Money exchange business sails on despite rising costs

ABU DHABI — The sharp decline in the net disposable incomes of expatriates in the UAE does not seem to have affected the money exchange business, despite fears of the opposite taking place.

By Our Staff Reporters

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Published: Sat 9 Jul 2005, 10:48 AM

Last updated: Thu 2 Apr 2015, 7:42 PM

It is estimated that Dh25 billion were remitted by expatriates from the UAE to their home countries in the first half of the year through exchange houses, according to a top authority on the business. The figure does not include bank remittances.

Soaring rents and the higher prices of almost every thing, from food and clothes to costs of health care, medicines and school fees, are leaving dents in the budget of every family that many are left with little, if any, money to save and send back home.

They say the ‘saving’ tradition of many expatriates is vanishing in the UAE, as the majority are living with financial hardships with the cost of living going up and salaries stagnating at a level of the early 1990’s.

“Latest studies on money transfers by the expatriate workforce are not really authentic. People are hardly saving, especially in cities like Abu Dhabi and Dubai,” according to an economist.

A recent study by Abu Dhabi Chamber of Commerce and Industry says that money transfers by the expatriate labour force in the UAE was causing problems to the UAE economy since the currencies are diverted to nourish and strengthen other economies, and are not used locally.

It said that there were economic factors which encouraged the flow of transfers to other countries. One was the nature of UAE economy and the structure that compels the UAE to depend on huge expatriate labour force which is currently estimated at 89 per cent.

The study estimates the Asian labour in the UAE at 75 per cent of total expatriate labour. Asian employees transfer huge amounts of money to their countries.

A large number of the Asian force use unofficial methods in transferring their savings. Their unofficial transfers are estimated at approximately 60-65 per cent of the total official transfers.

According to the study, The Arab labour force in the UAE make up an estimated 15 per cent of total expatriate labour.

The volume of expenditure on education, health and recreational services is huge in the UAE, especially by expatriate families which spend a great deal of their incomes in the country.

The study showed that Arab expatriates were major spenders in the UAE market and transfers money abroad in a lesser degree than other expatriates.

Non-Arab and and non-Asian labour force estimated at 3 per cent of total expat labour force, mainly Europeans, Americans and some Africans. This segment is highly qualified. Their average transfers are between 80-85 per cent from their incomes, according to the study.

The study shed light on the economic effects resulting from expat money transfers on Gulf countries especially on the GDPs, levels of investments, balance of payments and on impact on the countries where money is being transferred.

It stated that Indian labour was the largest in the labour UAE market and constituted 52 per cent. Their money transfers, according to the study, has negative effects on GCC countries’ economies, including the UAE.

It proposed that that expats could invest their money in the UAE as per the country’s laws and regulations and as long as the investment market was regulated. A way the national economy would be better off and the expatriates would also gain a great deal due to the stability of the UAE market.

The study recommended the establishment of zones for persons of limited incomes and to create financial and investment policies in the banking sector in order to attract their capitals.

According to estimates, remittance activities in the UAE had witnessed an over 20 per cent increase , compared to the same period of 2004, adding that 75-80 per cent of total remittances was in US dollars.

Remittances to Asia, especially to India, Pakistan and Bangladesh, constituted 50-60 per cent. Remittances to Arab countries, mainly Jordan, Egypt, Syria and Morocco, Tunis and Algeria registered were estimated at 20-25 per cent.

Many expatriates, married and bachelors, say they now find it difficult to save money in the UAE. However, others do not feel the impact of high prices on their saving plans. Khaleej Times spoke to a cross section of people.

Sanjay Ghosh, administrative officer in a garment exporting firm in Dubai, said that his savings have plummeted over the last three years while the expenses shot up. “I used to keep apart Dh2,000 every month and spend the rest of my income on accommodation, transportation and a little bit of entertainment on weekends. Now even with a 15 per cent hike in my income, I am hardly able to save even half of what I used to,” said Ghosh who earns a monthly salary of Dh5,000.

Donny George, from Philippines who works as graphic designer in an advertising firm in Dubai spends his entire income in the UAE. “Every month I think of keeping apart at least a small amount, but in vain. My family back home is financially sound and I don’t need to send them money. Still my pocket is empty by the month end. I am living in a decent flat and would like to have some luxuries in life. But I do plan to save some money before I get married.”

Chandrachootan from Kerala, India, who works in the accounts section of a national bank in Abu Dhabi, said his savings today is at least 35 per cent less than what he used to some ten years back. “When I came to UAE 16 years back, I used to survive on just Dh500, send another Dh1000 for my family back in Kerala and save the rest of my salary. Today, my two children are in professional college and even the Dh3500 is not enough to meet their needs. My expenses have also increased by way of almost 60 per cent rise in the accommodation charges over the last ten years. Today I hardly can save one third of what I used to. In my retired life, I will have to fall back on the amount I will receive as my end of service benefits.”

Hussain Arabi, a Pakistani financial executive, said: “I am bachelor, so my budgeting is different, as I share my accommodation, which is costing me 30 per cent more. I send 45 per cent of my salary to my family back home. But, the cost of living on account of accommodation has reduced my savings, as now I hardly save 40 per cent of my salary. Earlier, when things were not that bad I was saving about 50 per cent”.

M. K. Zaman, Indian Corporate Executive, said the cost of living had risen substantially during the past one year, effecting the budgets of 95 per cent households. But there are people like corporate executives, and technocrats who are generally high net-worth individuals. These individuals better manage their savings and reap best returns by minimising their risks”.

He added: “So, like other corporate executives, the recent price increases has not affected my budget. In fact, my saving has improved, because I took best yields on my savings. I could exploit the opportunities of IPOs and real estate which are the best bet”.

Zaman said the high net-worth individuals are generally not affected by such price-hikes, as they are generally part of the managements of their institutions who can better negotiate their emoluments, which majority of the working class cannot do so.”

M. A. Haq Asif, an Indian Accountant, said “I am among lucky ones whose company has provided a decent accommodation and has also given a handsome hike in salary, to meet the increasing cost of living. But, things these days were not the like in past when we could save something for the raining days. My saving has trimmed down substantially. Until, Iast year I was saving at an average of 25-30 per cent, but the price-spiral that has hit country has eaten away my saving by 5-10 per cent. Since, I have to take care of my family back home, so I send 20 per cent of my salary”.

Maria C, Flipina, works as supervisor in a boarding house for Special Needs Children in Sharjah, said that she spends one quarter of her salary in the UAE. She send the rest of her income to her husband and child in the Philippines.

Jolan Abed, a foreman, said that he spends all his salary in the UAE. “Frankly speaking, I save nothing. I am actually waiting for my US immigration papers to arrive as I intend to leave the UAE and settle in the United States,” he added.

Nasi Al Askhari, an Omani driver in Sharjah, said he saves half of his income, which he sends to his family in Oman.

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