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Politics & Policy

Corporate Governance Practices in Egypt: The Road Ahead

By Dr. Yousef Boutros-Ghali
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 dynamics.

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 institutions.

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 better government.

CIPE.ORG Feature Service