By Dr. Yousef
Feb-04 - Feb-10, 2002
Dr. Yousef Boutros-Ghali is the Minister of Foreign
Trade for the Egyptian government. This article is based on a speech
by Dr. Boutros-Ghali at a conference in Cairo on October 24, 2001,
sponsored by the Egyptian Capital Market Association and the Center
for International Private Enterprise.
There are many challenges to promoting the
principles of corporate governance in the Arab world. The first
challenge I have found is that there is no Arabic equivalent for the
word "governance." We tried to find one Arabic word that
translates the English word or its concept, but it was difficult.
"Governance" is related to "governing" and though
it seems related to ruling, it is neither rule nor government.
"Governance" applies to the public and the public and
private sectors, but it is not limited to management or to training of
personnel-it is, for example, possible to have efficient personnel in
an environment of poor governance. The problem is not just semantic,
because when we don't have a word to express a concept, then the
concept does not exist in our daily life.
Corporate Governance is about shareholders rights,
the way decisions are made, and how companies are run. It is the
interaction between the components of one unit. Concepts of governance
apply to any human association or organization. Policy makers and
government officials, like myself, are concerned that governance is
not well established. While we support recent efforts to help
establish governance in the Egyptian economy, there are still problems
in the private sector that must be addressed.
The interaction between the components of one unit
and between those components and the outside world is a main concern.
The strength of an economy lies in its ability to anticipate change in
the internal or external environment and its ability to adapt quickly.
This is especially evident during times of crisis, when you may find
strong economies that grow at a reasonable rate but suddenly it looses
the ability to adapt mainly due to poor governance.
How the external changes are interpreted and how
this interpretation leads to action is the basis for governance. This
is what we consider in our efforts to help develop the Egyptian
economy. Our current economic reform program has already affected
changes in exchange rate and interest rate policies. These are
decisions that can be issued in minutes, but the management of these
policies is again a matter of governance, as is the interaction
between the results of this policy and the external conditions. The
interpretation of the external conditions that affects the exchange
rate, interest rate, the size of public expenditure, and credit is all
related to governance.
Governance is a concept that integrates
regulations, laws, traditions, and human interaction. It exists only
by practice and it cannot be imposed simply by a decision or law.
During the past ten years, we started to change the decision making
process in addition to the economic reform policies. This change in
the decision-making process includes the transformation from direct
government management or intervention in the economy to free market
The most difficult element that is facing the
government institutions, the family institutions, and the private
sector or state enterprises is that the demand and prices move up or
down as a result of factors that are beyond the institution's control.
This uncertainty sometimes leads institutions to
resort to strange interpretations when what is needed is flexibility.
Too often workers and managers refuse to see that change is a result
of the interaction between demand and supply, and between
Good governance is contagious. Once liberalized
trade policies open a country to the external world, they promote
investment, and almost immediately change the society. This investment
money reacts well to governance and demands transparency, disclosure,
enforcement of contractual agreements, and property rights.
If we agree that good governance is needed and that
we cannot simply apply it from a set of rules, and then we must be in
contact with those who practice good governance. This open contact is
needed and this need fosters investment and free trade policies as
well as increased interaction with the outside world. When good
governance becomes a daily concern of society, only then can we build
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