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NewsMorison Menon

January - March 2011

EDITOR’S NOTE

Welcome to the first edition of Morison Menon News in 2011. New Year is a good time to take stock of previous year activities and learning

and look forward to New Year with renewed vigor and enthusiasm.

Couple of months back Indian President Her Excellency Pratibha Patil made State Visit to UAE. Her visit is expected to further increase the bilateral trade between UAE and India. Her visit also stressed on increased sharing of knowledge and intellectual capital between the two countries, which I think is significant. The economic challenges in 2010 have been a great learning experience and time to ponder in the direction of our business. 2010 has also been the year when we went with our expansion plans, be it in audit and accounting our forte, or in consulting or in the Business Process Outsourcing space. I personally believe that as USA and Europe despite facing challenges in their economy; will continue to offshore several of their activities to Asian countries such as India, China and Philippines because of the cost advantage and large English speaking population in these countries which are able to attend to the service needs of the west. Our consulting arm Morison UAE Consulting has been able to establish leadership position in providing internal audit services for the financial

Sudhir Kumar, Partner & Head-Corporate Communications, Morison Menon, CA. Raju Menon, Managing Partner, Morison Menon, Pushpakaran Parambath, Head-Incorporations, CA. Saju Augustine, Partner, Morison Menon-Sharjah, CA. Kurian Kuriakose, Managing Partner, Morison Menon-Qatar, CA. Charly K. Sunny, Partner, Morison Menon-Abu Dhabi, Nasser Al Khamisi, Partner, Morison Muscat, Jeralyn & Roselyn, Senior Auditors, Morison Menon with Jean - Pierre Larroze, Chairman, Morison International, Paul Wan, Chairman, Morison International Asia Pacific, Liza Robbins, CEO, Morison International & Stephen Chang, Vice Chairman, Morison International during a photo session on the sidelines of Morison International Asia Pacific Conference in Manila.

services sector in the UAE and have bagged several key contracts in this vertical in 2010. Our IT arm MMIT is gaining the confidence of hotel industry in UAE and in 2010 added three five star hotels to its account for its flagship HR Software ‘HEADS’. On the incorporation front of our business I am happy to see our team helping five major international companies to setup their operations in UAE in telecom, engineering, architecture domains besides many other setups. The growth of the incorporation business in Dubai shows that Dubai is back as a choice of business destination for global entities in 2010 and I see the future to be bright. Our global reach also extended with us opening an office in Kuwait, besides expanding the capability of our IPIX BPO office at Calicut India, to serve clients in the healthcare domain besides the financial sector.

The year 2010 also saw Morison Menon actively participating in two prominent events; ‘the World Free Zone Convention 2010’ and ‘the Stars of Business Awards and Summit’ celebrating the achievements of the contribution of the SME sector to the economy of UAE. In the Stars of Business Awards Summit, Morison Menon was privileged to be associated as ‘Strategic partner’ in setting up the awards criteria for the event held in Dubai. In this issue the managing partner from Morison Menon Qatar discusses the growth opportunities in Qatar and its spillover effect in the GCC due to Doha grabbing the rights to host the FIFA World Cup 2022. Our Guest writer Dr. Khater Massaad brings in perspective the active role that is being played by Ras-Al-Khaimah Investment Authority (RAKIA) in attracting local and foreign investors to the growth of Ras-Al- Khaimah. Our specialist on Accounting and Audit standards elucidates the changes in Lease Accounting that are expected in the IFRS based on the draft circulated by IASB and FASB. How organizations can breed excellence, is the thrust of article by our BPR specialist.

The year 2010 also saw Morison Menon consciously consolidating and bringing together under one roof, the CSR role that was being played by the group entities, by registering the CA Girija and CA Raju Menon Foundation, to give thrust to the CSR activities. The Foundation activities can be viewed at www.cagirijaandcarajumenonfoundation.org. This issue also features two outstanding institutions that serve the cause of humanity, namely the Al Noor Training Centre for Children with Special Needs and the Dubai Autism Centre. The future issues of Morison Menon News shall be covering activities of many such UAE based and international institutions that are playing a significant role in changing the lives of people who need all possible help and our support morally and financially. Our Editorial team is excited with the changes that are envisaged for MM News in 2011. Our tech savvy followers can follow MM News and other latest updates in the financial world on Morison Menon Twitter and Face book account. On behalf of my team, I wish our readers, clients and partners a very happy 2011 and hope to get your continued patronage. C A. Raju Menon

2Kurian KuriakoseManaging Partner, Qatar Office

“Expect Amazing”, was the tag-line of the Qatar Bid committee for FIFA 2022 and this became a reality when FIFA awarded the right to host the 2022 World Cup to Qatar, the first country in the Middle East to get this honour. The FIFA World Cup is expected to draw around half a million visitors, almost a third of Qatar’s current population. The FIFA event at Qatar is expected to have a significant impact on the economy.

