Dubai: A vision, not an illusion

“Dubai and the UAE as a whole are constantly taking steps to enhance the business environment and protection for investors. The business climate is steadily improving in line with the country’s growth and development.” - KT photo by Rahul Gajjar

The long-awaited bankruptcy law and the revamped UAE Companies Law, which are expected to be unveiled soon, will help Dubai reinforce its position as a sought-after global investment and business destination, says Hisham Abdulla Al Shirawi, chairman of Free Zones World.

Talking to Khaleej Times, Al Shirawi, who is also the vice-chairman of the Dubai Chamber of Commerce and Industry and member of the Economic Council, said the bankruptcy law, which would help regulate lending, is in line with international best-practice. It will trigger increased flow of investment into the UAE by ensuring businessmen a dignified exit route in the event of business collapse and will encourage genuine entrepreneurs to come up with mega initiatives.

Al Shirawi, a member of the board of directors of the Al Shirawi Group and the architect of the Electronics Business Group, the first-ever business group affiliated to the Dubai Chamber, also sounded very upbeat about Dubai’s business environment, particularly in the aftermath of the new Companies Law.

He believes the law will improve Dubai’s competitiveness as well as encouraging new investment. It will make it easier to set up a business, strengthen the protection of shareholders and lay down a framework for the governance of public companies, while at the same time “ensuring transparency and disclosure of financial data and the efficiency and integrity of the board of directors”.

“By giving companies a more modern set of standards to adhere to that meet today’s constantly changing business climate the law will improve Dubai’s competitiveness as well as encourage new investment,” says Al Shirawi.

Allaying concerns about escalating cost of doing business in Dubai, he argues that Dubai is still a cost-effective investment destination when one takes into account factors like access to a skilled workforce.

Summing up, Al Shirawi ardently believes that Dubai’s vision to become one of the world’s leading cities in terms of business and investment is definitely a realistic one given the emirate’s existing success as the region’s leading business hub.

When asked how pragmatic is the vision to make Dubai the most favoured investment destination in the world, Al Shirawi was unequivocal: Dubai’s vision is not an illusion; it is a goal to be achieved by structured steps and processes.

Following is the full text of the interview held at Al Shirawi’s office at the Jafza headquarters.

How realistic and pragmatic is the vision to make Dubai the most favoured investment destination in the world?

Dubai’s vision is not an illusion, it is a goal to be achieved by structured steps and processes.

Dubai’s vision is to become one of the world’s leading cities in terms of business and investment. This is definitely a realistic one given the emirate’s existing success as the region’s leading business hub. Actually Dubai is the headquarter hub of the region for many multinationals. Dubai is using its resources to its advantage; trade, tourism, logistics and financial services are its key economic pillars, which are driven by the emirate’s strategic location, quality hotels, highly-developed infrastructure, commercial, industrial, and financial free zones and stock exchanges.

The growth of the emerging markets is compelling “world capital” to consider location beyond classical location. As this grows, Dubai as the most favoured investment destination in the world would become a natural result.

The FDI confidence index continues to show Dubai improved its ranking every year. In the World Bank’s Ease of Doing Business report 2014, the UAE is ranked first in the Middle East and North Africa region and 23rd overall. This is up three places from 2013 due to continued effort by the government to improve business conditions.

It is not an illusion; it is a vision.

What are the major hurdles and challenges you foresee in achieving that goal and in enhancing further Dubai’s global competitiveness?

Business leaders always cite rising costs as a hurdle to growth. However, Dubai is still a cost-effective investment destination when you take into account factors like access to a skilled workforce, quality commercial space and thriving consumer market. Expo 2020 is driving price increases especially in the real estate sector and this is something that needs to be monitored — which I hope the government is doing — as if costs escalate significantly then it will impact Dubai’s competitiveness generally.

Inflation is usually created by haste; this happens mainly in construction and real estate projects. If we try to execute a project that takes between two to three years to finish in half as much, then the cost can get doubled or you might be forced to compromise on quality if the price remains the same. Hurrying results in creating additional demand on building materials, machinery, staff, labour, etc, companies will steal each other’s qualified professionals, luring them with skyrocketing packages. The snowball keeps on rolling and the value of your resources diminish rapidly.

