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French Version

Former Lord Mayor notes Beirut 'buzz'

Chairman of arab Financial forum in town for regional conference
'Corporate governance can encourage people to bring money back'

"It is a place everybody wants to come to. There is a buzz about the place and it has been percolating back to London as well.

Beirut is now moving in spirit to what it was before the war," said the engaging chairman of the Arab Financial Forum and former Lord Mayor of London, Sir Gavyn Arthur. Sir Gavyn is in town for four days to open a conference on corporate governance, which was held at the Movenpick Hotel in Beirut on Thursday and Friday. The conference was attended by central and former central bank governors from across the region. "That source of attendance is a tribute to Lebanon for a start, and sends out a message that the region is taking corporate governance seriously," Arthur said.

Arthur, 53, started working as a barrister in the City of London, the world's leading international financial center, in 1991. He later worked as a Sheriff, a deputy to the Lord Mayor, from 1998 to 1999, and was appointed the 675th Lord Mayor of the City of London for 2002 to 2003. "The Lord Mayor has for some 600 years been limited to one year, and because this is such a very short time, Lord Mayors work very much as a team. As we are not politicians we have the same agenda - we may place certain emphasis on our own expertise - but we cooperate before, during and after being Lord Mayor," Arthur explained on the rooftop cafe of the Movenpick hotel. "For instance, I was abroad some 110 working days last year and while I was away my predecessor as Lord Mayor filled my role during my absence. Equally this year while my successor is away I will stand in his place. I will probably as a past Lord Mayor have two or three official engagements each day," he said. When traveling overseas the Lord Mayor has the status of a British government Cabinet minister, essentially acting as the ambassador for the City. Although Arthur is now traveling in a private capacity, his previous position and involvement with the City garners him warranted respect through his potentially profound economic influence. Arthur is now the chairman of the Arab Financial Forum (AFF), which is a parallel organization to the European Financial Forum (EFF), "whose motive is to bring the Arab world together to be able to negotiate on problems arising with the EU and the United States and other trading blocs." The EFF operates to try and sort out trade problems between EU and non-EU members. Like the EFF the Arab Financial Forum is a way of one group meeting another in a neutral setting. Arthur opened an AFF conference in Bahrain in November 2004. "One of the issues we were dealing with there was how we could make public relations for Islamic banking and Islamic products, so far as other parts of the world are concerned, such as recognition and authorization of Islamic banking and Islamic finance products in the EU and the U.S." Arthur believes that Islamic banking will break into Western markets if it is economically advantageous to do so. "There is a market in Europe and the rest of the world, and certainly, we in London wish to be part of it," he said. Due to Arthur's discussions with the British Treasury when Lord Mayor, it was agreed that Islamic financial products would not face double taxation on property, enabling the sector to be financially viable. As a result, the Islamic Bank of Britain now has a license to trade, and the British financial services agency has licensed the first Islamic products to be sold in the U.K.

Arthur thinks that the expertise in Islamic banking will remain in the Arab and Muslim world for the foreseeable future, but is confident that Islamic banking can also be considered as an alternative form of financing for Muslims and non-Muslims alike. "There might be very good commercial, nonreligious reasons for using Islamic products and they should be looked at as such, as products." Arthur does not believe that Beirut, Dubai or Bahrain will loose out to one another as rivals for the major financial center of the region. "It is impossible to say which financial center will be successful. Certainly competition is good for all, and there is room for more than one center in any region. We in Europe have one predominant center, which is London, and Edinburgh (Scotland) for example is the fourth largest European financial center. So, there is room for different expertise in different places," he said. However, to encourage investment in the region corporate governance is essential he said. "I gave some figures at the conference and they are compelling. In the years 1987 to 1998 the Middle East attracted 1 percent of direct global foreign investment. In 1999 it only attracted 0.4 percent, so it more than halved. The region does deserve far more than that, but the point is that it is a worrying trend and the region needs a lot of investment," he said. "The region has got to have absolutely state-of-the-art (corporate governance) to have a competitive advantage over other areas of the world where there isn't that excellent standard of corporate governance. Capital will go where it feels safest and most secure, usually where there is the highest quality of corporate governance. Countries just have to compete. Some will lose out and others will succeed," he said. "Because of the geopolitical reasons of the Middle East, the region has to be extra careful to keep up," he added. Arthur believes that the "secret of this region" is money being able to go to the very buoyant Small and Medium Sized Enterprises' (SME) sector. "SME's will not be able to draw down funds from Merrill Lynch or great global organizations, they are too small, and old traditional forms of financing from family and friends is not going to be sufficient. Local banks are the ones that are going to have to provide that money, and the best way of funding those local banks is if local money comes back from abroad. It needs to be repatriated and that's why corporate governance will encourage people to bring their money back, as they will know there money is absolutely safe in the local banking sector. It is not to say that it isn't safe in the Lebanese banking sector, but it is a question of public relations as well as good, genuine corporate governance."

Meeting President Emile Lahoud earlier in the day, Arthur said Lahoud was very conversant on the principles of corporate governance, which the country is keen to fully implement.

"The other thing about corporate governance is that it makes borrowing cheaper. It is estimated that if there is no corporate governance borrowing is 30 percent more expensive, and that is a huge factor when it comes to competitive advantage. People will pay for security," he added.

Beirut 24-01-2005
Paul Cochrane
The Daily Star

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