BREAKING NEWS: A rigorous framework for insolvency is needed for the UAE to continue to attract overseas investment the director general of the Abu Dhabi Council for Economic Development said today.
Economic chief calls for Emirates bankruptcy overhaul
Bankruptcy laws in the UAE are in need of an overhaul if the country is to attract more overseas investment and avoid capital flight in times of trouble, according to the director general of the Abu Dhabi Council for Economic Development.
Speaking at a conference this morning, Fahad Saeed Al Raqbani said that a rigorous framework for insolvency would be crucial to attracting overseas investors and preserving jobs in the Emirates.
"The lack thereof might lead to capital flight, especially in times of crisis," he added.
"[Investors] are going to go to the countries that serve their best interests. If closing a business takes four to five years, then of course they're going to go elsewhere."
Though Mr Al Raqbani stopped short of announcing any new initiatives to bring the UAE to an international standard, he added that the Government "was looking at tackling this issue collectively."
His comments come following the bankruptcy filing late last year of Al-Murjan Real Estate, the first developer to do so since the onset of the global financial crisis and its impact on company earnings.
Delegates at the conference also said a process such as the United States' Chapter 11, for selling off a company's assets in advance of suspension of payments, could help preserve jobs and investment.
According to the World Bank, the UAE ranked 143rd out of 183 countries in ease of closing a business in 2011, with an average time of 5.1 years and an average recovery rate of 11.2 cents on every dollar invested. The Emirates' ranking for "ease of doing business" was higher, at 40.
Michael Barker, a partner at international law firm Herbert Smith, said that Al-Murjan's bankruptcy proceedings may serve as a test case for the UAE's current laws.
"On paper, they're not out of kilter with other countries' laws. The procedure looks okay… but I do wonder how it will play out in practice," he said.