Government on track with large spending program Prior to FIFA’s announcement, Qatar had already outlined a plan to spend around $100 billion, being 87% of GDP (2010 GDP in current prices is estimated at $115 billion) on infrastructure projects as a part of the country’s ambitious National Vision 2030, to modernize the country. The FIFA event has only accelerated the infrastructure spending programme and can expect the completion by 2022.

As part of the plan, the government will spend more than $40 billion on projects, while the remaining share will be from government entities such as Qatar Petroleum. The plan includes, among others, a number of high profile mega projects, largely in the transportation, tourism, health, education and housing sectors. The plan also includes a $25 billion metro and rail network.

The construction of the first phase of the new $10 billion airport, dubbed the New Doha International Airport is already in full swing, which will eventually replace the current airport. The first phase of the project is scheduled to open in late 2011 or early 2012, with later phases being rolled out between 2012 and 2027. Once completed, the new airport would have the capacity to cater to 24 million passengers per year initially which could be expanded to handle 50 million passengers.

Other prominent projects include a $7 billion deep water seaport and a $1 billion crossing to link the new airport with projects in the northern part of Doha. An additional $20 billion will also be spent to build and expand roads. This does not include the Qatar-Bahrain Friendship Bridge project at a cost of $4 Billion.

How would the World Cup help?Hosting the World Cup adds a sense of urgency and provides a stiffer deadline for the completion of projects, critical to showcasing Qatar to the world. As a first step, officials in Qatar have already announced the launch of a staggering 200 projects in different areas by the first quarter of 2011 and the metro and rail projects are expected to be complete before the world cup to accommodate the expected inflow of tourists. The Qatar-Bahrain causeway, could finally receive the necessary focus and attention which will see the project take shape well on time for the mega event. One needs to take note of the fact that while all the above projects were planned prior to the World Cup announcement, Qatar would also benefit through additional spending on projects undertaken exclusively for the World Cup. Qatar will receive an

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unexpected boost primarily in two areas, sports facilities and hotel/leisure facilities.

The Qatar World Cup bid outlines having 12 stadiums ready by 2022. The stadiums, costing around $4 billion, include three existing venues which would be expanded and nine new state-of-the-art stadiums with capacities of at least 43,000 each.

Qatar also plans to build 90,000 additional hotel rooms, although FIFA requires Qatar to build 65,000 rooms. Indeed, the resulting boost to the economy is not to be underestimated, and comes at a most opportune time. It coincides with Qatar reaching the targeted 77 million tons per year of LNG production and amid much speculation over Qatar’s ability to sustain its rapid growth after gas related projects are completed.

The International Monetary Fund (IMF) provided Qataris more reason to rejoice when it projected a growth rate of 20 per cent for the country next year.

Already, Qatar is the second largest recipient of FDI amongst GCC countries after Saudi Arabia.

According to the World Investment Report 2010, in turn issued by United Nation’s Conference on Trade and Development (UNCTAD), Qatar succeeded in more than doubling the value of FDI flows in a span of one year, from $4.1 billion in 2008 to $8.8 billion last year. The credit partly goes to the sustained progress made by the country’s energy sector, notably in gas production. The 2022 World Cup event is expected to increase this FDI flow into the country.

ImplicationsQatar is set to benefit enormously from currently planned spending in general, as well as from the impact of the World Cup. Continued economic growth would be the primary result, just when the fast-paced growth, induced by the large buildup in capacity in the hydrocarbon sector in recent years, was set to come to an end. This vast spending program will also help diversify the economy away from hydrocarbons. Moreover, the private sector will have a greater role to play, as the contribution of non-hydro carbon related activities to the economy surges.

Investment in infrastructure will also help relieve some of the bottlenecks and shortages that have built up in many areas, because expansion in infrastructure had not kept up with the rapid growth of the economy or population. The new investments can help set the stage for further growth in the future. This also bodes well for Qatar’s plans to boost its tourism and become a pole of attraction in the region.

