Soaring Gulf inflation burns expatriates wages

UAE, 9 Apr 2008

Foreign workers making up the bulk of the labor force in the robust Gulf economies are feeling the crunch of rocketing prices and weak currencies. Some are even questioning the point of staying.

"A segment of workers is considering leaving, particularly those from countries that are seeing strong economic growth," said Yasser Hatami, managing director of regional recruitment agency GulfTalent, referring to Indian professionals who are getting better deals at home.

The six Gulf Cooperation Council (GCC) states have traditionally been a major destination for migrant workers from neighboring South Asian and Arab countries, while Westerners are also attracted by tax breaks and the lifestyle.

But despite impressive economic growth fed by an oil windfall, expatriates in GCC nations face surging inflation, while the value of their remittances has dropped as most GCC currencies are pegged to the tumbling dollar.

"It is becoming much harder to persuade professionals -- bankers and engineers, for example -- in India to leave," Hatami told AFP, adding that GCC-based firms now look for fresh graduates who are more willing to come.

What is the point of staying?

Laveen Melwani is an Indian banker who moved to Dubai straight after graduating over four years ago. Despite salary increases, he now has second thoughts about being in the region's business hub.

"The higher value of money that is not taxable and career opportunity (brought me to Dubai)... Now, I am constantly thinking about the point of being here," said the 27-year-old customer relations manager.

"The economy is growing in India, offering higher pay and maybe better opportunities," he said, lamenting that his remittances have depreciated by 17 percent over a year due to the Indian rupee surging against the dollar.

Melwani also has to commute four hours daily from the neighboring emirate of Sharjah where housing is more affordable than high-flying Dubai.

In Qatar and the United Arab Emirates, both of which registered double-digit inflation in 2007, the cost of housing alone amounted to 35 percent and 31 percent of household income, respectively, according to a study by Dubai-based GulfTalent.

-- 'Many people have to send their families back home' --

"Many people I know had to send their families back home because they cannot afford the higher cost of living, especially housing," said Adel Ayoub, an Egyptian laborer in Qatar.

"This surely makes me think of the point of staying... but I like my job," said Rebecca Torr, a British journalist based in Bahrain, where inflation was running at four percent in 2007.

For Indian cleaner Manoj Chamollathil, 32, an increase of 50 dollars to his 320-dollar monthly wages would make his life in Bahrain much easier.

"I send around 50 dinars (133 dollars) every month to my family. But now they insist they need more. I am left with 10 dinars after paying for rent and food. That's why I wash cars in my free time to increase income," he said.

The struggle of low-wage earners is echoed in Kuwait, where Bangladeshi cleaner Abdulhafeez said he spends almost all his earnings on food.

"It used to cost me half a dinar (almost two dollars) per day for food. Now, it is between 0.75 and one dinar," he said.

Surging inflation

According to the latest official figures, inflation was running at seven percent in October in Kuwait, but economists and lawmakers claim it was much higher.

A series of protests by manual laborers in the UAE and Bahrain in recent months have been linked to rising prices and the drop in remittances.

But mostly Asian construction and other manual workers in the region were complaining about low pay and poor working and living conditions before inflation began soaring.

Many foreign workers appear to be staying in the Gulf simply because the situation back home is not any better.

"I found out that the increase in the cost of living in Saudi Arabia is still lower than in Jordan and other Arab countries," said Jordanian Ali Abu Hashem, who has lived in the kingdom for several years.

"I do not save as before, but at least in the past years I managed to save enough to buy a house back home... If I go back I would not find a good job," he said.

The traditionally-stagnant inflation in Saudi Arabia increased to over four percent last year, and climbed to 8.7 percent in February.

The private sector is meanwhile compelled to increase salaries to keep foreign professionals content, according to Hatami.

Asian professionals, who are usually paid less than others, enjoyed the highest salary increases in 2007, followed by their Arab counterparts, he said.

For some professionals, the GCC has also become a good place for work experience, Hatami said.

"It used to be a good place to save, but it could potentially dent your career, coming from the West... Now, it looks good on your resume," he said, underscoring Dubai's appeal to professionals despite being financially the least attractive due to the high cost of living.