UAE Not the Land of Opportunity

Since the dawn of the 21st century, the UAE has catapulted itself to the top of the list of travel destinations for visitors and job-seekers alike.

Boasting to become the latest hub of economic, social and cultural diversity, the UAE has moved leaps and bounds in its efforts to distinguish itself from its Gulf peers.

A host nation for a myriad of cultural events, as well as sports, and hospitality, the UAE is now the place to be in the Gulf.

Or is it?

About a month ago, the BBC reported on Nicholas Warner; Destitute in Dubai. His story may seem familiar, a true riches to rags tale, a British expat with a prestigious job in Dubai, whose fall from grace was accentuated by the fact that he took out an overly large loan from a bank, went on holiday, returned to find himself barred from travel, having been labelled a “debt skipper’, a potential threat to the banks interests. After that, it all snowballed, the loan he took kept accruing interest, he lost his job, his house etc. and has been sleeping on the ground behind a hedge in Dubai Creek.

A recent survey claims that 85% of UAE expats are in deep debt (here).

Borrowers take out ‘crazy’ amounts compared with moderate salary earnings, according to financial experts.

The survey, carried out by the International Swiss Debt Management (ISDM) Consultancy, also ranks residents from India and Philippines as the highest in terms of total debt. Pakistani and South African nationals follow.

It is not unusual to meet a Filipino with a salary of Dh15,000 and over Dh250,000 in debt.

The reason for this behaviour has been the salary raises over the past years encouraging employees to borrow more as banks raised the stakes accordingly.

Individuals, even on low salaries of Dh6,000, were able to get eight credit cards from different banks, including platinum, and max them out.

Coupled with this ugly phenomena, UAE wage rises are the lowest in the Gulf Region (here), resulting in a truly ugly concoction whereby the debt laden will continue to fall deeper and deeper into the pit of debt.

There are two terms to consider when looking at salary and wage rises. Real & Nominal. Your nominal wage rise and salary would be the absolute currency amount, whereas the real wage rise considers factors such as inflation (rising prices). Suppose an employee received a wage rise of Dh1,000, on paper that sounds good, however, at the same time, due to inflation, prices have rise by 20%, and their rent has doubled. In essence, it is as if they never received an wage rise.

Real salaries in the UAE, or salaries adjusted for changes in consumer prices, will rise 0.84 percent next year, the lowest increase in the Gulf.

In terms of real salary increases, Saudi Arabia came out on top, with the average salary rising by 50 % over 10 years. 
Kuwait should see the biggest salary rise in the Middle East, as non executive salaries are projected to rise by 3.6 percent in real terms.

Working in Kuwait is a smart choice, it may not be as open as the UAE, yet it is not as restrictive as Saudi Arabia. The promise of financial security outweighs the lack of cultural enlightenment.

August 2011 ( View complete archive page )

September 2011 ( View complete archive page )

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