Spending will also have tremendous repercussions for the country’s financial sector. The banking and investment sector could be one of the main beneficiaries. Already, government backed projects have been very instrumental in 2010 in helping the banking sector’s quick recovery in the aftermath of the global financial crisis. Sustained future plans will help banks generate revenues through top line growth and increased fee generating businesses. The plan could also result in deeper stock markets with some companies likely to go public for their funding. This will improve Qatar’s competitiveness and its bid to become one of the financial hubs for the region.

Continued in Page: 5

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Indian President Her Excellency Pratibha Patil’s visit to UAE has emerged as one of the driving forces for accelerating the

trade and investment between UAE and India. She called upon business institutions and Councils in India and UAE to take necessary measures to strengthen co-operation in sectors such as energy, oil and petrochemical industries. She said India’s plans for expansion of infrastructure, energy and industrial sectors presents immense opportunities for investment. Her visit will act as a catalyst for UAE investors to be active participants in the India growth story. She also initiated talks for India and UAE to partner and work in third countries which will boost mutual co-operation. With a population of mere 6 million, the UAE has emerged as the largest trading partner of India. UAE topples the US, China, Russia, Japan, Germany, France and the UK - countries which export machinery, defence equipment etc to the growth hungry Indian economy. The fact remains that half of UAE population is blue collar workers and the country is not known as a major manufacturing or industrial hub. Yet India is the No: 1 trading partner of UAE whereas the UAE is India’s top trading partner. Currently the trade between India and UAE is valued at USD 43 billion and it is non-oil trade. Out of this the oil trade contributes only USD 5 billion. The strong and sustained economic ties, joint efforts of the visiting delegations etc have added to this outstanding trade. There will be significant increase in this volume in the coming year itself. Trade, investments and FDI flows will be the bedrock for India - UAE partnership in the new World order. Other significant areas of co-operation are food security, energy security, security co-operation and water desalination. Proposals in each areas will be taken up in detail at the forthcoming meeting in Abu Dhabi of the Joint Commission which is headed by the Foreign Ministers. The call by the Indian President to reactivate the India-UAE Joint Business Council

and increasing the frequency of exchange of delegations between apex members will also boost more interactions at different levels. Already the non-oil trade between India and UAE had rose 57% to USD 20.4 billion during the first half of 2010 compared to the same period last year. Currently UAE is the top Middle Eastern and 10th global investor into India. All these sectors will have marked increases during the coming year.

Currently Dubai’s imports and exports with India are concentrated on precious/semi-precious stones, textiles, base metals, ceramics etc. These will go on and see marked increases. Moreover service sectors will grow rapidly. Service sector contribute 63% of India’s GDP. The President had emphasized focus on Service sector where India and UAE can work more closely not only together but together in third countries. Dubai is currently home to 20,000 Indian Companies both ownership and Partnership registered with the Dubai Chamber and operating across various economic sectors. The inauguration of ITEC - India Trade & Exhibition Center in Sharjah will act as a springboard to elevate economic partnerships to new levels. ITEC will hold industry and state specific exhibitions for extended periods of time and will provide office space to aspiring Indian exporters.

Today UAE and other countries are looking towards India, more so after the global financial meltdown. So the prime thing to be set up is to clear all the bureaucratic hassles often associated with investments, set up Middle East desks etc at the relevant Ministries which can act as a one-stop help desk.

The recent opening of Sheikh Khalifa Special Economic Zone in Abu Dhabi will attract and enhance Indian investments in Abu Dhabi. The opening of Dubai Export Development Corporation in New Delhi will generate humungous export opportunities and accelerate the current export between India and the UAE. India and the UAE are seeking to forge new ventures, co-operation and alliances which will eventually make UAE become a gateway for India’s trade with rest of the region.

CA. Raju Menon Chairman & Managing Partner, Morison Menon

CA. Saju Augustine-Partner, Morison Menon Sharjah (4th from left) with His Highness Sheikh Sultan Bin Mohammed Al-Qasimi, Supreme Council Member and the Ruler of Sharjah, Her Excellency Pratibha Devisingh Patil, Honorable President of India, during the Presidential visit to the UAE.

Indian President’s visit to the UAE - Impact on India - UAE Trade

5Continued from Page : 3

Implications for the regionGCC firms are expected to vigorously pursue emerging opportunities in Qatar given the assurance in the form of a new accord reached by the six member states. Reference is to a resolution adopted during the GCC’s 31st summit held in Abu Dhabi earlier in the month of December 2010, granting GCC companies the right to open branches in member states and to be treated on par with local businesses.

