| Kippreport.com

Arrested development

October 9, 2008 8:48 by kippreport

Adam Grundey

Summer is usually a quiet time for business news in the Middle East. Offices empty as employees look to escape the heat and it becomes even harder than usual to schedule a meeting. Slow-news days turn into slow-news weeks.

That wasn’t the case in Dubai this summer, however. Almost every week of the last few months has brought fresh revelations of high-level executives – particularly in the finance and real-estate markets – being arrested or questioned by authorities as part of Dubai government’s crackdown on corrupt business practices.

A former CEO of Deyaar Development (along with other staff members), a senior executive at Nakheel, an Etisalat employee, a former vice-president of Dubai Islamic Bank, two former executives of Tamweel (working for Istithmar World at the time they were questioned), the CEO of the Lagoons project, and four Sama Dubai execs have all made the headlines of regional – and international – media since April. And all for the wrong reasons.

Allegations of financial wrongdoing are never good news from a branding or PR perspective, but most of the companies involved, experts say, have worsened the problem through lack of crisis-management planning, meaning that they were unprepared to deal with the ensuing media attention. Failure to promptly respond to news of the investigations has meant damage not only to the individual brands involved, but also – potentially – to Brand Dubai.

Confirming stereotypes. “It’s a crisis of confidence,” says crisis-management expert Chris Kinsville-Heyne, managing director of Dubai-based C3i Strategic Solutions, of the investigations. “And confidence is what stock markets function on – particularly in the Middle East. And on a larger scale, it’s confidence in Dubai Inc.”

“The negative publicity from the discovery of the corruption is definitely a blemish for Brand Dubai,” says Hermann Behrens, CEO Middle East of The Brand Union. “Particularly because Dubai is such a positive story that has created so much interest overseas. These are big corporations and big corporations are associated very closely with the success and vision of Dubai.”

The major problem is that allegations of financial mismanagement will – for many international observers – confirm long-held prejudices about the state of corporate governance here. “There has always been an undercurrent around doing business in the Middle East,” says Behrens. “There’s a perception that transparency’s not at the level that it should be here.”

“The perception of Dubai, internationally, isn’t the one that it would like to enjoy – as an international financial center that people choose to list on because of its transparency and governance. It’s seen more as a building site than anything else. It’s where real estate happens,” says Louise Tinsgström, director of international operations for strategic communications consultancy M Communications. “When they launched DIFX, the promotional material said, ‘We want to be the Hong Kong of the Middle East.’ But there’s no real proof of that yet.” And the recent crises make that goal even less realistic in the near future.

To attract the international investment Dubai so desperately needs to realize its vision, its homegrown companies need to be perceived as reliable partners. “What do Western companies look for in Middle Eastern partners?” asks Kinsville-Heyne, thankfully rhetorically. “They’re looking for the ‘me too’ factor. Which is: We do things the same way as you.” And that means with full disclosure, rather than a handshake with your cousin behind closed doors, which is the way much of the region’s business has been done for centuries.

Pages: 1 2 3

Tags: branding fallout, Deyaar, Dubai anti-corruption drive, Dubai brand image, Etisalat, image, PR companies, Sama Dubai, Tamweel