Anti-Corruption Authority needs more teeth

AL-SHALL WEEKLY REPORT

Between the first establishment of the Kuwait Anti-Corruption Authority on 19/11/2012 and the talk today about referring its Board of Trustees to retirement or to a probing committee, ie the option of killing it by the knockout blow or its defeat by points, as in wrestling, there are about four years and two months (50 months). During this period corruption peaked despite the numerous entities of fighting it such as the State Audit Bureau, Financial Controllers, the parliamentary Protection of Public Funds Committee and the private Protection of Public Funds Committee, which are supporting entities to the work of the Anti-corruption authority. Before November 2012, the government dismissed most of the Capital Markets Authority members and suspended its work for several precious years. After that, the Constitution Court revoked two National Assembly’s because of governmental procedural errors. Before and after that, all development plans failed and all financial and economic reform policies despite the huge expenses of consulting that the government received.

Over and above what have been said, the government was responsible for the foregoing, however, everything else changed and it remained firm. The procedural error or choice error is its creation. Unless authority is associated with responsibility for accountability there is no hope for the stability or completion of any of these authorities and there is no use from advice or consulting. We are not in a position to defend the AntiCorruption Authority neither are we in belligerency with it.

But after 50 months of its founding, it cost the public treasury a lot of funds. No achievements in confronting corruption. Nevertheless, the mechanism of transforming of its management has become so simple by the same government and what value do all similar institutions have? The basic principle is to maintain the prestige of such institutions, while the aim of criticizing it and from the highest authorities is only to put those institutions in the self-defense mode rather than being in an offensive mode to achieve its ends.

In France and Italy, a President and a Prime Minister were jailed; in South Korea and Brazil, two Presidents were dismissed; in Germany and Britain two Ministers of Defense were dismissed due to indirect accusations, all of them were accused with corruption. There are no watchdogs in all these countries or supervision institutions as in Kuwait. But they have good values systems and interchanging governance governments.

The reason for this severity in these states is not vengeance from a corrupt person but a real belief that responsibility begins from the top to be a lesson and example and that development and growth cannot be built on corrupt bases. Its remedy begins from the top of the administrative pyramid. While in Kuwait we overdraw building structures then we take off their teeth and claws while insist on keeping them as a form without content. And later on to be developed to load and cost and quotas in appointing its leaders and some big corruptors have a major stake therein.

During the prosperity of oil market, it was possible to conceal many sins like the lack of relationship between appointment and the need of work in the public sector or the lack of relationship between wages and productivity and like the exaggeration in the cost of bargaining political loyalty or allegiance, etc. That has become almost impossible in our present times and in the visible future. Corruption and waste are two devastating pests and the country’s future may not stabilize unless they are confronted firmly. The way that Anti-Corruption Authority is treated is a wrong pattern that will keep it paralyzed and will recur with similar entities. If there is hope about development and reform, the responsibility should be respected and kept alongside with the power. Reward and punishment should not exclude anyone. Hostility among the Authority’s Board of Trustees is the outcome of corruption institution’s superiority and the result of the abusive quota style of the government forming its board of trustees. If reform is the target, it should start with the government, the crises maker.

Local Real Estate Market

2016 ended with negative liquidity outcome. According to available data, released by the Ministry of Justice -Real Estate Registration and Authentication Department-, market liquidity dropped to KD 2499.2 million, ie -24.7 percent of 2015 liquidity which was in the amount of KD7133 million. Liquidity in the second half of the year scored KD 1121.7 million (KD 7.1131 million for the first half ), this indicates a likely trend of continued drop in 2017 especially if the rise in the interest rate is sustained. The above graph shows the performance of the real estate market in the past 15 years. Its rise began in 2002-2003 and its liquidity then scored KD 8383 million.

