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Hana’a Mehyar Awad has spent all of her 24 years in Hebron, the largest Palestinian city in the West Bank. Hebron often makes international headlines because of political tension and violence. But as a resident, Awad knows that it’s also a busy hub of West Bank trade, generating a third of the area’s GDP—and that the city has even more potential to drive economic growth.

That business potential, unfulfilled in part because of a lack of consumer and investor confidence, sparked Awad’s interest in corporate governance. After she graduated from Palestine Ahliya University College’s corporate governance program, an IFC initiative to promote good corporate governance in the Middle East and North Africa, she landed a job at the Palestine Investment Bank.

Applying corporate governance principles like transparency and disclosure “can improve business performance here and enhance the confidence of customers, as well as enhance our country's ability to face risks,” she says. “The course helped me so much that I’d like to see it offered in all universities in the West Bank and Gaza.”

Training future leaders like Awad to help strengthen the Palestinian economy is a primary goal of the corporate governance program—part of a decade-long project between IFC and the Palestine Capital Market Authority (PCMA) to build local capacity. IFC partnered in 2014 with the PCMA and five Palestinian universities to offer the corporate governance course, based on IFC’s curriculum, every semester. More than 1,100 students, including Awad, have already graduated.

Hana’a Mehyar Awad landed a job at the Palestine Investment Bank after graduating from the corporate governance program. © PCMA

Influencing the Marketplace

The IFC-PCMA corporate governance curriculum starts with basic principles and covers topics like global best practice, how boards of directors can be more effective, and the board’s role with respect to management, audits, internal controls, disclosure, and transparency.

The project is especially relevant because this is the first formal corporate governance education program to be launched in the West Bank and Gaza, says Bashar Abu Zarour, the PCMA’s General Director of Research and Development. “These students could be the future change agents in their companies as they will join the workforce equipped with fundamental corporate governance knowledge.”

Well-governed companies are associated with lower risk and higher returns for shareholders, and are able to operate more efficiently. In addition, corporate governance builds trust among company stakeholders, including greater confidence from investors. Economies with good corporate governance frameworks are usually less vulnerable to financial shocks.

Corporate governance is especially important in conflict-affected regions like the West Bank and Gaza because its principles are a foundation for rebuilding economies. Conflict and political instability threaten to destroy vibrant businesses, sending more people into poverty. But strong corporate governance helps bring a broad shift in business culture and enables companies to weather these difficulties, while increasing their potential to attract investment. This is a pressing concern in the region, where an unsustainable economic situation threatens to deteriorate further amid declining donor support and a persistent financing gap.

Image: Hebron is a busy hub of West Bank trade, generating a third of the area’s GDP. © Shutterstock

Creating the Right Environment

In addition to the corporate governance course, IFC’s partnership with the PCMA has resulted in the creation of a corporate governance code and the capacity to implement it, creating rules for companies listed on the stock exchange. In 2013, IFC also assisted local officials in developing a corporate governance scorecard model to measure the adherence of listed companies to the code. This suite of tools was fully implemented in 2017.

Together, those efforts paved the way for the Palestine Exchange being promoted to frontier-market status by FTSE Russell in 2016, according to the PCMA’s Abu Zarour. (FTSE Russell is a unit of London Stock Exchange Group’s information Services Division.)

The good corporate governance practices of the listed companies and the trading platform was one of the major pillars for the upgrade,” Abu Zarour says. “Thanks to the mutual efforts of the PCMA and IFC, corporate governance is now known by public shareholding companies… We believe this is very important to the growth of the Palestinian economy.”

IFC works with firms to attract and retain investment by promoting the adoption of good corporate governance practices and standards. IFC provides specialized advisory services and assessments, builds the capacity of local partners and institutes of directors, and works with regulatory institutions and governments to improve corporate governance laws. IFC has helped in the adoption of 121 laws, regulations and codes through its corporate governance work. IFC has assisted over 15,000 companies in more than 30 countries in implementing better corporate governance practices. This has helped these clients obtain over $7 billion in new financing.

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Published in September 2018