Chapter Three: Corporate Governance in the Emerging Markets

3.1 Introduction:

There are differences between the corporate governance in the emerging markets and the developed markets that can be attributed to the differences in the financial structure of each market especially with regard to ownership structures. 115 Moreover, corporate governance is no less important in the emerging markets than it is in the developed markets. In other words, corporate governance as a system is needed in the emerging and in the developed markets.

Firstly, corporate governance is needed to identify the meaning of an emerging market. The emerging markets can be defined as Countries in the world that are expected to experience lots of growth. Investing in these countries has lots of potential for big returns, but it also carries lots more risk than typical domestic investing. 116 The Kuwaiti economy has undergone positive changes in recent years. 117 For example, the stock market has grown by approximately sixty percent in the last two years, and more companies are going public. Notwithstanding this growth, the Kuwaiti government is in the process of conducting a major privatization reform to major industries.

Consideration of corporate governance in the emerging markets focused at the outset upon issues related to the privatization transaction. 118 In other words, the discussion was about the conversion of corporate ownership from the public authority (the state) to the private sector. Thereafter, due to the development of the economy in the emerging

See Gill Amar, Corporate Governance Issues and Returns in Emerging Markets, in Robert E. Litan, Michael Pomerleano and V. Sundarajan (eds), The Future of Domestic Capital Markets in Developing Countries, (Washington, Brookings Institute Press, 2003) at p.313. Hereinafter Amar Gill. 116 See http://www.teenanalyst.com/glossary/e/emergingmarkets.html, retrieved on 4 March 2009. 117 Kuwaits situation must be mentioned here because it is the case study of this thesis. 118 See Cankar, Nina, Transition Economies and Corporate Governance Codes: Can Self-Regulation of Corporate Governance Really Work?, (October, 2005), Journal of Corporate Law Studies, Vol: 5, Part 2, at p. 297. Hereinafter Cankar Nina.

115

32