Gulf companies are reporting record double-digit growth, profits are soaring due to record oil prices which could hit a scary US$100 by December this year, and rival stock exchanges are at each other's throats to buy large multi-billion dollar stakes in established markets. All is well in Arabian businessland, or so a lot of people would make you believe.
A few weeks ago an asset management company by the name of Forsyth Partners announced that it was on the verge of being suspended by the Dubai Financial Services Authority. The regulatory body dithered somewhat and failed to give a decent response to what was taking place on deadline day. The company's CEO, Paul Forsyth, was equally reluctant to give me any more information. Something was clearly wrong. 24 hours later, I rang the Dubai International Financial Centre (DIFC) office and spoke to one of Forsyth's employees. She was in a panic, told me that 30 people would lose their jobs and that in the next few days there would be no one left to answer the phones. The company was then promptly booted out of the DIFC and is now up for sale - along with the unknown amount of debts it still has hanging around.
Not all business in the Gulf is as rosy as many like to portray. Not everyone is making piles of cash, on the verge of an IPO or expanding across India and China. Forsyth was a tragic first of its kind story, but sadly one that will undoubtedly be repeated in the coming months and years as businesses find it increasingly difficult to compete in a progressively more crowded and expensive Gulf.
According to various sources I have spoken to over the last few weeks Forsyth's demise was a tale of alleged infighting, mismanagement and overspending in one of the most costly places in which to do 21st century business. And it can't be alone, others must be teetering on the brink - this is simply a fact of life when operating in a globalised business world.
One senior asset manager close to the company told me that the business model was "wrong from the start". He also alleged that it moved it's group sales and administration to Dubai but that once in the emirate many of its senior staff were flown out to do business in other locations. The costs rose and rose and so did its rent, debts mounted up and perhaps it couldn't cope. On top of all this a recent report suggested that "irreconcilable differences of opinion and infighting" among Forsyth Partners' board members combined to force the company to close shop. However, another source also told me that despite its alleged financial problems, Forsyth was considering expanding its reach to new markets including Singapore, Hong Kong and Kuala Lumpur. No one now knows exactly what happened to the Forsyth few or even its local partner.
Still, regional and international firms continue to flock to Middle East markets. More cases similar to that of Forsyth's are bound to happen, this time however, it won't be an isolated incident.
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