First with Financial Comment from Arabia

Jewelry shops to close in $870m Damas debt standstill deal

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Damas, the largest jewelry chain in the Middle East is to close or relocate some of its 450 outlets as a part of a $870 million debt restructuring deal that follows in the wake of a record $3.7 million fine for violating corporate governance standards last week.

Yesterday a majority of the group’s banks agreed to a standstill agreement and officials said a restructuring plan would be implemented at the end of the standstill agreement period. They had previously announced in December that this would involve the closure of some of their 450 retail outlets.

Corporate governance

Last week the Dubai Financial Services Authority ordered the dismissal of the Damac board and fined the family owners for violations of corporate governance that amounted to treating the publicly quoted company like a private concern.

The Abdullah bothers, Tawhid, Tamjid and Tawfique have been ordered to repay $99 million and two tonnes of gold that were taken for personal use and property investments.

The Damas scandal is one of many that has rocked Dubai business since the collapse of the real estate boom 18 months ago. Many business arrangements that might never have surfaced have been exposed as lacking in proper corporate governance and are now the source of much embarrassment and public ridicule.

Entrepreneurs who skate on thin ice and make it, are usually regarded as heros. Those who fall through and have to be rescued are seen as national liabilities.

Merchant traders

Yet where would Dubai be today without its merchant families, whatever their trading practices? It is actually men like the Abdullah brothers who built Dubai, and most recently they have devoted an enormous amount of time and effort to the highly successful creation of the Dubai Multi Commodities Centre.

That is not to say that wrong has not been done, merely to note that entrepreneurs are rule benders by nature and that their value to a society amounts to much more than some of the people now passing judgment on them.

For where does the wealth of a city like Dubai come from if not its merchant families? If this inconvenient truth is forgotten then Dubai really does have a problem. It is very sad to see Damas closing and not opening jewelry shops.


Written by Peter Cooper

March 29, 2010 at 7:31 am

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