Transparency is an asset to be prized

For Saudi Arabia's allies and Dubai's investors, there is no better tool to build trust than transparency.

There are growing signs that the region's leaders have a better understanding of how openness can boost confidence and assuage fears. Two very different releases over the past week have shown a trend towards greater transparency in the Gulf.

In the first instance, the ruling family of Saudi Arabia issued four reports on the state of King Abdullah's health. Discussion of the Saudi King's well-being has typically drawn attention to succession planning, a sensitive issue, to say the least. But this time, rather than allow for the spread of false information through unfounded rumours, a candid assessment of King Abdullah's back problems quelled unnecessary anxieties.

The second release of information was much closer to home and more critical to this country's future. Yesterday, Dubai's leadership committed to a frank assessment of its economic health. "We continue to work towards improving the level of disclosure and transparency," Sheikh Ahmed bin Saeed Al Maktoum, Chairman of the Supreme Fiscal Committee, said.

He supported this statement with a commitment to a series of quarterly updates that will open Dubai's books to investors every three months. What each report will say about the state of Dubai's economy will differ. But by institutionalising these reporting practices, investors will have less reason to resort to rumour and hearsay when evaluating Dubai. The emirate will allow its fundamentals to speak for themselves.

Investors have already voted for this with their chequebooks. Dubai Inc's recent prospectus for a $1.5bn (Dh5.5bn) bond offering amounted to a reckoning and it did not come without pain. But investors respected and trusted this process, bought Dubai's bonds, and bought into its future despite the setbacks of its past. In fact, the bond offering was over-subscribed.

The lessons of the financial crisis were many. What is certain is that a lack of information leads to illogical swings in sentiments, damaging a marketplace.

Saudi Arabia has learnt some similar lessons, but over succession planning. Most importantly, the kingdom has introduced laws to replaced informal discussions on the process with constitutionally backed practices. For Saudi Arabia's allies and Dubai's investors, there is no better tool to build trust than transparency.