Dubai's Rising Costs Blamed For Forsyth's Demise

by Lorys Charalambous, Tax-News.com, Cyprus

19 September 2007

It has been claimed that the rising costs of doing business in Dubai were partly to blame for the demise of asset management group Forsyth Partners, which went into administration last week.

According to a report by Reuters, a UK-based employee blamed Forsyth’s troubles on over-expansion into Dubai and the associated costs, which led to its inability to meet the Dubai International Financial Centre's capital requirements, and subsequent descent into administration.

"There's absolutely nothing wrong with the UK business," the source told Reuters, adding that: "It was the over-expansion into Dubai, setting up head office in Dubai, the costs associated with all of that have caused numerous problems. That's the issue."

Speaking to the Khaleej Times, a representative of Grant Thornton, which has been called in as administrator to Forsyth Partners, agreed that the high costs associated with establishing a business in Dubai can be problematic for incoming companies.

“Initial running costs (in Dubai) are high,” the Grant Thornton contact told the paper, citing the high cost of visas and rents. “Then there is the cost of expatriate workers. These two factors put on costs so the returns take longer than expected.” However, the report stressed that the contact was not commenting specifically about the Forsyth case.

Dubai's booming economy, which has seen an influx of investment and foreign businesses in recent years, has seen soaring real estate prices and rental values for residential and commercial property. The official rate of inflation in 2006 was 9.3%, but unofficial estimates put the figure much higher.

In August, the Dubai Financial Services Authority (DFSA) withdrew the licence of Forsyth Partners Global Distributors Limited to carry on financial services activities in or from the Dubai International Financial Centre (DIFC), after the firm failed to meet the applicable regulatory capital requirements, and was unable to demonstrate a capacity to remedy that breach.

Forsyth Partners claims to manage some GBP1.8 billion in its fund business, Forsyth Funds. On Wednesday, in a deal with Grant Thornton, Crosby Capital Partners agreed to become the new manager of Forsyth Funds, subject to approval by financial regulators in the UK, Ireland, Bermuda and the Cayman Islands.

Recommended