Panel 4: Mr. Henry WANG; OECD MENA & SOE Governance Anti-Corruption Overviews, Mr. Henry WANG Executive Advisor, Corporate Strategy and Planning, Saudi Basic Industries Corporation (retired)Vice Chair, BIAC Energy and Environmental Committee; Enhancing Integrity for Business Development in the Middle East and North Africa, 18 April 2016, Paris, France, session 4

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OECD MENA & SOE Governance Anti-Corruption Overviews
By Henry K. H. Wang
FRSA, FIChemE, MCMI, C.Eng, Eur Ing., MSc, BSc, DMS, DIC
International trade is a key driver global economic growths. It is involving larger
amounts of natural resources, manufactured goods, services and financial flows. In 2013, the
total world exports of goods and services amounted to U$ 17.86 trillion. The OECD
countries was responsible for the bulk of U$ 11 trillion. The total imports of goods and
services reached over U$ 17 trillion, of which the bulk U$ 10.8 trillion was generated by
OECD countries. International trades are also changing fast with products and services being
sourced from all over the world. The digitalization of trade also promote new trade partners
globally creating new sources of supply, often with volumes of smaller cargo initially.
However the lack of governance and corruption in the trade value chains and in the
SOEs and companies involved can have serious negative impacts. Hence better governance
and anti-corruption measures are increasingly important to protect the cross-border trade
value chains plus to improve management and integrity in the SOEs, private companies, the
public sector and society as a whole. A good business examples is that fast and efficient
customs and port procedures with good governance and anti-corruption procedures are
essential for efficient handling of imports and exports in MENA and globally.
The MENA region and countries are playing important roles in global trade
particularly in oil and gas with their rich natural resources. An important example of MENA
international trade is its oil and gas exports to China. Saudi Arabia KSA & GCC countries
have been the largest suppliers of crude oil to China. In 2013, KSA supplied some 20% of
China’s total oil imports with a total value of over U$ 45 billion. China imported around
1,064 thousand barrels per day of oil from KSA. In 2013, GCC countries collectively
supplied over 35% of China’s crude oil imports with a total value of over U$ 85 billion. GCC
countries supplied over 1,960 thousand barrels per day of oil to China.
In addition to oil & gas, China & MENA countries also have strong bilateral trades in
a wide range of manufactured good and chemicals. In 2013, China imported from GCC, in
addition to oil & gas, a large variety of goods including chemicals, metals, salts, sulphur
with a total value of U$ 112 Billion. Crude contributed U$ 85 billion, petrochemical and
chemicals contributed around U$ 14 billion and other products contributed U$ 12 billion. In
2013, China exported to GCC a large variety of products including machinery, tyre,
electrical, plastics, furniture, ceramics with a value of U$ 54 billion. Chemical products
contributed U$ 2 billion and other products contributed U$ 52 billion.
As a key strategic driver for sustainable economic growth in MENA and globally,
international trade is a strong policy lever. However it is essential to have proper governance,

