Deyaar has been in the media recently with a news item that raised many eyebrows. Deyaar’s CEO, Zack Shahin resigned over alleged embezzlement. The tone has for the most part been that Zack Shahin is guilty, before a case has even made it to court. The police has apparently extended Zack’s detention for another 30 days. Several arrests are made and now Deyaar’s Nasser Bin Hassan Al-Shaikh says, “From the looks of it, it will go to court, we have enough evidence to take it to court.” in an interview with Bloomberg at the World Economic Forum in Egypt.

For those who have not had the privilege of being introduced to Dubai’s legal system, almost anything and everything is enough to go to court. The more complicated a case is, the more likely it will go to court. The Public Prosecution is simply a bureaucratic step before the inevitable court date. Nothing to be particularly excited about.

I know very little about the details of the case, but I thought it would be worth pointing out that we should always assume the accused is innocent until proven guilty — opposite of the legal system (and the media).

It is also interesting to see that Deyaar’s website has nothing to say about this case.

I have always been a fan of Internet-based companies in the region. I also understand the general frustration that stems from the seeming unfair compensation packages offered to people of different nationalities. While I maintain that this is strictly an exercise of providing incentives to leave one’s home country, I was rather disappointed to find Bayt.com add an option for employers to specify nationalities accepted for positions.

Why would you encourage such practice? That is indeed a sad thing.

Mr. Mohsen Khan seems to be upsetting Dubai Customs with statements about VAT causing a 2% inflation in the UAE. Dubai Customs’ Al Saleh rebuffed Khan’s statement, citing that they are personal observations and do not reflect the IMF’s report. Considering that the IMF report hardly touches on VAT, I’m not sure what Mr. Al Saleh’s problem is.

I’m not sure what is surprising about the VAT being an inflationary addition to the economy. If the cost of goods and services increases, it is inflationary. Yesterday I paid AED 100/- for X goods, tomorrow I’ll pay AED 103/-.

Al Saleh’s statements are your typical Arab government official rhetoric. Al Saleh says:

The evidence, however, suggests that there is no reason to expect that VAT would be inflationary, although the VAT may have a one-time effect on the general price level and may lead to a change in relative prices.

It is well-known globally that implementing VAT in many countries has significantly contributed in boosting the economy’s sustainability, as VAT is considered the ideal tax for already strong economies.

And what evidence is that? So let me get this straight: VAT is not inflationary, because it will increase prices once and for all?

While I am not disputing that VAT is a good thing for the economy, I find Mr. Al Saleh’s statements troubling. Either he is not sure what inflation means, or he thinks we are all idiots. Either way it is not good.

Occasionally, I listen in to the Business Breakfast on 103.8FM. Well, up until the reception goes bad on the way up to TECOM. While one would understand the occasional PR stunt, there was no excuse for today’s Westin Hotel interview about their invention of the world’s first battery-operated toaster. Right.

Brandy and Malcolm should both have known better than to put up an interview like that. A simple search for it would have revealed the following:

A housing having a generally upwardly directed slot therein for receiving a slice of bread, with rechargeable battery-powered heating elements therein for toasting a slice of bread inserted within said slot.

Filing Date: 8/13/1969

You can read all about the patent here. I would hope that the Business Breakfast team does not disappoint again with such carelessness.

The IMF says the Gulf is looking good:

The International Monetary Fund has issued an upbeat outlook for economic growth across the Middle East and central Asia, saying that high prices for oil was likely to insulate the region from the broader global economic downturn and keep money flowing into new industries and poorer economies.

They are also telling the Gulf states to tough out the current 2-digit inflation rate for the next couple years (optimistic guys, aren’t they?). I never considered the IMF to be a purely financial institute and always saw them as a political instrument. Putting up with 2-digit inflation is just absolutely ridiculous as it harms the economy in more ways than I can count.

So, why are the Gulf leaders still not listening to the experts and instead heeding the politically influenced advices? Could it be that the politics of the peg have such a dramatic impact on the economy that economists simply are unable to quantify? Perhaps.

Currently, what is happening is very simple. Costs are spiraling out of control. Small businesses are barely coping with operating costs. The number of start-ups are decreasing as the number of companies folding increases. Employees are jumping ship to ‘re-peg’ their salaries. So, good talent is moving away from small innovative companies to bigger ones. This puts further strain on smaller companies to innovate in order to compete with the bigger more established organizations.

So, Mr. IMF, I strongly disagree with you. Given the current economic environment, I would most certainly not take the risk and start a new company. I would not be able to afford the rent, the Internet (AKA extortion) and the salaries. Simply put, it would be suicidal. So, is that what you would call a good outlook?

Okay, so now your favorite blog has its own domain name (something about *.wordpress.com didn’t sound appealing to me at all!).

http://dubaiplanet.net/ is our new home (though it’s still hosted at wordpress.com).

There is a lot of talk about VAT lately. Dubai Customs has been all over the news and radio, discussing their technical readiness to implement the VAT. When looking at their own website, the latest news item on the subject dates back to December 25, 2007 with a clarification about inaccurate reports in the media. Recently, they confirmed that VAT planning is on track.

