Debt collection in Dubai
Dubai is the economic engine of the United Arab Emirates. It has a growing market and a booming economy, but it presents numerous difficulties in terms of payments
The strategic position and the abundant reserves of fossil fuels have driven the economic growth of Dubai making it become in a few years a highly developed Country with a high standard of living (in fact its GDP per capita is one of the highest in the world) .
In 2018 the United Arab Emirates – in particular the Emirate of Dubai – were the 7-th most competitive economy in the world, according to the recent report of the IMD Business School, surpassing in terms of competitiveness also countries like Norway, Sweden and Canada.
Now that all the spotlights are on Dubai, the speed with which the city has come to the attention of everyone seems incredible. The extraordinary economy of Dubai has helped to bring out the city as the place where many international businessmen have chosen as their regional headquarters or, in some cases, worldwide.
A few years ago, Dubai based its economy almost exclusively on oil. Today, however, after actions to diversify its economy, Dubai depends directly on oil profits for only 4% of its GDP.
Those aiming to maintain economic relations with the small UAE find evidence of the expansion of the Dubai economy. In fact, signs of enormous investments in infrastructure are visible everywhere: roads, airports, residential areas, hotels, tourist attractions.
Estimated spending on these investments will reach US $ 21 billion over the next 5 years, almost exclusively concentrated in Dubai. Apart from this great infrastructural drive – and the preparation for Expo 2020 – the Country will benefit from a New Investment law that authorizes the complete foreign ownership of companies in selected sectors.
So the economy is open and dynamic, above all thanks to diversification policies that have reduced the incidence of oil revenues on the share of GDP from 60% to the current 30%. This incidence is also destined to be further reduced in the years to come, as decided by the Federal Government.
Focus Economics experts forecast a 2.6% GDP increase in 2018, down 0.1% from last month’s forecast and 3.2% in 2019.
The correction on 2018 is more marked, as the forecast changes to 3.4% (from 4.4% in April). According to the IMF, however, in the coming years there will be a recovery of the economy. In particular, the non-oil sector should record medium-term growth rates above 3%, benefiting from investments in view of Expo 2020.
Significant risk factors remain on the economic recovery. The IMF identifies four of them: a) failure to recover oil prices; b) tightening of financial conditions; c) intensification of regional crises; d) increase of protectionism.
Dubai mainly import from China, India, America, Japan, Germany, UK, Turkey and Italy. It imports above all these goods, from the countries mentioned above:
- Gems, preciuous metals, coins: $32,8 billion
- Machines, engines, pumps: $29.6 billion
- Electronic equipment: $26.1 billion
- Vehicles: $21.7 billion
- Oil: $15.8 billion
- Aircraft, spacecraft: $13 billion
- Iron & steel products: $5.9 billion
- knit or crochet clothing: $4.7 billion
- Clothing (knit or crochet clothing): $4.7 billion.
As far as Debt collection is concerned, the topic remains always thorny. Recently, at the OECD – Organisation for Economic Co-operation and Development – headquarters in Paris, the United Arab Emirates also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the so-called MAAT.
The wish, says Mr. Mombelli, is that MAAT can also act as a trailblazer in terms of the protection of credits by exporting companies – today highly exposed to the Risk of Insolvency and with poor judicial protection – towards the region and in particular to Dubai.
A new era of fiscal transparency should also correspond to a new season in terms of contractual compliance and payment terms. However, this reality does not yet exist or only partially exists.
Even after the signing of the MAAT, what we need to remember is that when we deal with the judicial system of this Country it is necessary to first understand the cultural and behavioral dynamics, to implement its strategy and try to assert its reasons.
The Mise and ICE have identified several actions to prepare foreign companies to maintain business relations in the best possible way with the United Arab Emirates and then with Dubai. Furthermore, a fundamental aspect that is often overlooked is the protection of credits.
To the problem of finding a reliable partner for credit recovery in Dubai, there are the complications of a legal nature concerning two types of summary proceedings: the injunction and the order of delivery. If the judge considers that the request for the decree is unfounded, then it requires a hearing in contradictory, exclusively in Arabic, but since the decree is normally opposed, then the execution will be prevented.
Invenium, however, recommends using the extrajudicial recovery activities also because of the rather sustained costs for a case in the UAE.
According to Invenium’s legal collaborators in the Arab emirates, in order to see their legal reasons recognized, it becomes necessary to refer directly to a local court of first instance.
For any dispute related to credit, Invenium is able to assist companies that have commercial relations in the UAE – and therefore in Dubai – thanks to the experience gained in this Country in the last 20 years.