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ICAEW works on UAE insolvency overhaul

The Institute of Chartered Accountants in England and Wales (ICAEW) is receiving positive attention in the Middle East for public policy work on the United Arab Emirates’ (UAE) dysfunctional insolvency practices.

The institute, which set up office in the Middle East late last year, has also had success with its Emiratisation activities.

Professional services institutes the world over increasingly view public policy work as a vital way to demonstrate their expertise and become more visible to potential members, students and employers.

The ICAEW has identified a particularly good public policy opportunity in the UAE’s post-financial crisis examination of its financial structures and systems.

ICAEW Middle East regional director Amanda Line said the systems are not fit for purpose.

One example is the insolvency framework and Dubai’s related system of post-dated cheques (PDCs), which Line calls "very alarming".

PDCs are used as security in business transactions. For example, rent is paid quarterly, but at the beginning of the year the tenant must provide the landlord with four post dated cheques.

If the tenant gets into financial difficulty and cannot pay rent, the post dated cheque is presented to the bank. If it bounces, it is a criminal offence.

Jailed businessman

One example of this system in action occurred this month when British businessman Safi Qurashi was jailed for seven years for bouncing cheques and withholding payments.

"Frequently when businesses get into trouble, the people who have written the cheques, who are often expats – because 90% of the working population are expats – flee [to escape a prison sentence]," Line explained.

"You are left with a big mess because the directors of the company have gone and there is no proper mechanism for liquidating the assets and distributing those to the creditors in an appropriate way."

The ICAEW believes it is well placed to help fix the system as it is the largest licensor of insolvency practitioners in the UK, with 120 years of experience in the area.

The institute produced a White Paper in partnership with the Dubai International Arbitration Centre that was submitted to the Minister of State for the Economy.

The paper suggested ways the insolvency framework could be strengthened through methods such as forming a body of licensed insolvency practitioners and reforming the law to make it more transparent.

"At the end of the day, if you want security in doing business, clear transparent insolvency laws are part of that," Line explained.

The White Paper has been well received, with Line appearing on local television to discuss it. There has also been coverage in newspapers and online.

"I hope the document has now been published widely enough that the decision makers will take note of some of it, or perhaps involve us again in the debate, because we have established some credibility and a willingness to contribute in a positive way," Line explained.

Emiratisation

Another ICAEW Middle East initiative in the UAE attracting significant attention is an Emiratisation scholarship scheme.

Native Emiraties make up a small percentage of the population and typically work in the public sector. Only about 3% of employees in the private sector are Emiraties, Line said.

The government wants future business leaders to be Emiraties and is therefore encouraging the private sector to hire and train locals.

The ICAEW is contributing through a scholarship scheme that will place native Emiraties in Big Four accounting firms, provide them with a first class training package, first class salary, six months secondment in a London Big Four office and mentoring.

There are just five positions in the programme this year, but Line hopes that by 2012 or 2013 there will be 20 people entering the programme each year.

There are also plans for the Emiratisation scheme to be mirrored by similar schemes in Bahrain, Qatar and Saudi Arabia, which all rely heavily on expats.

Line says Emiratisation is a real buzz word in all Middle East countries at present: "You just say Emiratisation and everybody leaps at you. It is so important."

 

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