We yammer on a lot about reform here in the UAE: how all sorts of things, from land sale registration to corporate boards, need to be brought up to international snuff. It's comparatively rare, though, that we get to attach a human face like Simon Ford's to what are for the most part purely abstract issues.

That's why today's story in The National about Mr Ford's internet business, Blue Banana, is so poignant. A number of government officials and economists have in the past month or so urged for more robust laws covering businesses that go bust, partly to prevent against the kind of situation Mr Ford now finds himself in.

I'll spare you all the legal details here (you can read about them in the story), but the situation is basically this: the UAE has laws covering bankruptcies, but they remain largely untested by the UAE's court system. When they run into trouble, companies tend to make settlements out of court, both because of the uncertainty surrounding how courts might treat them and the length of time it might take to process a case, as well as the attendant costs. It takes 3.5 years for a business to close in the Middle East, according to a recent World Bank report, compared to 1.7 years in the developed world. If you want more background on this, check out this story I wrote earlier this month.

In a letter to friends and former business partners, Mr Ford put partial blame for his sudden departure from the country on this underdeveloped insolvency system. "I am not running away from debt," he wrote. "I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions."

Mr Ford isn't alone here, and it's not only the owners of struggling businesses who are taking a hit. Employees of those troubled firms have also been left in the lurch. Take the story of Gary Bell, whom I wrote about in my original story on insolvency this month. Mr Bell hasn't been paid for about six months, and the company he came to the UAE to work for is in some serious financial straits. The company's owner has repeatedly told Mr Bell that he, along with other employees, would be paid, but as weeks stretched into months, no money was forthcoming. He has since filed in court to retrieve what he's owed.

I asked Mr Bell what he thought about Mr Ford's situation because I thought it sounded like they were dealing with some of the same issues: both companies found themselves unable to pay suppliers (and in Mr Bell's case, employees), and neither went to the courts for a resolution. Here's what he had to say:

"I think he is in the same situation as our [managing director], where they got in debt too deep, they tried to keep the dream alive and started to gamble with other people's money on the hope that something would turn up that would save the company," he wrote in an e-mail. "... I have sympathy for Simon and and it's good to see that Simon will try and do the decent thing but at the end of the day, no-one asked him to start a business, run it the way he did or continue when he knew there were financial problems... not his suppliers, financial institutions or staff who will be the ones presumably bearing the cost for the decisions made by Simon."

"It's a bit of a mess in Dubai and a lot of innocent people have been caught in the crossfire," he added. "I only hope lessons have been learned by all parties."

A local bond market in the UAE got a big boost last week with the passage of a federal law that would establish regulations for the issuance of sovereign bonds. Pointedly, the law sets limits on how much the UAE's federal government and individual emirates can borrow. The federal government can borrow 45 per cent of GDP under the law, while individual emirates can borrow 15 per cent, setting a theoretical maximum of 60 per cent of the country's overall GDP.

This seems to be an indication that the federal government will play an increasingly prominent role in raising money for infrastructure and other long-term development projects in the country. The new law would severely limit, for example, what the Dubai government can borrow; the emirate has at least $20bn in direct government debt, compared to a GDP of $82bn last year.

It remains unclear how the new law will affect the $70bn debt load of the so-called "Dubai Inc." government-controlled companies, but speculation so far has centered around the idea that the aura of government support for these companies may dim a bit because of the law. If Dubai as a sovereign entity has limits on its borrowings, it can by definition provide less support for government-owned companies if they run into trouble.

It's mere speculation at this point, but according to SJS Markets, a Swiss brokerage, the new law could even cause Dubai's government-owned companies to sell assets in order to pay down debt and reduce its overall borrowings. Says SJS in a research note:

The new law if enacted could limit Dubai's debt financed growth as the second largest emirate in the UAE has debt load of ~$70 bn while its GDP is ~$55 bn.  However Dubai's assets are estimated at $1.3 trillion and we feel the government could sell assets to pay down debt.

That, SJS reckons, could mean things like selling a minority stake in DP World, which the company is already contemplating offloading on Abraaj Capital, the region's largest private equity firm. That transaction alone could raise around $1.3bn, SJS says.

The more important issue here, though, is that establishing a framework for bond issuances could establish a long-awaited benchmark for bond markets. When the government issues five-year, ten-year and 30-year bonds, their yields form a basis from which all kinds of other bonds can be priced.

With a super-safe government floor to work from, investors know better what kind of added risk they're taking when they buy shares in the corporate debt of, say, one of the UAE's big developers. That, in turn, means that more companies find it easier to issue debt, both locally and internationally, simply because investors have more certainty about how their bonds are being priced.

Establishing just such a benchmark has long been a goal of regulators, policymakers and economic experts in the UAE, and last week's news appears to be a stride towards realising it.

Mohammed Shroogi, a 30-odd-year Citigroup veteran in the region, is resigning from his post at the mammoth bank and taking a job at Investcorp, an alternative asset manager based in Bahrain.

It's a big move for Shroogi and an impressive grab for Investcorp, which deals in private equity, hedge funds, property and technology investment and has roughly $13 billion in assets under management.

Prior to joining Investcorp, Shroogi had served for 32 years at Citigroup. He had risen to become managing director for the Middle East, prior to which he had been Citi's chief executive for the UAE, among other posts at the bank.

"Mohammed Al-Shroogi is one of the most experienced bankers in the Gulf, having had an exemplary career running Citigroup across the region," Nemir A. Kirdar, Investcorp's chairman and chief executive, said in a statement. "He will bring unparalleled depth of expertise and he will be instrumental in positioning our great firm in this region for the future."

Shroogi is said to be leaving Citi in September, according to a Zawya Dow Jones report. There's no word yet on his replacement.