VAT is essentially a more sophisticated version of the sales tax that takes the overhead away from the government and passes it on to the organizations and individuals involved at every transaction. I am not quite sure how that would impact the free zones though. How does it impact services. How do you put a ‘value added’ on services rendered? It’s a lot more clear-cut with products. I buy X for $1 and I sell it for $1.20, so my profit margin is $0.20. You can verify this information through receipts and purchase orders. Services on the other hand are not tangible, so how d you verify what the profit margin is?

My understanding is that in the free zone, we are exempts from taxes. Does it mean that we are exempt as long as we are trading within the free zone? Do I have to pay it to suppliers or charge my clients outside of the free zones?

Someone needs to clarify these things before they come out giving us a deadline and telling us all to just get on with it.

I thought both are one and the same. If you are efficient, then you would be happy. It made sense to me. Unfortunately, real experience tells me otherwise. The first impression people have when they walk into my office is awe. No, not the great design. It is the fact that everyone is completely involved in whatever task they are doing, 100% concentration. You don’t hear office chit-chat.. you don’t hear anything but keyboards tapped and mouse-buttons clicking.

I run my company like a factory. General Ford would be proud. Coming from a technology background, I utilize technology to its maximum potential. Every second is accounted for. Whenever we see a problem, it is analyzed and measured to the second. Oh no, I don’t exaggerate. This is the only way I can compete. My competitors have more human resources and money than I can compete with. I have no choice but to be extremely efficient.

Efficiency comes at a price. General employee happiness is low. It would be unfair to blame efficiency alone. My management style is very aggressive and tough. I’m the type of manager would will blow up in your face. I hate doing it, but I do it nevertheless. I tried to tone myself down several times, but I can’t seem to find the right balance to keep me cool. Anything that upsets my perfectly oiled time machine upsets me visibly. As long as things are going as I had planned, everything is okay.

I don’t necessarily go out of my way to complement staff on doing a good job. In my view, they should always do a good job. That’s what I’m paying them for. It is an obviously flawed view. I disagree with it, but I know that in the back of my mind, that’s how I act. Partly, it has been my upbringing where praise and complements were not common. I don’t expect it from people and neither do I give it out easily. I don’t think much about it really.

The fact that my receptionist quit because of my style has been a serious wake up call for me. Granted, receptionists are a dime a dozen. Big deal. But the fact that I have caused a person to simply quit their job has affected me far more deeply than I thought.

So, I decided to start introducing small changes to the office environment. For starters, Thursdays are going to be designated for donuts/coffee/tea/mankeesh/whatever. Let everyone take a break and eat a bit, socialize a bit..

I can’t make a 180 degree turn, so it will have to be in baby steps. I don’t want to lose my staff. I know I have made them the most efficient (and from what I’ve seen from other companies, I am sure they would rank substantially high).. now it’s time to make them happy as well.

We spend AED 75/- per transfer for our payroll. It is a lot higher than it should be, by all means. However, I put up with it because I think it is very important to go through the banking system, in case of any future disputes. This was not how we have done things for a long time, due to limitations on visas, etc. We weren’t always 100% legal, thanks to silly TECOM regulations (if you don’t rent with us, we can’t give you visas, but we don’t have office space for you, so tough!). Since we have had our office space, we have been as legal as you can be.

However, when we hire new staff, more often than not, they don’t have a bank account ready in time for their first paycheck. So, we issue them a check. The bank returned the check saying that the Central Bank circulated a memo asking banks to refuse cashing salary checks. That is absurd at best.

The staff member is ‘in process’ as far as immigration is concerned. So, he is unable to open a bank account in time to get paid. So what happens now? Well, we issue another check, made out to cash. We pay our new employee in hard cash. Even less traceable!

I spent yesterday’s evening with the auditors to go over their report. Mind you, this is my first audit ever, so it had to cover 2 years. In hindsight, I should have done the audit earlier. This is primarily for a few reasons:

• Tremendous amounts of mistakes could have been avoided
• An incredible amount of information and knowledge about accounting would have been learned fairly early on (I am still having a hard time with some of the finer concepts like: calculating income on an accrual basis vs. cash basis, etc.)
• Budgeting would be done from a completely different angle

The last point is perhaps the one I think is most relevant. You can make accounting mistakes and recover from them. You can always learn later (better late than never). However, budgeting would not be a case of: I have 1 million dirhams and I can spend 600k now and bring in 1.2m income. There are many things to consider.

This may not be such a big deal for those who come from a financial background. However, if you come from a completely different discipline, you are going to have to learn about the different types of assets, your share capital, different types of costs and expenses.. the fundamental difference between what’s in the books and your cashflow. There are even legal implications to your total P&L. So, it isn’t just a simple matter of being able to read a Profit and Loss statement. It is the act of knowing what actions need to be taken to make it look better.

You can build a house with the best of foundations, but if you don’t paint it well, it will not look very attractive. I have found that making your books look good is an art in its own right. You would have to be an artist to make your company attractive. Attractive for what?

There are two important groups that need to be considered here:

• Banks (if/when you need financing of all kinds — overdraft, loans, etc.)
• Potential buyers (acquisitions, mergers, etc.)

The above groups may have heard of your company. But, their decision to proceed or not will primarily come from your books.

So, yes, your books have gotta look sexy! I am learning, and that is what I’m doing now for 2008.