Weakness indicators began to appear in 2004 and 2005 and liquidity scored KD 2231 million. Once again, liquidity began to improve in 2006 though it was a correction year in the regional capital markets and Kuwait Stock Exchange. It continued to rise until liquidity scored KD 4447 million in 2007. But it dropped again in 2008 and continued to retreat in 2009 which achieved the lowest level since 2002 without calculating the impact of inflation. It recovered in 2010 and continued until 2014 and liquidity scored its highest figure during the period 2002-2016. It began to decline in 2015 and liquidity scored KD 3318 million and continued in 2016 and scored KD 2499.2 million.

Private housing liquidity dropped in 2016 and scored for both contracts and agencies about KD 1022 million. Its relative contribution to liquidity formed 40.9 percent, less than 44.4 percent of its 2015 contribution. Drop percentage vis-a-vis 2015 scored -30.7 percent compared with 2015.

Likewise, trading of the investment housing dropped to about KD 861.9 million, which was coupled with a drop in its contribution to liquidity to 34.5 percent in 2016 (41 percent in 2015). Drop in the liquidity of investment housing scored -36.6 percent compared with 2015. Housing of both private and investment captured 75.3 percent of real estate market liquidity in 2016, leaving about 24.7 percent of liquidity to the commercial activity and warehouses.

Commercial activity rose and achieved KD 600.1 million, 31.8 percent rise. The contribution to total market liquidity increased to 24 percent in 2016, while its contribution to liquidity was 13.7 percent of market liquidity in 2015. This is logical because it was not affected by price inflation during oil market prosperity era.

Average value of one deal in the end of 2016 for private housing dropped to KD 332 thousand down from KD 352 thousand in 2015. Likewise, the average value of one deal of investment housing dropped sharply to about KD 644.6 thousand from KD 862.6 thousand. The average price of the commercial deal is KD 5.715 million up from KD 4.509 million in 2015. The general per deal average dropped in all real estate sector trading in 2016 by -2.1 percent. We note that the second half of 2016 witnessed drop in the market liquidity and liquidity may contain in dropping in the first half of 2017. Its liquidity will be affected negatively by the contracting monetary policy as we mentioned, but it may be supported by improved oil market conditions and cooling down geopolitical events.

Trading Features at Boursa Kuwait

Kuwait Clearing Company issued its report titled “Trading Volume According to Nationality” for the period of 01/01/2016 to 31/12/2016, which was published on Boursa Kuwait official website. The report indicated that individual investors are still the prevailing group though their share is declining; they captured 46 percent of total value of sold shares (48.9 percent for 2015) and 42.1 percent of total value of purchased shares (45.4 percent for 2015).

Individual investors sold shares worth KD 1.325 billion and purchased shares worth KD 1.213 billion with a net trading, more selling, by KD 111.692 million.

Corporations and companies sector captured 32.4 percent of total value of purchased shares (30 percent for 2015) and 26.2 percent of total value of sold shares (26.5 percent for 2015). The sector purchased shares worth KD 933.330 million while sold shares worth KD 754.078 million with a net trading, more purchasing, by KD 179.251 million.

The third contributor to market liquidity is the clients’ accounts sector (portfolios), which captured 18.7 percent of total value of sold shares (15.6 percent for 2015) and 16.3 percent of total value of purchased shares (14.9 percent for 2015). The sector sold shares worth KD 538.107 million and purchased shares worth KD 469.305 million, with a net trading, selling, by KD 68.802 million.

The last contributor to liquidity is the investment funds sector which captured 9.2 percent of total value of purchased shares (9.8 percent for 2015) and 9.1 percent of total value of sold shares (9 percent for 2015). This sector purchased shares worth KD 264.544 million and sold shares worth KD 263.302 million, with a net trading, purchasing, by KD 1.242 million.

