More tales of imprisonment and Catch 22 in Dubai

Readers,

Another cautionary tale of the draconian laws in Dubai and the obscene powers available to the banks in the UAE to imprison expats, from the BBC online. [TWI - thx for the link!]

The Catch-22 aspects of the UAE's immature laws with regard to debt and the absence of a personal bankrupcy law are scary indeed. More on that to come soon.



Dragon's advice on the UAE remains, as before, "Best Avoided"

BBC News

Homeless in Dubai

18 July 2010 Last updated at 03:45 ET Help
Nicholas Warner is British and sleeping on the street in Dubai. He got into a dispute with his bank, Emirates NBD, initially over whether his credit card repayments had been made.

He went on holiday at Christmas and the bank says that by leaving the country without its permission while they were in a dispute, he got reclassified as a so-called "debt skipper" - one of the many expats who leave Dubai in a hurry with large debts, never to return.

When he arrived back at Dubai airport, he was arrested. His passport was seized by police on the authority of the bank.

Although he was released and tried to negotiate with the bank he got into further difficulties.

He had been working as a strategy adviser for an alternative medicine company, but his employer decided it was safer to let him go while he sorted everything out.

Emirates NBD is refusing to let his passport be released until the debts are paid. Nicholas has no way of paying them without a job. And he cannot get a job without being able to show he's in the country legally. For that, he needs his passport.

Read more:
Destitute in Dubai: One man's story

PS: The Dragon is still on leave, like everyone else. Expect delays and occasional champagne-induced poor typography...

Easy Credit the rule in the GCC, and Oman

Interesting article this week in one of the UAE financial mags about the explosion in UAE and GCC Credit card debt and personal loans. As in Oman, it seems many people are in debt up to the eye-balls in loans. In fact, a rising problem in Dubai and Abu Dhabi are so-called ‘skips’, young expats (usually European) who live the high life a little too well, get into a deep pit of personal debt, and end up maxing out everything and then fleeing the country.

The key problem is the immaturity of the financial markets: in most of the GCC you can go from bank to bank, applying for personal loans and credit cards, with no cross-check between the lenders as to the actual debt load of an individual, as there are no real credit rating agencies. Across the GCC banks have relied on an adhoc system of requiring letters from employers, insisting salaries are paid directly into the accounts, and ‘blacklists’ of people who are to be denied credit.

Easy unsecured credit is a huge problem in the US and UK, so you can imagine the damage it could do in a country like Oman, where the average citizen is even less fiscally smart. In addition, Oman seems to have a tremendous cultural expectation that, no matter what, the mighty government (or Daddy) will step in to fix all financial ills. Interestingly, Kuwait’s Government have recently had to create a $2bln fund to bail out locals who have effectively borrowed themselves into bankruptcy.

Oman has done something good with the plan to create such a real credit rating agency here by 2009, teaming up with Experian, a major global consumer credit rating agency. Called the National Bureau of Commercial Information, it is (naturally) backed by the big boys (Zubair, Bahwan, Hosni…) and supported by the Central Bank. This is well overdue, but ahead of the rest of the GCC.

Why is this an issue?

In a report in June the CBO reported that the level of outstanding credit in Oman rose almost 50% in 2007, rising to $19.4bln. They also lowered the ceiling on the maximum interest rate on personal loans to 8%. (in theory only on new loans, but people could refinance old loans to the new rate). According to the CBO official report, Personal Lending by Oman’s Commercial banks rose in 2007 by 42%, from $4.7bln to $6.7bln.

A credit crash seems almost inevitable in Dubai with the whole 'running on vapor' attitude to everything, and a society dominated by relatively young expats. Dubai is also a net importer of oil…

Hopefully it isn’t too late to forestall a ‘debt crunch’ here, plus deposit growth in Oman is pretty robust, also at 40%+. But its a worry that so much of the easy credit is being spent on cars, weddings and holidays. As long as oil prices and the MSM stay high, things should be OK in Oman for now. Else the next bit of financial sophistication will need to be bankruptcy laws.

Oman Tribune article

Sultanate gets first private credit bureau

MUSCAT The National Bureau of Commercial Information SAOC (NBCI) launched Oman’s first private credit bureau on Monday under the auspices of HE Hamoud Bin Sangour Al Zadjali, executive president of Central Bank of Oman (CBO).

NBCI has partnered with Experian to acquire technical know-how and systems for the bureau. Experian, one of the three largest global information services companies, has signed an agreement with NBCI for supply of its proprietary software to enable NBCI to establish a credit reference data base and bureau service in Oman.

The partners of NBCI are Al Jawhar National Corporation, Infoline, Zubair Corporation, Qurum Business Group and Al Farqad Investments; and Hind Bahwan is its chairperson. NBCI vice-chairman and MD Khalid Ahmed Al Hosni said credit bureaus are part of the financial infrastructure of a country and are among the providers of basic information for developing credit strategies.

The function was attended by Executive President of CMA Yahya Al Jabri