While the general atmosphere is returning to normalcy in Dubai, there is quiet whispering among business owners about a sense of scare related to their ability to face up to liabilities. That they would not be able to recover dues while at the same time, creditors are enforcing stringent conditions.
This adds to the feeling of foreboding.
Why is there this pessimistic feeling in such a pragmatic country that is host to an over 75 per cent expat community? The issue has to be addressed. I feel a clear cut bankruptcy law, particularly for small and medium enterprises, needs to be in place without further delay to bring confidence among the players. Business and bankruptcy are integrated like success and failure.
No one likes to be bankrupt. It does not give mental satisfaction to anyone. There may be some wilful defaulters. But most are victims of circumstances.
Business is a bridge between debtor and creditor. When debtor fails to meet his commitment, the business fails to serve the creditor, who in such a situation has relatively strong options to exercise. This is where problem starts.
Don’t think of it as stigma
Bankruptcy will allow the businessman to remain intact and recover outstandings. It is an integral part of business. The president of a mighty nation is known to have been bankrupt few times - still he enjoys the political confidence of the nation.
I remember somewhere during the early sixties, I made a visit to Bahrain to sell textiles, which was our main line.
Before proceeding on my maiden travel, a senior colleague advised me to take an introduction letter from the local bank for their branch in Bahrain, so that in case of need, contact could be made. Those days we had just one bank in Dubai, and taking the required document, I visited their counterpart in Bahrain to check about the credit-worthiness of a company I intended to deal with.
“A reputed company and financially, known to be sound. But we don’t deal with them,” was the banker’s reply. “Why?” I enquired.
“They have gone bankrupt thrice in last 12 years. Every leap year they down their shutters. This is leap year again. We don’t know what will happen.”
Even banks can change mindsets
But then how do they continue to operate was my obvious question to which boss at the bank answered that according to law, in Bahrain if one pays off 0.31 per cent of total liabilities, they can continue to be in business. But the bank won’t do business with any entity that had failed once.
That used to be norm. I don’t know if it is still followed. But the company still thrives in Bahrain. The existence of a bankruptcy law saved an enterprise.
Adapt in these abnormal times
The pandemic has created an abnormal situation all over the country. The Government has faced it with unparalleled wisdom and Dubai appears to be functioning with the business as usual mindset. But with salary cuts and mass retrenchments, things have become difficult for the average person.
No doubt a lot has been done by the regulators to extend substantial relief, by way of reduction in taxes and levies. But there is a strong need to have forensic audit to check that benefits are passed on to deserving quarters.
I received yesterday an invoice with consecutive increases in the amount towards service charges from a developer. It looked strange as a hike in any area of spending these days looks unrealistic.
Real estate is the lifeline of our beautiful country. We should regulate each and every aspect connected with it so that no undue advantage is drawn by greedy players who fail to recognize and acknowledge the efforts put in by the Government.
Let us retain Dubai as an investor-friendly society. Confidence of investors is prime.
- Dr. Ram Buxani is Chairman of ITL Cosmos Group.