The UAE's Central Bank today issued a set of draft laws covering corporate governance at the banks it regulates. Boring stuff? Yeah, except it's also pretty important.

It's important because it's an indication that the Central Bank is looking to put the UAE's local banking system on par with those in developed countries, increasing transparency, improving discolosure and eliminating conflicts of interest. While this might come across as corporatespeak gobbletegook, all of those things would undoubtedly be good for the UAE's banks - which is not to say that some of them aren't already in line with international standards. If you want to bring in international capital, a healthy, transparent banking system is probably pretty crucial. So even if the Central Bank guidelines are a bit vague, it's good to have this kind of guidance from the very top.

A copy of the draft guidelines is available on the Central Bank's website. You can also download them here:
CG Guidelines june09finaldraft-revised-18June09.pdf

As promised, what follows is a detailed timeline (with links!) about the convertible bond Shuaa Capital issued to the Dubai Banking Group in 2007. You'll have to thank The National's super-organized Travis Pantin for this one:


June 24
Shuaa announces plans to issue a Dh1.5bn convertible bond to Dubai Banking Group. Shuaa shares trade at Dh5.31. (Shuaa statement)

November 7
Shuaa issues Dh1.5bn of convertible notes to DBG. On Oct 31, 2008, DBG says it will convert the bond into 250m shares at Dh6 a share, giving DBG a 32 per cent stake in Shuaa. Interest on the bond is set at 6 per cent per year. (Shuaa statement)

This might sound a bit wonk-ish, but in the world of finance, it doesn't often get as dramatic as this: today, Shuaa Capital, an investment bank in Dubai, said it issued 250m shares to Dubai Banking Group to make good on a Dh1.5bn convertible bond. Then, get this: DBG said it wouldn't take them. The Dubai Financial Market agreed with DBG, saying it wouldn't put the shares in DBG's name until an agreement was reached by both parties. The Emirates Securities and Commodities Authority went along, too, saying the shares should not be issued.

Oh, boy. So here's the backstory:

I'm a bit late on this one (apologies!), but I just want to point everyone to an excellent analysis piece by The National's own Travis Pantin. It's about the hard times that have befallen two large Saudi conglomerates - Saad Group and Ahmad Hamad Al Gosaibi and Brothers.

Conglomerates are key ingredients in the region's economic lifeblood, and at least a few seem to have overextended themselves during the boom times, borrowing to finance expansion to what has turned out to be an untenable degree. One question, though: how much government support will these companies get if similar problems crop up in more than a handful of them?

(Photo: Maan al Sanea, the Saudi billionaire who founded the Saad Group in the 1980s. Supplied)

Gulf Capital, an investment firm in Abu Dhabi, said today it has partnered with Related Companies, the developer of the $1.7bn Time Warner Center in New York City, to build up to five projects in Abu Dhabi and Riyadh over the next five years.

Karim el Solh, Gulf Capital's chief executive, expects the projects to cost between Dh2bn to Dh5bn, half of which will be corraled from investors and half of which will come in the form of bank loans. Following initial investments in Abu Dhabi and Riyadh, Mr el Solh said the venture, called Gulf Related, may expand to other cities and countries in the GCC.

It's an interesting and somewhat surprising move for Gulf Capital. The venture marks the first foray into property for the firm, which heretofore had concentrated on private equity deals in the region - earlier this month, it raised Dh1.75bn in commitments for a new private equity fund.

The announcement also comes at what might seem a strange time, when property values across the region are sagging and a lack of cash available for lending at the banks is making getting the loans Gulf Related plans to rely on to finance its projects hard to come by. But Mr el Solh said he expected conditions to improve during the year or so it's going to take for the firm to study the market and partner with developers in Abu Dhabi and Riyadh. And he said a severe shortage of housing in both Abu Dhabi and Riyadh should make the projects viable despite the downturn in prices.

Another lingering question: how Gulf Related will get the land on which to build these huge  developments, which are to include retail, commercial and residential space. The plan, according to Gulf Capital, is to ink agreements with developers that have large land banks that haven't yet been earmarked for development. In Abu Dhabi, that would probably mean going after plots owned by Aldar, Sorouh or Mubadala, all of which own extensive unused tracts of land. This is definitely one to watch.

(Pictured above: Karim el Solh, chief executive of Gulf Capital; photo supplied)

Whether you're investing in local markets or merely watching them, analysts play an important role (or at least they're supposed to): they help you push past the basic give-and-take of daily news and reveal what it all means. They give you context. Of course, they also help those of us who are covering the UAE's economy and companies to give you, our dear readers, a clearheaded perspective on the day's events.

But which analysts are most worth listening to? These guys. Here, in no particular order, are 11 of the best analysts and economic commentators in the UAE, as chosen by a few of the folks on the business desk at The National.

The Gulf's appetite for foreign investment has long been a key part of its economic constitution. Until the financial crisis, it flowed like an open tap into the region, helping finance the rapid development of the non-oil sector. Dubai's massive buildings were constructed using it. So were many of Abu Dhabi's. Whenever the UAE's companies - or, for that matter, Kuwait's, Qatar's or Saudi Arabia's - went into international markets looking for cash, a ready hand was there to supply it and keep the boom booming.

Has the financial crisis brought a swift goodbye to all that? Not anymore, it seems. These past few weeks, we've seen signs that foreign investors are coming back to the Gulf, thanks to a rebound in developed-country stock markets and positive news about the length and depth of the ongoing global economic slowdown. As Sara Hamdan and I report today in The National, a series of recent regional bond issues have been oversubscribed, and even private equity firms, which have had a rough 2009 so far, are feeling the pick-up in foreign interest. It's worth a read.