Shehab Gargash, the chief executive and managing director of Daman Investments, warns that a growing culture of red tape and a lack of lending is holding back economic recovery in the UAE.
The Daman Investments chief also said yesterday the company's planned initial public offering was on hold until 2014 and Daman was beginning a second round of private fundraising.
Mr Gargash took aim at what he said was an increasing number and complexity of company laws in the UAE. "The opening of a business today versus 10 years ago is a far more complicated, more costly and more confusing endeavour," he said.
"I think we're in a more difficult place and if it continues to trend, all of a sudden you'll find it doesn't make sense to come from all over the world to do business here," he said at the firm's annual economic roundtable.
In particular, Mr Gargash singled out the Securities and Commodities Authority's (SCA) recent investment management regulations, which would affect investment funds offered by Daman Investments, as particularly worrisome.
"SCA has, much to our dismay, come up with mutual fund directives as of July which are going to stifle if not kill the mutual fund business in the UAE," he said.
"When you come in and straddle too much regulation, too soon, on a nascent industry, you will not see any meaningful mutual funds in the UAE for the foreseeable future."
Mr Gargash also urged banks to abandon the "signs of shyness" they had displayed in their lending patterns so they would "come back into the mantle of the industry and lead the charge to regain normalcy for our economy".
Bank lending to the wider economy has grown 1.8 per cent this year to Dh1.09 trillion (US$296.76 billion), after a burst of lending growth during June lifted the otherwise stagnant corporate lending market, according to the latest available data from the Central Bank.
In the meantime, Mr Gargash said, lack of market liquidity was the biggest brake on the UAE's economy recovery from the property slowdown of the past few years.
"Markets have never really lost their core value, it just hasn't translated into explicit value and that's because of the lack of liquidity in equity markets since 2008," he said.
He also said Daman was attempting its second capital raising ahead of its planned initial public offering, which he ruled out taking place before 2014.
Daman sold a 22.7 per cent stake via a private placement in June, in a deal that valued the company at Dh440 million.
The company said it was preparing to raise another round of financing through the sale of another 800,000 shares, which are yet to be priced but that are expected to raise at least another Dh136m.
The law firm Latham and Watkins has also been among those warning investment firms based in the Dubai International Financial Centre (DIFC) will be damaged by the regulations, citing a lack of distinction in the directive between potential investors who are sophisticated institutional clients, such as the Abu Dhabi Investment Authority, and retail customers who make up the majority of trading on local exchanges.
Onshore UAE laws have recently come into competition with those in effect at free zones, where independent regulators administer trade in accordance with international best practice. The DIFC, regulated by the Dubai Financial Services Authority, is one such example.
The grey area between SCA and the Central Bank over regulation of the financial services sector "adds confusion" to the sector, Mr Gargash said.