Another challenge, and this is specific to the finance sector, is the ability to attract experienced financial professionals to feed this high-growth area. This is particularly true for the Islamic finance sector. According to the Al Huda Centre of Islamic Banking and Finance, only 38 universities worldwide are producing 5,000 Islamic finance graduates per year, whereas the demand is for 50,000 professionals. Dubai, through its Capital of the Islamic Economy initiative is taking steps to address this need and has established the Dubai Centre for Excellence in Islamic Banking and Finance, which is part of the Hamdan bin Mohammed e-University and will offer master’s and foundation certificates in Islamic banking and finance. Dubai also has the advantage of offering a high quality of life that will help attract experienced international finance professionals to the city to live and work.

We also should not forget that the geopolitical and growth of the region continue to be areas to observe. Dubai needs the region to continue to be stable, grow and attract positive reviews as a destination for investment. Capital favours growth potentials and ROI.

Do you think that to attract more global corporates and investors to Dubai, further liberal and investor-friendly reforms and regulations need to be in place?

Dubai and the UAE as a whole are constantly taking steps to enhance the business environment and protection for investors. There are a number of new laws in the pipeline that are dedicated to this and which we hope will be ratified soon, including the Companies Law and a new bankruptcy law. If you look at the World Bank’s Ease of Doing Business report there are areas that can be improved including enforcing contracts and resolving insolvency, which will be addressed directly by the two laws I have mentioned. The same rankings also show a significant improvement this year in protecting investors, which is an excellent sign. The business climate is steadily improving in line with the country’s growth and development.

While the UAE’s investment climate is investor friendly, the absence of a proper bankruptcy law as well as permanent residency provisions for investors remain a cause of serious concern for investors and businesses. Do you anticipate immediate legislation in this regard?

I anticipate the new bankruptcy law will be approved in the short term. It will help Dubai’s economy by bringing legislation in line with international best-practice. It will help regulate lending and will attract more foreign investment into the country. The law seeks to provide businessmen a dignified exit route in the event of business collapse and will encourage genuine entrepreneurs to come up with mega initiatives.

While there are many drivers of growth to local economy, the Dubai catchment area is the whole region not Dubai market. Some of the important factors are how investors can capture investment opportunities. While ensuring the safety of capital and improve ROI.

Some countries are more advanced in their legal framework but either very high in taxation or your assets might be frozen due to unreasonable suspicions as trivial as last name similarities. I see Dubai today the best environment on these critical factors and as I mentioned earlier the focus is to continue to improve on what matters most.

Other serious concerns include the escalating cost of doing business and current companies law that require a national partner with 51 per cent shareholding in all endeavours outside the free zones. We have been hearing about a new far more liberal law to replace this. When can we expect this? What are the key reforms you anticipate?

There are a number of benefits for business that will be brought about by the new UAE Companies Law. The law makes it easier to set up a business, strengthens the protection of shareholders and lays down a framework for the governance of public companies, while at the same time ensuring transparency and disclosure of financial data and the efficiency and integrity of the board of directors. This gives companies a more modern set of standards to adhere to that meet today’s constantly changing business climate. Generally the law will improve Dubai’s competitiveness as well as encouraging new investment. It will also aid the establishment of more new companies in Dubai because it makes regulations and the business environment more attractive for foreign investors.

I would like to state that the Dubai economy is highly integrated. Staying at a free zone allows investors to acquire investment opportunities. However, UAE nationals play a vital role and add values to investors. Many investors prefer and demand local participation. As you go around the world, local participation is a component of success.

Regarding cost of doing business, it’s essential to measure value, not cost alone. The complexity of investment measures all aspect of investment; productivity, ROI, opportunities, etc. Therefore we need to evaluate the whole in combination. Yet, we must always keep our eyes not to price ourselves out the market. So far, we are still competitive.

— issacjohn@khaleejtimes.com