February’s approval by the Kuwait parliament of the framework legislation for a long-awaited Capital Market Authority represents an important step forward in the state’s efforts to impose greater accountability onto its financial sector.

Weak regulation is regularly blamed for the price manipulation and lack of transparency that undermines local savers’ confidence in the Kuwait Stock Exchange and deters many foreign institutions from buying stock on one of the oldest bourses in the region.

Investors and financial analysts in Kuwait are now waiting to see who the government chooses to lead the new supervisory body.

The global crisis has brought added impetus to the calls for tighter oversight of the financial markets, not just in Kuwait, but also in the wider region. As the world economy begins to emerge from recession, the key challenge now will be maintaining the momentum to push for reforms; as history shows markets have the habit of forgetting a crisis all too quickly.

In the case of Kuwait, the success of its efforts to introduce accountability and transparency will depend in great part on the choice of individuals chosen run the authority and whether they have the personal determination to create an effective, credible and independent authority. It will also require a change in attitude among investors who are used to operating in an unregulated environment. Their support would make the task much easier.