KSA improves real estate transparency

Jamil Ghaznawi, national director and country head of JLL Saudi Arabia.
Updated 29 June 2016

KSA improves real estate transparency

JEDDAH: Saudi Arabia has moved up the rankings to finish in the ‘semi-transparent’ category for the first time in the JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index (GRETI).
Strong advances over the past two years have seen Saudi Arabia (63rd) and Egypt (65th) move into the dynamic ‘semi-transparent’ group, which is largely dominated by large emerging markets, including the BRIC countries (Brazil, Russia, India and China) and all four of the fast-growing MIST economies (Mexico, Indonesia, South Korea and Turkey).
Dubai (48th) has retained its position as the most transparent real estate market in the Middle East and North Africa (MENA) region, with Abu Dhabi (59th) following closely behind, according to the report.
“This is very good news for Saudi Arabia,” said Jamil Ghaznawi, national director and country head of JLL Saudi Arabia.
“Moving into this category for the first time shows the advances the Kingdom is making and is an indication of the focus the country has on strengthening corporate governance, transparency and market data.”
The 10 countries identified as ‘highly transparent’ by GRETI account for 75 percent of global investment into commercial real estate, highlighting the extent to which transparency drives real estate investment decisions.
A number of key factors are driving progress and frame the broader issues raised by both high and low transparency:
l Capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of $1 trillion will be targeting the sector, compared to $700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be on a par with other asset classes.
l There is a growing recognition that transparent real estate practices play a significant role in capital formation, municipal finance, and as a foundation to improve the quality of life in many communities. This foundation includes security of property ownership, safe housing and workplaces and the ability to trust agents to act honestly and professionally.
l Technology is both a driver of the digitization of all kinds of real estate data and also an enabler in disseminating and analyzing this data; improvements in data capture techniques are allowing a more granular and timely assessment of real estate markets.
The formation of real estate committees in Saudi Arabia’s chambers of commerce has highlighted the issue of low transparency in the market and encouraged more action toward addressing the issue.
As a result, there has been some mild improvement in ‘open data’ platforms such as registering property transactions with the Ministry of Justice which is then shared publicly on its website.
“Saudi Arabia is now positioned in a very dynamic tier, which is considered the most improved transparency group, and a category which is seeing growing middle classes mobilizing against corrupt practices,” added Ghaznawi.
The JLL report highlights a number of factors which will influence real estate transparency in the next several years:
l Revelations of the Panama Papers in early 2016 have led to mounting pressures for greater real estate transparency and put the fight against corruption decisively on the international political agenda.
l New data capture techniques get adopted, the pressure mounts for real estate to raise the bar and achieve even higher levels of transparency.
l The mounting intolerance of corruption within the world’s growing middle classes will force the pace of change, especially among the Semi-Transparent countries, and social media will help people mobilize around this issue.
l Technology will continue to advance and will allow some countries to leapfrog the traditional route to transparency; we are already seeing this happen in places like Kenya, Ghana and Ecuador.
l There will be greater emphasis on regulatory reform, but also on enforcement, particularly in semi-transparent markets where the greatest disconnect currently exists.


Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

Updated 34 min 17 sec ago

Trump advisers urge delisting of US-listed Chinese companies that fail to meet audit standards

  • Growing pressure to crack down on Chinese companies that avail themselves of US capital markets but do not comply with rules
WASHINGTON: Trump administration officials have urged the president to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission and Treasury officials said on Thursday.
The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, with drafting a report with recommendations to protect US investors from Chinese companies whose audit documents have long been kept from US regulators.
It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of US capital markets but do not comply with US rules faced by American rivals.
“We are simply leveling the playing field, holding Chinese firms listed in the US to the same standards as everyone else,” a Treasury official told reporters in a briefing call about the report.
The US Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.
Democratic Senator Chris Van Hollen, who sponsored the bill described the recommendations as “an important first step,” but said that “without the added teeth of our bill, this report alone does not implement the requirements necessary to protect everyday American investors.”
The administration’s recommendations, if implemented via an SEC rulemaking process, would give Chinese companies already listed in the United States until Jan. 1, 2022, to ensure the US auditing watchdog, known as the PCAOB, has access to their audit documents.
They can also provide a “co-audit,” for example, performed by a US parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the United States for the first time will need to comply immediately, the officials said.
A State Department official told Reuters the administration plans soon to scrap a 2013 agreement between US and Chinese auditing authorities to set up a process for the PCAOB to seek documents in enforcement cases against Chinese auditors.
China said on Friday that the two countries have “good cooperation” in monitoring publicly listed firms.
“The current situation is that some US monitoring authorities are failing to comply with their obligations, and what they are doing is political manipulation — they are trying to force Chinese companies to delist from US markets,” foreign ministry spokesman Wang Wenbin told a media briefing.
The PCAOB has long complained of China’s failure to grant requests, giving it scant insight on audits of Chinese firms that trade on US exchanges.
The report also recommends requiring greater disclosure by issuers and registered funds of the risk of investing in China, as well as mandating more due diligence by funds that track indexes and issuing guidance to investment advisers about fiduciary obligations surrounding investments in China.
The moves come amid rising tensions between Washington and Beijing over China’s handling of the coronavirus and its moves to curb freedoms in Hong Kong, among other issues.