20 Jul 2014

SUMMER IN THE CITY – A TIME TO GET SHIP-SHAPE

Authored by: Tim Watkins

SUMMER IN THE CITY – A TIME TO GET SHIP-SHAPE

Tim Watkins, Senior Legal Consultant in the corporate team at Hadef & Partners in Dubai discusses the traditions of business activity in the UAE during the summer months and what preparations and initiatives businesses could be doing to make the most of the quiet period.
 
The UAE is growing again. According to the National Bureau of Statistics, national GDP growth was 3.9% in 2012, 4.4% in 2013, and is predicted to be between 4.5% and 5% by the end of this year (against an anticipated global average of 3.7%). Exports from the UAE (of which oil and gas account for around 40%) have doubled between 2010 and 2014. You can physically see a re-birth in activity out of the window, and read about it in the papers: the new canal set to wind its way through Dubai by the end of 2016, and the recently announced Mall of the World that is set to dwarf its neighbouring Mall of the Emirates, to name but two major projects.
 
The announcement of such grandiose projects would have been unthinkable just a few short years ago, in the depths of the economic downturn. But whether or not you subscribe to the view that the market is once more over-heating, there is undeniably a renewed optimism about, that will surely continue to permeate all aspects of the business community. And most likely, as seems always to be the case here, it will quickly develop a life and pace of its own….
 
After the summer, that is.
 
It is a quaint annual tradition in the Gulf that the hot summer months see a massive exodus of expatriates and UAE nationals alike, between late June and late August. With the holy month of Ramadan also falling in the middle of that period this year, the effect is arguably magnified.
 
For those that remain, the office hours and the workload are, in the main, lighter. A mood of lethargy descends. Why do now what you can put off until later….
 
But there are some useful things that can be done in this quiet period before September. There is time to make preparations for the autumnal cycle of client events, marketing and business development initiatives, and then the flurry of activity that precedes the need for projects to be concluded by the year end. Like the beginning of a new school year, September is the time when everything seems to start again. But in a market as competitive as the UAE can be, who wants to risk casting off into this maelstrom of activity and events promoting a business that is not ship-shape and ready for the journey?
 
We’ve been here before of course. In the downturn, much was said of ‘taking stock’ and improving business efficiencies. With perhaps ominous foreboding, the Emirates Securities and Commodities Authority (ESCA) published a Corporate Governance Code for Joint Stock Companies and Institutional Discipline Criteria in 2007. In this pre-recession period, many businesses were just too busy looking outwards and “doing deals” to give much attention to any non-legally binding Code of suggested internal house-keeping measures. Time was money.
 
But, in the downturn, many businesses (devoid of much business) turned in great numbers to their lawyers, to their other professional advisors, and to professional educational and training institutions such as Hawkamah, for a fresh view. Those that weren’t crushed by the global recession had time and space to take stock. What was this Code then? Could it help them to improve their companies and business strategies? What was corporate governance really all about?
 
The problem now is that while it is good news that the UAE has emerged from its dark years, with new found optimism comes a return to bad habits. Old practices are returning. Ask yourself how often you now see the closing of a deal defined and prioritized more by a deadline, than by diligence. Are professional corners perhaps being cut?
 
As lawyers, we are once again increasingly being engaged by some clients that are seeking little more than a legal ‘sign-off’ of a deal that has already been all but signed. In such a situation, any diligent lawyer who starts questioning the deal structure, or highlighting previously unforeseen risks, or suggesting that perhaps the client is not quite as well protected as it might have been had the lawyers been engaged sooner, is not necessarily greeted with appreciation and thanks.
 
Such is the pace of the UAE market. But isn’t this therefore a reason to take advantage of the annual quiet summer months, and to remember the lessons of 2008-12? The Corporate Governance Code may not be legally binding, but nor should it need to be. Successful businesses are run by commercially minded people, who realize that the defining characteristics of a good business deal are not solely how quickly one’s personnel can rally to achieve financial close faster than one’s competitors, but rather a demonstrable, well-supported determination that the deal is viable in all business aspects(commercial, financial and legal being merely three).
 
The peculiarities of the Middle Eastern business calendar provide a useful time and place, every year, to take stock of one’s own business; to do an internal mini-audit perhaps, to determine whether it is being run as efficiently as it might be, and whether it is as marketable as it could be. To see also whether one’s business maintains a fully documented track record of both its outward-facing and its internal business, to the extent that it should do. And therefore to properly ascertain whether one is in the best possible position to start the new business year come September, and so maximise the potential rewards.
 
There is always, undeniably, a financial benefit in the short term for all involved in ‘getting the deal done’ before one’s competitors have a chance to assemble. But the longer term consequences to your business of not conducting the kind of annual service you would have no hesitation doing to your car, can be just as significant.
 
The UAE is a fast paced, and now (again) a fast growing market. To keep up and remain successful, one must focus just as much on continued fitness for purpose as on financial closings.

 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the develop jurisdiction of the UAE