Intra-regional trade would also get a boost. A good deal of the raw materials involved in the construction of many projects will be sourced from neighbouring countries. Large regional financial institutions would also benefit by sharing in financing and servicing the plethora of projects. This would be especially the case as more and more regional companies take part in the execution of the different projects and look for local and regional financing.

CautionThere are always risks to take into consideration when assessing such ambitious plans. To begin with, planned spending runs the risk of putting pressure on government finances in the short to medium term. The government has already issued several bonds in the past few years, and has increased its borrowing from local banks. Moreover, as is often the case, actual spending may tend to exceed budgeted costs, and the ultimate bill might see some considerable upward revision over the years. However a large foreign asset reserves and strong hydrocarbon revenues would cushion any sharp unforeseen spike in spending estimates.

A final consideration is the costly legacy assets that would remain after the world cup concludes. The 12 stadiums that will be built for the event can be overkill for a country of the

size of Qatar, although the authorities intend to get around this by dismantling and gifting some of the stadiums to other countries once the event is over. Also, the country runs the risk of building excess supply in certain sectors, mainly in hotel rooms. Still the bulk of the spending will be on projects that are critical for the country regardless of the requirements of the World Cup.

OpportunitiesThe massive spending plans for World Cup 2022 projects and the ever-expanding gas industry, it is hardly surprising according to the BP Statistical Review of World Energy,

Qatar’s gas reserves amount to 25.5 trillion cubic meters, or nearly 14% of proven global reserves. The IMF has issued a positive outlook for the Qatari economy.

As suggested, the IMF is expecting economic growth of 20 per cent next year unless there are serious i n fl a t i o n a r y pressures. The inflation rate is projected to hover around the bearable rate of 3 per cent in the absence of adverse effects of rising energy prices. Broadly

speaking, Qatari authorities have a once in a lifetime opportunity to turn their economy into a global one. The 2022 World Cup is indeed a strong catalyst to realize Qatari growth dreams.

The main sectors that will benefit include construction, infrastructure, hospitality and banking. There will definitely be significant opportunities for allied and service industries which are supporting and complimenting the aforementioned sectors. It is hence the most opportune time for related business to enter or expand in Qatar.

Qatar is set to benefit enormously from currently planned spending in general, as well as from the impact of the World Cup

6

In August 2010, International Accounting Standard Board (IASB) and US Financial Accounting Standard Board (FASB)

issued an Exposure Draft (ED) on Leases. The proposed ED will result in fundamental change in lease accounting from the current International Financial Reporting Standards (IFRSs) covered under IAS 17: Leases.

Leases play a vital role in the operations of many entities and contain provisions that range from simple to complex. The accounting for leases under existing IFRS depends on the

What do we need to know• Proposed requirements will significantly change

lease accounting and is expected to impact almost all entities

• Proposed requirements will replace; IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC 15 Operating Leases - Incentives, SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease

• Use of ‘right-of-use’ model for all leases and elimination of ‘risks and rewards’ model

• Introduction of single lease accounting model • All assets and liabilities arising under lease contracts

are recognised in the statement of financial position while eliminating the off-balance sheet lease accounting

• Management should plan to evaluate the impact on financial reporting function and business implications including tax consequences

• The comment period ended on 15 December 2010 and Boards expect to issue the final standard in June 2011. The effective date is yet to be determined but expected to be in 2014

classification of a lease into either operating lease or finance lease. Classification as an operating lease results in the lessee not recording any assets or liabilities in the statement of financial position (balance sheet) under existing IFRS. This results in many users having to adjust the financial statements to estimate the effects of lessees’ operating leases for the purpose of investment analysis.

Definition of a leaseThe draft IFRS proposes to define a lease as ‘a contract in which the right to use a specified asset (the underlying asset) is conveyed, for a period of time, in exchange for consideration’. Changes to lessee accountingExisting IFRS classify leases into two categories as finance leases and operating leases. At present, lease payments arising from operating leases are accounted for by recognising them as an expense in the period in which they occur. The draft IFRS requires lessees to recognise an asset representing its right to use the leased asset for the lease term (the ‘right-of-use’ asset) and a liability to make lease payments in the statement of financial position. The lessee would amortise the right-of-use asset over the expected lease term or the useful life of the asset if shorter.

Lessee shall recognise interest expense on the liability, amortisation of right-of-use asset, revaluation gains/losses, any changes in the liability to make payments and any impairment losses of right-of-use asset in the statement of comprehensive income.

