The Expat dilemma

Many expats have historically been attracted to the Arabian Gulf region with the offer of a tax-free income, low-cost of living, and a clean environment where they can bring their families. The average length of expatriates’ stay in GCC countries, counting in all major expatriate groups (Western, Arab, and Indian), typically exceeds 10 years.

But declining oil prices resulting in a fiscal crisis, with salaries frozen, benefits taken away from employees, some companies shutting down businesses, and a change in the ‘cultural atmosphere’ means that many expats are questioning whether it’s time to go.

Expatriates working for the private sector account for 85% of total employed workers in the GCC (Fasani and Goyal, IMF Working Paper). From teachers to engineers, lawyers, to bankers and accountants, expats from all over the world have located themselves in countries within the GCC.

In a 2016 study cited by Edgardaily.com that ranked 67 expat destinations based on factors they believe important to their overall standard of living (which includes cost of living, healthcare, work-life balance, leisure, and quality of life), Bahrain ranked 19th, (making it the best place to live in the GCC), Oman 22nd, UAE 40th, Qatar 60th, Saudi Arabia 63rd, and Kuwait lagged least favorite at the very bottom. In addition, the GCC is ranked in the top 10-25% metric of the world in terms of per capita GDP, low crime rates, human development (healthcare, human education, and life expectancy). However, several new factors are now coming into play.

Expats are having to increasingly deal with rising living costs along with the introduction of taxes and other cost of living increases that do not effect nationals. Saudi Arabia has already significantly increased fees for many of its government services; while Bahrain has cut subsidies with big price increases in electricity and water being shouldered, for the large part, by companies and by expats. As we go to press new municipality fees payable by every expat tenant in Abu Dhabi is to be backdated to February last year. The fee, equivalent to 3% of a tenant’s annual rent, has begun appearing in water and electricity bills. The backdating means tenants face a double blow: they will pay not just for this year, but for 11 months of last year. In addition, the portion of the fee from last year is payable as a single lump sum. The GCC has also announced plans to introduce Value Added Tax (VAT) in 2018.

“In September 2015, Qatar doubled electricity and water prices overnight. However, Qatari nationals, the wealthiest per capita in the world, were excluded from the price rise. Bahrain has followed suit, with 1.3 million foreigners facing the gradual loss of subsidies on water, fuel, electricity and meat. No cash hand-out for them, such as the one Bahraini citizens will receive.” (Law, 2016)

Despite the obvious discrepancies, many nationals (who are not affected by subsidy cuts) are working for utility companies and the public sector, a job sector mostly closed off to expats. In fact, more than two-thirds of Saudis work for the government – the kingdom spent 45% of its budget to pay their salaries in 2015. Yet, it is the expats who are expected to shoulder the increased costs.

This has led to concern among many expats that they will be paying more and more fees for benefits which they themselves will not benefit from. As one expat in Bahrain put it; “struggling expats driving old Toyotas will be subsidizing wealthy Bahrainis driving new BMWs’”.

Another example is Bahrain, where the Electricity and Water Authority (EWA), has adjusted prices (as of March 1, 2016, for the commercial and industrial sector as well as expatriates, but has remained unchanged for the domestic consumption of Bahrainis.

The current plan of EWA, will have energy tariffs increase up to fivefold by the end of 2019.

Bahrain will shortly also being introducing road tax for car owners – but only for expats!

For many expats, living in the GCC is becoming just as or more expensive than living in their own countries, so the question remains if it is still worth it to remain.

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Brain Drain?

It is possible that the most able and qualified expat professionals will start looking for better opportunities elsewhere? Of course there will always be people willing to locate to this region, but they may not be as skilled or of such quality. Tonia Gray, the general manager of Muscat-based recruitment services company Competence HR, says a trend has emerged for expats to be replaced by cheaper expatriate resources (Thomas and Ginn, 2016).

Another trend is families being separated by the intent to keep costs low; the employed parent will stay for the work contract while the rest of the family go home where it is cheaper to live.

Because of the increase in job insecurity and the rising economic pressures, many expats are just not inclined to spend their disposable incomes; instead they save it. This means less money moves around the economy.

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To leave or not to leave?

There is a feeling among many hard working and law abiding expats, particularly long term residents, that those making the laws are turning against them and that they have nobody to defend them.

In Bahrain, at the time of writing this article, an MP is calling for the reduction of expat’s allowances in the government sector to be reduced by 50% in order to “benefit the economy”. He cited a similar procedure that happened in Kuwait which reduced allowances and bonuses granted to expats and which, according to him “proved beneficial for the national economy of Kuwait” (Mansour, 2016).

An MP also recently called for the banning of expats (and it seems only expats) playing cricket and other sports on waste ground at weekends, something that has been enjoyed particularly by those from the Indian sub-continent, for as long as anyone can remember. The MP claimed such events caused disturbances and could be dangerous to those living nearby, though he did not provide any examples.

Though it is impossible to measure in hard economic terms, expats who stay for a long time often develop a love for the country in which they live, and add value through their outreach and various social and civic activities. Once their long-term benefits are threatened, they might very well leave to be replaced by short-term workers who know that they are only here to make money and are not out to contribute in any other way to the community.

At this point in time, it is interesting to see how the Middle East will rebound from its economic hurdles, and how the measures the governments put into place will affect the lives of expats.

We planned to put together a graph to compare average energy bills by house size in Bahrain, but were not satisfied with the veracity of the figures we obtained. We will continue to investigate and hope to present you with a more accurate picture of energy prices.

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