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integrity and anti-corruption measures so ensure high standard of integrity, transparency and
efficiency in different steps throughout the trade chain in emerging economies and globally.
The ‘OECD Guidelines for Multinational Enterprises recommendations for
responsible business conducts in a global context’ are being adopted by many MENA and
emerging economies governments. They share in and support the vision that it is very
important for their national enterprises to have responsible business conducts and integrity so
they can develop sustainable economic and business growths. The various OECD guidelines
covering human rights, employment, industrial relations, environment, combating bribery,
consumers are being adopted by relevant agencies and SOEs. The proper dissemination and
implementation of the OECD/G20 Corporate Governance Principles and the OECD
Guidelines for Corporate Governance of State-Owned Enterprises are also very important for
proper governance of SOE in MENA and emerging economies. However there are also many
ongoing serious challenges that will need to be addressed by SOEs and enterprises in these
important areas in MENA and emerging economies.
SOEs in different emerging economies are now growing and expanding rapidly to
become world-class companies. They are playing increasing important roles in international
business and trade. SOEs are major contributors to MENA and fastest-growing emerging
economies. They are also increasingly active in international business and play increasing
roles in importing and exporting of resources, goods and service. SOEs are also partnering or
competing with private firms and multinational companies MNCs globally in international
trade and businesses. For SOEs to continue their growth in a sustainable manner, it is
important to for SOEs to have good governance systems, code of ethnics and anti-corruption
measures in their host countries and globally. The SOEs’ boards, managers and government
owners should prioritise sound governance and anti-corruption practices so as to improve
their integrity and facilitate the prevention of corruption at all levels of the SOEs.
Corruption and mismanagement can make the SOEs more inefficient, raise costs and
cause delays. Hence corruption is often described as a non-tariff barrier to trade. The World
Economic Forum refers to corruption as the most sensitive and difficult trade barrier for
companies to discuss. However as no company likes to admit paying illegal bribes,
corruption’s full scope is hard to quantify. In addition, corruption also causes the loss of state
revenues from custom duties and taxes. Graft, bribery and mismanagement at the various
steps of the international trade chain results in revenue loss, both in terms of unpaid official
tariffs and the loss of trade transactions due to decreased economic activity. In addition,
corruption and illicit trade inflict serious financial, environmental and social costs on the
SOEs. Illicit trade flows and operations of organised criminal groups cause security risks and
have serious negative consequences on the SOEs and national economies.
SOEs globally and in MENA regions are facing specific challenges which are making
them more vulnerable to corporate governance and corruption issues due to a number of key
special factors. Firstly SOEs are frequently operating in regions and industrial sectors where
bribery is more likely to occur. These are mainly resulting from their sectors of operation, large

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asset sizes, major contract tenders and large public procurement contracts bids. Secondly the
public officials in charge of or supervising the SOEs may be faced with serious conflicts of
interests. This could result in them more susceptible to corruptions and use of SOE assets for
personal means. Thirdly SOEs operating under weak governance structures may result in lack
of transparency and low standards of corporate disclosure. Hence it is recommended that there
should be clear transparent separations of political and commercial roles in the major SOEs.
The corporate structure of the SOEs must be clearly delineated from general government. A
good business example is that there should be clearly defined roles and responsibilities between
the government directors of the SOEs and the professional management of the SOEs.
It is also recommended that SOEs must improve their transparency and disclosures to
match international standards of transparency and disclosure. SOEs must ensure that there is
adequate resources for internal audit systems and engaging in aggregate reporting on their SOE
portfolio to the required international standards. A good business example is that SOEs should
manage their internal audits to international standards and they should report to the Board
Audit Committee to maximize transparency and minimize interference.
Ethics and integrity should form the foundation upon which SOEs are built. This
foundation is one of the key reasons for successful SOEs in MENA and emerging economies
globally. A key requirement is the need to implement a world-class compliance program that
inspires and supports a culture of integrity in the SOE at all levels. One important area is to
improve employees’ confidence in their ability to report an issue without fear of retaliation
from their management and peers. A good open reporting culture should be supported by
global network of helplines which are a resource for all employees to report compliance
concerns and get answers to compliance questions. There should be good online reporting
which enables employees to report compliance concerns whenever a non-compliance or
corruption occurs anytime anywhere. There should be good global compliance investigation
guidelines that provide a comprehensive, fair and consistent process for investigating and
resolving compliance concerns across the company. There should be strong management
policy and support that strictly prohibits retaliation for reporting a compliance concern.
These program elements should provide a sturdy architecture for improving compliance
culture in SOEs in MENA and emerging economies. However it is very important that all
SOE staff must embrace fully living within that compliance architecture every day to create
an environment where ethics and integrity are core values that are built into the DNA of SOE
and will not be compromised to achieve short-term goals.
Author
Henry K. H. Wang,
FRSA, FIChemE, MCMI, C.Eng, EurIng, MSc, BSc, DMS, DIC
Emails: henry.wang76@alumni.imperial.ac.uk, henrykhwang@ymail.com