Jan 25 2011
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Gulf states urged to reform 'archaic' bankruptcy laws
"There is no question about it. Insolvency laws in this region are completely archaic, there is no bankruptcy protection," said Arif Naqvi, group CEO of Abraaj Capital, which has paid-up capital of $1.5 billion.
"The essence of capitalist behavior, which is what all of us aspire to, needs to have bankruptcy protection as without that you don't innovate, you don't take risk and you do not allow entrepreneurship to flourish," Naqvi said at a economic forum in Riyadh.
Gulf countries including the UAE and Qatar have pledged to pass new bankruptcy laws to help mitigate future financial difficulties of the type experienced by companies during the downturn Insolvency legislation in the Gulf states has come under the spotlight following the global economic crisis. Under existing laws, it is a crime to bounce a post-dated check and there is no legislation for consumer bankruptcy.
"Without question, criminalizing the activity of bouncing a check is not the best way of grow business," Naqvi said. Saeb Eigner, chairman of UK-based investment firm Lonworld, seconded the views.
"Insolvency laws in the Gulf are archaic and there needs to be a reform and a revamp in the whole region," he said.
Dubai has said the reform of insolvency laws is at the heart of plans to address vulnerabilities in the emirate's financial system.
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