Anyone waiting for Gulf banks to consolidate — a long talked about prospect — can forget about it for now.
If there is a silver lining to the impact of the credit crisis in Kuwait, it could be highlighting the poor transparency – even by Gulf Arab standards – in the desert country.
Other Gulf countries such as the United Arab Emirates or Saudi Arabia have taken steps to crack down on corruption or boost transparency in a region where stock prices often move sharply before major company announcements. Most – but not Kuwait — have independent stock market regulators.
Once a regional leader in developing financial markets, Kuwait has fallen behind its neighbours. It would have been almost impossible for investors to discern problems at Kuwait’s Gulf Bank before its rescue last month, economists say.
Lack of transparency can often hide corruption, said Amani Bouresli, finance professor at Kuwait University.
“In terms of corruption, there is the perception of corruption index and every year we have a worse location than the year before,” she said.
The global crisis may add pressure on Kuwait to act, Bouresli said.
“When the index is red you see the government acting,” she said. “I hope if the index goes up again the government won’t stop acting.”
But more decisive measures on disclosure might be too bold a step to expect from Kuwait’s current government. Some have suggested that battles between the government and parliament in Kuwait, perhaps the most democratic of the Gulf Arab states, could hinder the type of action that would be necessary.
“The government knows there is a lot of corruption, but it is weak and unserious,” Kuwaiti economist Naser Alnafisi said.