Boursa Kuwait continues to be a domestic bourse with Kuwaiti traders forming the biggest trading group and purchased shares worth KD 2.501 billion capturing 86.8 percent of total value of purchased shares, (84.9 percent for 2015), and sold shares worth KD 2.481 billion, capturing 86.1 percent of total value of sold shares (85.9 percent for 2015). As such, their net trading, purchasing, by KD 19.755 million. Other investors share, out of total value of sold shares scored 10.8 percent, (10.4 percent for 2015), worth KD 311.731 million and they purchased shares worth KD 268.843 million, or by 9.3 percent of total value of purchased shares (10.7 percent for 2015); thus, their net trading value, the only one selling, by KD 42.889 million.

GCC Investors’ share, out of total value of purchased shares scored 3.8 percent (4.4 percent for 2015), worth KD 110.771 million, while their total value of sold shares scored 3 percent (3.7 percent for 2015), worth KD 87.638 million. Their net trading was, more purchasing, by KD 23.133 million.

Relative distribution among nationalities changed slightly from the previous period; 86.5 percent for Kuwaitis, 10.1 percent for traders from other nationalities, and 3.4 percent for GCC traders versus 85.4 percent for Kuwaitis, 10.6 percent for other nationalities and 4.1 percent for GCC traders, for 2015. This means Boursa Kuwait remained domestic though with more trading by foreign and investors from outside the GCC than from the GCC with trading prevalence to individuals.

Number of active accounts between the end of December 2015 and the end of December 2016 dropped by -39.6 percent, (dropped by -57.6 percent between the end of December 2014 and the end of December 2015). Number of active accounts in the end of December 2016 scored 15,603 or 4.2 percent of total accounts, versus 25,844 accounts in the end of December 2015, or 7.1 percent of total accounts.

Boursa Kuwait performance

The performance of world markets indices during 2016 mingled by 2016 performance for the (Morgan Stanley Capital International, the “MSCI”) index. The world index rose by 2.4 percent in the end of the year versus a drop in the indicator itself in 2015 by -2.7 percent. The “MSCI” increased also for American market by 8.4 percent. The weight of the American market and its impact are quite extensive on the rest of other markets. The comprehensive index for the two Americas rose by 6.6 percent. But MSCI index including Europe dropped by -8.5 percent. And if we exclude UK, the index itself dropped by -5.6 percent. The situation of Asia was similar to most European markets. MSCI index for Asia/the Pacific dropped by 2.1 percent compared with -4.3 percent drop for 2015. The Japanese index rose by 8.2 percent. Global markets index dropped to about -5.6 percent if we exclude the US market. This reflexes the weight of the US market in making the index as reference above.

When compared to 2015 year, 11 markets raised out of 16 markets, while the Boursa Kuwait index fell, according to AlShall index and occupied the 13th place, with a slight decrease of about -0.8 percent, (-17.6 percent and in the 16th place the last- among these markets in the end of 2015). It should be noted that the average rise of all markets scored 4.7 percent in the end of 2016 compared with a rise by 0.6 percent, during 2015.

Graph indicates the performance of 12 selected financial markets in the Middle East where all markets achieved positive growth except for Boursa Kuwait which achieved the last position within 12 markets in the ME and achieved losses in its index according to AlShall index without adjusting the impact of currencies exchange rate against the US dollar. The un weighted rate of growth/loss scored 16 percent after declining by around - 11.5 percent in 2015.

The Egyptian market came first throughout 2016 rising by about 76.2 percent without accounting the impact of the floating of the Egyptian pound. The Pakistani market came second by 45.7 percent rise, and then the Moroccan market which rose by about 30.3 percent.

Weekly Performance of Boursa Kuwait

The performance of Boursa Kuwait for the last week, was more active compared to the previous one, where all indexes showed an increase, the traded value index, the traded volume index, number of transactions index, and general index, AlShall Index (value weighted) closed at 374.6 points at the closing of last Thursday, showing an increase of about 5.1 points or about 1.4 percent compared with its level last week and it increased by 11.6 points or about 3.2 percent compared with the end of 2016.