward to the level of other countries. In order to shed more light on the importance of professional management in the public and private sectors, Al Watan met with lawyers Nader Al-Awadi and Abdul Aziz Al-Yaqout on the sideline of a forum that has been held in Kuwait recently.
Al-Awadi criticized the fact that Kuwait Capital Market Authority (CMA) commissioners are appointed before being trained properly to shoulder their tasks, while Al-Yaqout mentioned that the authority will be in a promising status after it matures in three years; especially after shareholders will be able to hold boards accountable. Al-Yaqout also called for including corporate governance in specialized curriculums.

The following is the interview with Al-Awadi:
How do you see the developments that occurred since the issuing of the CMA law? Do you see any opportunities to apply it? When?
Al-Awadi: The problem is that we put in place the law, but we did not prepare a team to execute this law. We are still discussing the status of the authority's commissioners, and the Cabinet decided to rule out three of them. Actually the executive committee is not complete, and I expected them to be highly trained in the field of law execution. However, what we saw was a haphazard attempt to assemble employees, which is a problem in itself, because Kuwait has many laws and never applies those laws.

Do you think it is important to determine the specifications of the members of the authority, which is what occurs in other global authorities?
Al-Awadi: It is not me who says so, but the authority's law that has set accurate specifications that would end this issue if these criteria were followed. However, we need people who have received legal training before being assigned to any tasks. Saudi Arabia sent a team to the United States to receive three years of training before shouldering their responsibilities. In Kuwait, however, the law was issued but we have not agreed on the commissioners yet.

What prevents the enforcement of the law?
Al-Awadi: Many authorities prevent the enforcement of the law, and despite efforts exerted by the Minister of Commerce, there is strong resistance, which is normal. However, the problem lies in political decision makers who must set aside any factors that are not related to the issue while making their decision. It is understandable that those who enjoy benefits may try to affect political decision makers, but they should not yield to any social or political conflicts; especially because the decision has to be unbiased.

How do you see governance in Kuwait compared to the UAE, in light of the large delegation that came from UAE to take part in the governance forum that has been held in Kuwait recently?
Al-Awadi: Governance in the UAE is very advanced, whether we like it or not, and their wise management can be noticed; especially that the political decision making process is based on partiality and taking into consideration public welfare. We are all aware of the incident when one of the ruling family members was imprisoned after abusing his authority by granting himself an undeserved bonus. Of course this would never happen in Kuwait, because the law is not even imposed on common citizens; especially that everyone is connected to MPs or figures of significant influence. The problem is that every official is afraid of losing his position; but in the 1960s, 70s, and 80s, management was wise, before it began to gradually deteriorate. I can understand the fact that problems can surface after wars, but that does not mean that the decision maker cannot take wise decisions. On the contrary, the past periods of time have shown that Kuwaiti capital is ready for investments, but a large chunk of it has been transferred overseas, in search for safer and more feasible investment channels.

Since you are a lawyer, do you think Kuwait requires new laws to amend the current situation, or does it need to enforce the laws it already has?
Al-Awadi: We do not need new laws at all, because through our existing laws, we can reshape the universe, but the most important factor is enforcing those laws. The law is merely ink on paper and cannot enforce itself, so it needs to be enforced in order to be effective. The concept of reward and punishment is what deters people and grants them the feeling of safety, but in Kuwait, the opposite is happening. The Kuwaiti market is uninviting for good currencies, and if you would discuss governance two years ago, people would laugh at you. However, people are now dumbfounded and are clueless because they know nothing about the money they had paid to acquire shares in companies in the Kuwaiti market. The money they invested went down the drain, and companies declared bankruptcy. Investors could not find any help. It astonishes how the current laws and the authorities of official bodies can refer those companies to the public prosecution. Many companies lost over 90 percent of their capital, and not one of them was asked about the reasons behind such dramatic losses. If proper, unbiased investigations take place, we will discover that those companies declared bankruptcy not because of shortcomings, but because of fraud, which is punishable by law.

Al Watan's interview with the second lawyer Abdul Aziz Al-Yaqout:
Where does Kuwait stand in the governance arena among other advanced countries in that arena?
Al-Yaqout: We are still very late, and we have a long path to follow to accomplish what other countries have accomplished in that arena, or even part of what other Gulf Cooperation Council (GCC) countries have achieved. Dubai, for example, has implemented governance in all governmental circuits in compliance with the decision made by its ruler. Such a step is significant for Dubai, and Kuwait has a great opportunity to learn from the implementation of governance from Dubai. If we rate countries in the governance arena, Kuwait will be at the bottom of the list at point zero, which is very obvious, because Kuwait does not even apply the simple regulations concerning governance that are found in the Kuwaiti law.

Are there laws regarding governance in Kuwait?
Al-Yaqout: There are mere basics and simple regulations in the commercial companies' law, and some amendments issued by the Central Bank of Kuwait (CBK) regarding banks. In short, when it comes to governance, we have a few regulations scattered amongst other laws.

What are your expectations regarding the performance of Kuwait's CMA in the future, in light of the challenges it faced at the beginning of its founding?
Al-Yaqout: I am sure that the authority will develop and will perform as expected. It will also benefit from the experiences of other authorities that worked in the region before it, but this requires some time, which is normal. As we can see in Saudi Arabia, their authority has become very significant, but required a long time before becoming effective. The authority in Kuwait is newly born, and lacks the necessary trained employees, since the members lack experience and a legal background, which are pivotal factors in the authority. I believe they need some time to gain experience and cement their knowledge before turning the authority into a regulator of the market.

Do you believe that politics has a role in founding the authority and the formation of its members? What is the future that awaits the authority in your opinion?
Al-Yaqout: Of course politics have a role; especially regarding the speed of which the authority was formed. In Saudi Arabia, it took them two years to understand the laws and deliberate with the market's main players, investors, and traders, not to mention training programs. I think forming the authority hastily has forced it to bite more than it can chew, because some segments of the economic society feared attempts to obstruct the authority's work. Regarding the authority's future, I simply believe that it requires some time, and I am confident that after three years, the authority will be strong and experienced enough to manage its issues and play an effective role in the Kuwaiti economy.