At the inception of the lease, a lessee shall measure the liability to make lease payments at the present value of the lease payments, discounted using the lessee’s incremental borrowing rate while the right-of-use asset at the amount of the liability, plus any initial direct costs incurred by the lessee. After the date of commencement of the lease, a lessee shall measure the liability to make lease payments at amortised cost using the effective interest method and the right-of-use asset at amortised cost. Lessee shall reassess the carrying amount of the liability after the date of commencement of the lease.

Mahesh RanasingheAssistant Audit ManagerMorison Menon - Dubai Office

7For lessees, the statement of financial position will be grossed up to report a leased asset and lease liability. In addition, straight-line rent expense will be replaced by amortisation of the leased asset and interest expense on the lease liability. Hence, as illustrated below, the total expense will be front-loaded compared to the current practice.

Changes to lessor accountingThe proposed approach to lessor accounting would differ significantly from existing IFRS. According to the proposed IFRS, Lessor would recognise an asset representing its right to receive lease payments and, depending on its exposure to risks or benefits associated with the underlying asset, would either:(i) recognise a lease liability while continuing to recognise the

underlying asset (‘performance obligation approach’); or(ii) derecognise the rights in the underlying asset that it transfers

to the lessee and continue to recognise a residual asset representing its rights to the underlying asset at the end of the lease term (‘de-recognition approach’).

A lessor shall not change the accounting approach after the date of inception of the lease.

If a lessor retains exposure to significant risks or benefits associated with the underlying asset, the lessor would continue to recognise the underlying asset and in addition recognise a right to receive lease payments and a lease liability.

If a lessor does not retain exposure to significant risks or benefits associated with the underlying asset, the lease would be accounted for in a way similar to the existing accounting for finance leases. The pattern of income recognition will also be similar to the pattern of revenue recognition currently required for manufacturer/dealer lessors.

Under both approaches, at each reporting date lessor shall assess whether the right to receive lease payments is impaired and shall recognise any impairment loss in profit or loss.

Although the proposed changes may be less fundamental for leases currently classified as finance leases, they would result in significant changes in the measurement of the assets and liabilities arising from those leases due to the adjustments required for options and contingent rentals. In addition, the pattern of income and expense recognition in profit or loss will change significantly.

Accounting for short-term leasesThe draft IFRS proposes that a lessee or a lessor may apply simplified requirements to short-term leases, for which the maximum possible lease term, including options to renew or extend, is twelve months or less:

Lessee: At the date of inception of a lease, a lessee may elect on a ‘lease-by-lease basis’ to measure, both at initial measurement and subsequently, (i) the liability to make lease payments at the undiscounted amount of the lease payments and (ii) the right-of-use asset at the undiscounted amount of lease payments plus initial direct costs. Such lessees would recognise lease payments in profit or loss over the lease term.

Lessor: At the date of inception of a lease, a lessor may elect on a lease-by-lease basis not to recognise assets and liabilities arising from a short-term lease in the statement of financial position, nor derecognise any portion of the underlying asset. Such lessors would continue to recognise the underlying asset in accordance with other IFRSs and would recognise lease payments in profit or loss over the lease term.

TransitionAn entity shall recognise and measure all outstanding contracts within the scope of the draft IFRS as of the date of initial application using a simplified retrospective approach as described in the draft IFRS.

ConclusionThe proposed IFRS results a significant change from existing accounting treatment for leases. The proposed changes affect the financial reporting function over leases while having significant impact on financial position, financial results, tax consequences, leverage and capital ratios, cash flows and EBITA etc. The management shall assess the impact on these proposed changes over the business operations, even though the effective date of these changes is expected to be in 2014.

P.O. Box: 103737, Dubai, Tel: +971 4 398 68 62, Fax: +971 4 398 82 62E-mail: info@dubaiautismcenter.ae, Website: www.dubaiautismcenter.ae

THINK OFAUTISM

THINK OFGIVING

Illustration on the changes in lessee accounting A lease contract to pay annual lease payment of AED 3,000 each, over a period of three years. The present value of lease payments discounted at incremental borrowing rate is AED 7,500.

As per current IFRS, AED 3,000 annual lease payment is recognised in the profit or loss while proposed IFRS requires recognising a right-of-use asset of AED 7,500 together with corresponding liability of AED 7,500 at the commencement of the lease.

The impact on the profit or loss is analysed in the below table (amounts in AED).

