Speedy reform key in wake of investigations

Angela Giuffrida

• Last Updated: August 24. 2008 1:33AM UAE / August 23. 2008 9:33PM GMT

The pace of reform in response to recent investigations into officials at several developers will affect Dubai’s reputation. Ryan Carter / The National

As investigations into alleged corruption by senior Dubai executives move toward a possible conclusion this week, how quickly authorities act to strengthen and enforce property market regulation could help determine whether the wave of inquiries ultimately helps or hurts the emirate’s reputation.

“It’s crucial that these arrests are followed by decisive action to improve how the market is regulated,” said Nick Carnell, a partner at Kennedys, a law firm.

“The concern is that the arrests will affect confidence in the marketplace, which is inevitable. But if whatever follows instils a greater sense of transparency, along with a better approach to corporate governance and regulation, that will actually be positive in terms of market perception,” said Mr Carnell.

“Simply by regulating, you’re not necessarily going to stop corruption and dishonesty.”

The emirate has been hit by a series of arrests and investigations into some of the biggest players in the property market in the past few months, the latest being the arrest of four employees at Sama Dubai on allegations of bribery and mistrust.

The arrests came just one week after Nakheel confirmed that both an existing and former employee were being questioned over allegations of bribery. Two former executives at Tamweel, a local mortgage provider, are also being investigated for financial wrongdoing, while the former chief executive of Deyaar Development was arrested in April on charges of fraud.

Many of the companies whose executives are being investigated are partly or completely controlled by the Government of Dubai. Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, has made clear the investigations are being supported at the highest levels of power. Dubai authorities have said the investigations, which had extended for much of the year, were nearly complete.

The probes come on the heels of some of the fastest growth in Dubai’s history, after the emirate began allowing foreigners to purchase property. Massive development projects followed, many of them overseen by Government-controlled companies such as Nakheel.

Dubai’s regulatory infrastructure has struggled to keep up, although it has undergone rapid change as well. Where the Dubai Land Department (DLD) once oversaw all regulatory aspects of the property market, other agencies such as the Real Estate Regulatory Authority (Rera) have been created to handle some tasks. Keeping tabs on the rapidly growing number of companies has been challenging.

“A lot of the issues this market has stem from the fact that there are many more big companies operating here now, and of different nationalities. We need more corporate governance,” said Marwan bin Ghalita, the chief executive of Rera.

Mr Ghalita said Dubai had proven adept at responding to problems by crafting new regulation. “Whenever bad things happen here, the Government is very good at putting regulations in place.”

He said the wave of investigations had already led Rera to work more closely with the DLD to restore some of the former co-ordination that the department once had over the property industry. “When everything was in the hands of the Dubai Land Department, things were good – and everything will go back to [the DLD] system. I can assure you that the market will be good and stable.”

agiuffrida@thenational.ae