The American business magnate Warren Buffett once said, “It takes 20 years to build a good reputation but just five minutes to ruin it. If you think about that, you will do things differently”.
Shortly before the recession in 2008, it seemed the international stock market was controlled by investment groups that were managing the daily turnover. This could have been either incidental or pre-planned. However, it had a major impact on the investment and financial companies as well as banks. It also affected the classification of companies.
A number of companies left the stock exchange and many others deteriorated dramatically despite their excellent reputations. Eventually, the share prices fell below the book value for the first time after a long period, which caused the credit classification of the relevant companies to fall. Many companies were unable to face the lending banks and a mortgage race was launched with the aim of holding as much liquid funds as possible. Due to this, many of the investments lost their value to such an extent that hearing news about financial collapses became usual.
The case of Gulf Bank could be the most outstanding and relevant one in this regard that the situation could have affected many other banks if not for the immediate governmental interference. Nevertheless, most of the investment companies suffered enormous losses and many suffered from bankruptcy including some major companies. Enquiries were raised about the fate of companies such as the International Group, Al-Ahlia, Gulf Investment and Al-Bahar Company.
A financial tsunami turned everything upside down, leaving no one secure. Very few survived the crisis. Only the lucky ones who received support on a golden plate passed the hard times.
I am not going to mention about the Investment Dar and its relevant companies as it is a long story with several complications and all its doors were closed without a single one available for reopening. The Industrial Group also faced similar failure; however, it is trying to recover but very slowly because the impact of the crisis on it was as heavy as a mountain.
I will not talk about the Global Company which deserves great support because of the good way it managed the crisis. It gained respect and trust due to its perfect credibility. Of course, I wanted to talk about corruption and favoritism in addition to the absence of following-up of investments. It was noticeable that few of the appointments followed the professional processes and most of them were based on benefits and influence (wasta) without any form of professionalism. Nevertheless, its overall attitude saved the suitable environment for the tsunami that swept across the moulds in the market, which are the fake companies, leaving them to die on the dry shores of loses. They fell between the hammer of the lending banks and the anvil of the general meetings.
What is new after almost a decade of the international recession? The separation, mortgaging and liquidating of real estate into money for irrelevant values have started again. From time to time, we hear about obsessions that lack transparency and the required information.
It seems that we are again experiencing the events that preceded the 2008 financial crisis. The stock exchange is the most important economic front for every country. If the stock exchange gains respect due to its transparency and gets its power from the law, it will be the guarantee for public trust. Then the country will be capable of attracting foreign investments and funds. This will form a caring environment for the capitals that seek safe markets and facilitated procedures.
In case of any intentional mistakes that occur due to complicated bureaucracy and in case the market is used as a playground for the influential who misuse the laws and use every gap in them to carry out illegal actions, both the local and foreign investors will leave the market immediately. The influential figures usually do not hesitate to play games with the money of the minor investors due to lack of monitoring and supervision. They will direct the laws in the path that is in favor of their personal benefits.
In order to manage a respected financial market that is capable of gaining trust, you have to put the events of the past before your eyes. The hard experiences should form the strong reliable foundation on which the future vision is built.
By Yousef Awadh Al-Azmi