Existing IFRS Proposed IFRSLease expense Amortisation Interest Total expense

3,000 2,500 750 3,2503,000 2,500 450 2,9503,000 2,500 300 2,8009,000 7,500 1,500 9,000

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Ras Al Khaimah: Land of opportunity for local and foreign investors

For more than 5,000 years Ras Al Khaimah (RAK) has been one of the historically important cities in the Arabian Gulf region, being strategically located at the crossroads

of commerce and trade between the east and the west. Its name literally translates to ‘The Top of the Tent’ in Arabic in reference to its northernmost location, although the name also symbolises Ras Al Khaimah’s significant contributions to the social and economic development of the region.

As one of the seven emirates comprising the United Arab Emirates (UAE), Ras Al Khaimah has been a key contributor to the socioeconomic development of the country, and has over the years successfully established one of the Middle East’s most dynamic and fastest-growing economies. During the early 1970s, the emirate opened the country’s first cement company, which is now the largest cement producer in the UAE. In the 1980s, RAK Ceramics was established sowing the seeds of what eventually became the world’s largest ceramic tile manufacturer. The emirate is also home to Gulf Pharmaceutical Industries - Julphar, the region’s first pharmaceuticals company.

Visionary LeadershipUnder the visionary leadership of H.H. Sheikh Saud Bin Saqr

Al Qasimi, Ruler of Ras Al Khaimah and Member of the Supreme Council, Ras Al Khaimah has witnessed a major investment boom during the past seven years, driven by various reforms in government and legal systems that were implemented under Sheikh Saud’s directives. Sheikh Saud is responsible for bringing the World Bank to the emirate to conduct studies on how to make Ras Al Khaimah an investor-friendly and efficient business destination. It is also his idea to consolidate the government’s balance sheet, which has enabled the emirate to receive “A” ratings from S&P and Fitch for the last two years.

RAKIAOne of the most important directives of Sheikh Saud is the establishment in 2005 of the Ras Al Khaimah Investment Authority (RAKIA), the government institution that now oversees programs to attract local and foreign investments into the emirate. Within a few years of being institutionalised, RAKIA has already generated close to USD 3 billion in investments from all over the world.

RAKIA’s strategy focuses on aggressive diversification into non-oil businesses, capitalising on the emirate’s vast local resources and the strategic advantages of the emirate’s location. Currently

Dr. Khater MassaadCEO - RAKIA

Guest Article

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CA. ParthasarathyGeneral Manager, Morison Menon - Dubai Office

In any organization if one compares and analyzes the work of the successful individuals and the less successful ones, one will notice that successful ones are doing the right thing in each of their transactions, whereas the less successful ones are making the same mistakes repeatedly. Why this happens? Why can’t the successful people start doing mistakes and less successful ones start doing everything correct at the first instance? What is needed to ensure that less successful ones in any organization can be made to attain excellence in their role? If we try to understand how our habits are formed, then it would be easy for us to achieve excellence in whatever we do. Whatever we do repeatedly become a habit and turns permanent. If we practice our mistakes, then we perfect them. If we practice the correct way of doing things we succeed in all our endeavors.

How habits are formed? Let us try to understand how habits are formed and see if it is possible to influence habit formation at any stage in life.Did you ever try to fly a kite in your childhood? Any kite connoisseur will tell you that there are typically four stages of learning involved. The first stage is called unconscious incompetence. At this stage, you don’t know that you don’t know to fly a kite. Let’s take for example a child, the child doesn’t know what it means to fly a kite (unconscious) and nor can he fly a kite (incompetence). The child is in a stage of unconscious incompetence.

Continued in Page : 11

there are over 7,500 businesses from several countries that are registered under RAKIA, counting both on-shore and off-shore companies. Up to 66 percent of businesses registered in RAKIA are from Europe, India, USA, Russia, CIS and several Asian countries, while 19 percent are from the rest of the Middle East. Domestic investors account for the remaining 15 percent of businesses.

Incentives for Global InvestorsRAKIA steps in as a one-stop-shop for investors, delivering a complete range of investment portfolio and value-added services such as processing of licenses for industrial, commercial, trading, consulting/services and media-related businesses; employment, residence and visit visas; design approvals; and various types of permits. Catering to the distinct requirements of businesses operating in the emirate, RAKIA also develops customised products such as Land for industrial activities, Warehouses/Light Industrial Units, Business towers/office

space, commercial centres and various categories of residential accommodation.

