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Jojo Puthuparampil is a business news writer for Inc. Arabia.

Unimpressive corporate governance credentials continue to prevent companies in the Gulf region from attracting international investors, according to a report by S&P Global Ratings.

Governance standards among companies rated in GCC countries still lag those of global firms, as per S&P Global Ratings’ management and governance (M&G) scores.

Regional companies are not able to “unlock capital markets and cut the cost of raising debt.

“Just two companies (or 6%) of the 33 we rate in the region have strong M&G scores, the highest of our four categories,” said S&P Global Ratings analyst Tommy Trask.

This compares with 9% for Europe, the Middle East, and Africa as a whole. M&G scores tend to be correlated with rating levels (higher ratings typically means higher M&G standards).

This is, however, not the case in the GCC, where there are relatively high ratings by global standards (median rating of ‘BBB’ and ‘BBB-,’ including government support), but M&G scores below the rest of the world, according to Trask.

“This indicates that GCC corporates’ M&G governance standards are clearly lagging behind global peers’ at the same rating level,” Trask said.

Lagging governance standards can deter international investors from looking for opportunities in the Gulf region, the report said.

Potential investors face tightly controlled company ownership, a general lack of transparency, and the vagaries of individual states’ jurisdictions concerning creditor protection, according to the report.

“Main corporate governance weaknesses of Gulf companies include a lack of independence of the board, insufficient oversight and scrutiny of critical enterprise risks, and weak transparency and disclosure practices,” Trask said.

While companies in the region recognize that strengthening management and governance training could improve their access to capital markets, there has been a lack of progress in the area.

While corporate governance is a key focus area for many GCC corporations, we don’t expect change to take place overnight, according to Trask.

Trask said that effective governance practices take time to take root in a given jurisdiction and will necessitate a cultural shift in the way companies do business.

Recently, Dubai has unveiled a system to rate small and medium-sized enterprises (SMEs) in the emirate by corporate governance, among other parameters.

The initiative has been undertaken by Dubai SME—an agency under Department of Economic Development (DED) in Dubai mandated to develop SMEs—in partnership with The Executive Council of Dubai.

Dubai SME, here, will assess SMEs based on corporate governance, business performance (turnover/profit), innovation,  international expansion and corporate social responsibility (CSR).

The move is aimed at enhancing access to capital for SMEs.