To maximise investment potential of the emirate, RAKIA has also introduced a full range of economic incentives for businesses and investors, including Easy issuance of licenses, fewer documentation, Both Free zone & Non Free zone company formations, 100% foreign ownership in the Free Zones, Liberal labour laws, Low operational cost, etc…

RAKIA has emerged as one of the pillars of the emirate’s economic progress, generating multi-billion dollars in annual revenues and providing the strategic directions for Ras Al Khaimah’s socioeconomic development agenda. With RAKIA at the helm, Ras Al Khaimah has reinforced its reputation as a land of opportunity for thousands of local and foreign investors, offering a complete package of business and lifestyle amenities within the framework of a progressive, tolerant and multicultural society.

Dr. Khater MassaadCEO - RAKIA

Sudhir Kumar speaking at the session on Regional and National issues- ‘Relationships between Free Zones and Private Operators/Companies’ during the World Free Zone Convention 2010.

Sudhir Kumar with Her Excellency Sheikha Lubna Bint Khalid Al Qasimi, Minister of Foreign Trade, UAE and Arif Naqvi, Founder and Group CEO, Abraaj Capital during the inauguration of the ‘Celebration of Entrepreneurship 2010’ in Dubai.

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CA. Prabhakar Kamath, Partner, Morison Menon Limited speaking on ‘Key to effective cash management in SME’s at the SME Advisor-Middle East ‘Stars of Business Awards & Summit 2010’ in Dubai. Morison Menon was the Strategic Advisor for the Awards.

Sathya, Head-Strategy & Risk Consulting, Morison Menon speaking on the ‘Methodology followed for the Award process’ at the SME Advisor-Middle East ‘Stars of Business Awards & Summit 2010’ in Dubai.Sta

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His Highness Sheikh Saud Bin Saqr Al Qasimi, Supreme Council Member and Ruler of Ras Al Khaimah with Sudhir Kumar, Partner & Head-Corporate Communications, Morison Menon during the inauguration of the 10th World Free Zone Convention 2010 - Conference & Exhibition in Ras Al Khaimah.

CA. Saju Augustine, Partner, Morison Menon-Sharjah and Sudhir Kumar with His Highness Sheikh Faisal Bin Saqr Al Qasimi, Chairman, RAK Free Trade Zone during the World Free Zone Convention 2010 in Ras Al Khaimah. Jihad Quzmar, Legal Advisor to the Government of Ras Al Khaimah-Ruler’s Court is on the extreme right.

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CA. Raju Menon, Managing Partner, Morison Menon, George V. Villaruz, Senior Partner-Villaruz, Villaruz & Co., Philippines, Paul Wan, Chairman, Morison International Asia Pacific, Normita L. Villaruz, Managing Partner-Villaruz, Villaruz & Co., Philippines, Greg Hayes, Partner-Hayes Knight Australia and Stephen Chang, Vice Chairman-Morison International during the Philippine National Dress Theme Night Gala Dinner during the Morison International Asia Pacific Conference in Manila.

CA. Raju Menon, Pushpakaran Parambath, Sudhir Kumar & CA. Saju Augustine performing a dance during the Morison International Asia Pacific Conference Gala Dinner in Manila.

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During the second stage of conscious incompetence, the child is conscious of what is required to fly a kite, but unable to fly a kite himself. Then the child starts learning to fly a kite and this is the stage of conscious competence. Now he can fly a kite but has to concentrate on the tension that he has to give the string, the height to which he needs to take the kite, wind direction and magnitude wind speed. In this stage with conscious effort and adequate precaution, the child is competent to balance the kite in air. Nevertheless he is happy to see the kite fly high in the sky but always tense that anything can go wrong to make the kite fall to the ground. The fourth stage, unconscious competence appears when the child has practiced consciously to fly the kite to such an extent that he does not have to think. Kite flying becomes an involuntary act for the child. No longer is he bothered about any uncertain event triggering which can make him lose the flight of the kite. The child begins to chat with his friends, wave his hand to his parents and balance the kite in mid-air with his other hand. He has now reached the stage of unconscious competence. At this level, he doesn’t need to concentrate and think because practice has become a habit.

 

How can we breed excellence in organization?Management in organizations needs to understand that ideally all employees need to operate in the stage of ‘unconscious competence’ thereby breeding excellence. Attaining the goal of reaching the fourth stage of unconscious competence in case of all employees is difficult, but not an impossible task. A conscious effort can yield wonderful results.

When a fresher out of college joins an organization, he or she has only generic skill sets, and is in the stage of unconscious incompetence as far as the organization is concerned. The important task for the manager in such a situation is to make the fresher realize that he or she is in the unconscious incompetence stage. The manager then needs to quickly identify what the fresher do not know with respect to organizational requirements and put him into a training programme to transform him into the conscious incompetence stage.

Once the fresher gets trained based on the organizational requirements, he or she needs to implement the learning to work situations under controlled conditions. This activity is carried under the watchful eyes of his managers. Then fresher slowly enters into the stage of the conscious competence.

Finally over a period of time the fresher reaches a stage of ‘unconscious competence’ where the quality of his work is not only flawless, but also ready to transform other unconsciously incompetent employees in his team.

For individuals to operate at the highest level of competence, i.e. unconscious competence stage requires them to excel at their job, requires an individual to first identify what he does not know, get trained, practice what he has learnt and apply this to his job. Many a times, this may also require an individual to unlearn the mistakes that he has imbibed unconsciously and to do this he has to consciously practice to unlearn, by learning to complete tasks the right way.

The role of the managers is very crucial in quickly identifying what stage of competence the person is assigned to him. A smart way to identify this is by allowing the assigned individual to single handedly carryout organization task without active support or intervention. Such an exercise will help the manager to realize at what stage the individual is. Once this is done, push to the stage of unconscious competence can be achieved by designing and imparting necessary learning sessions that are tailored to individual needs, but within the organizational objectives.

Stage 1Unconsciousincompetence

(Ignorance)

Stage 2Conscious

incompetence(Awareness)

Stage 4Unconsciouscompetence(Perfection)

Stage 3Conscious

competence(Knowledge)

HABITFORMATION

Breeding excellence as a habit Continued from Page : 9

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The information conveyed in the newsletter are the individual opinions of the respective authors and is not the combined opinion of Morison Menon Group.

DISCLAIMER

DIRECTORY

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BUSINESS REGULATIONS - UPDATE

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DEPARTMENT OF ECONOMIC DEVELOPMENT, DUBAI DEACTIVATION OF EXPIRED LICENCE The Department of Economic Development (DED) has come up with the option of freezing expired licences upon payment of AED 2,000 for each year. After payment of the freezing fee, the license can be kept inactive for as long as three years with no further renewal fees. However, a company can freeze its license only when no employees are under its sponsorship and all governmental charges are paid. It is also important that no pending legal action at the courts of laws against the company at the time of exercising the freezing option. Creditors do not loose their rights to claim against the company and if a creditor initiates a court case against a company with a frozen license, DED will inform the owners and activate the licence immediately.

CANCELLATION OF LICENCE BY LOCAL PARTNERDED further introduces the option for UAE national partner to cancel a defunct licence without the presence of expatriate partner(s). Accordingly, under special circumstances it is possible for the local partner to cancel the company license provided that:a) the license has been expired for more than two yearsb) the foreign partner has been out of the country for more than

six months; andc) all employment agreements and visas under the license have

been cancelled and cleared.

The cancelation procedures shall remain the same of a normal limited liability company, but the only difference is that under this situation only one partner is involved in cancelation. In case the foreign partner wishes to reactivate the company, he can do so provided:a) he introduces a different local partner; and b) he pays all the cancelation and re-activation costs of the license.

EXTENT OF DIRECTORS’ / OFFICERS’ LIABILITY IN A LIMITED LIABILITY COMPANYThe UAE courts reiterate in a recent pronouncement wherein the managing director/ manager of a limited liability company (‘the company’) shall happen to be personally liable for the company’s liabilities if none of the communication of that company explicitly mentioned that the company is limited by liability and did not mention the extent up to which the company is limited in its liability.

UAE courts took the view that since the person dealing with the company was not aware of the amount of liability, up to which the company was liable; it was managing director / manager’s duty to mention in all communications, agreements the extent of limited liability. In light of that it is strongly suggested that companies (limited partnerships, limited civil company, limited liability companies, free zone companies or establishments) mention on each of their communication, business documents the following information, more specifically and explicitly

‘That the company is a company with limited liability’

‘To mention the paid up share capital of the company to which extent the company is limited in its liability’

Mentioning on the corporate stationery only the acronyms ‘LLC, FZCO, FZE, Pvt. Ltd’ etc does not convey the amount to which the liability is limited.

Accordingly, it is now become mandatory to mention the words ‘limited liability’ and ‘the amount of paid up capital’ on the letter heads, all agreements, contracts, local purchase orders, financial instruments, business communications and any other corporate stationery.

In the absence of above being explicitly stated, the signatory could be held personally liable for the liabilities of the company.