Alarm bells will be ringing for employers after the IMF announced that inflationary pressures in the Arabian Gulf will push up living costs this year.
From an employer's point of view, pressure has been attributed to rises in rent, costs of children's education, health care, and transport, including the price of vehicles. Given that these four elements comprise 40 to 50 per cent of an average household's spending, any unexpected or inflated increase will have a huge impact on employers' payroll costs.
It isn't long ago that corporate HR battled through the 2007 to 2009 years of inflationary pressures on direct employment costs, particularly housing and education, resulting in two years of frenzied fire-fighting on the salary front.
During this period organisations resorted to twice yearly pay reviews, heaping fixed cash on to housing and education allowances in attempts to compensate for escalating living costs. The squeeze was intensified by a drought of new joiners as expatriates were deterred from moving to the GCC because of the high costs of settling here.
Last December HSBC's purchasing indexes rose to the highest level in 19 months in both Saudi Arabia and the UAE; highlighting rising public spending, the first sign that inflation will climb this year. Employers would therefore be wise to take steps now to guard against spiralling costs should inflation exceed current official forecasts. Employers will need to respond by taking a very different approach this time, having learnt from pre-economic crisis times when packages simply became untenable once inflation topped 10 per cent.
Thankfully, smarter ways of managing fixed costs, a more extensive global talent pool and realistic growth forecasts afford employers more flexibility in how they deal with inflation next time around.
Employers are much more cost- conscious about fixed costs in 2013 than they were in 2007 and they are also aware a regional salary ceiling has been reached in the private sector. GCC management salaries are now on par with developed economies, especially within multinational organisations, and are raising eyebrows with global management teams that are receiving 1 to 2 per cent pay rises in developed economies, while being asked to give 4 to 5 per cent rises to employees in the GCC.
In the private sector, allowances during the 2007 to 2009 period increased 15 to 20 per cent. However, rents rose 25 to 30 per cent in the same period - therefore still falling short of compensating for rising costs, and applying constant pressure to businesses. Retrospectively we can see that packages offered during this time were designed based on overly optimistic growth projections that did not materialise. Hence, simply increasing basic cash to match inflation is an oversimplified solution.
This time, growth is more realistic and in this environment HR and leadership teams should consider reinforcing their current offering to help to keep employees engaged as fears of inflation return. Total reward statements explaining the overall cash, allowances and benefits provided to each employee on an individual basis give clarity and reassurance, and explain the full value of their package.
Over the last decade Gulf countries have experienced years of double-digit pay rises and varying rates of inflation. At management level and above, pay in the UAE and Qatar has risen by 64 and 80 per cent respectively. Pay rises during this period and in particular over the past five years have had a cumulative effect on end-of-service benefits, with liability increasing year on year.
In the current environment, businesses leaders have the opportunity to think carefully about manpower planning and hire in line with business strategy, therefore helping to reduce this liability.
By getting the right people in the right roles through a rigorous recruitment process, the risk of turnover is significantly reduced. In the majority of cases, HR and leadership teams do not realise the opportunity cost of turnover: losing a management-level employee costs the business 18 months worth of that individual's salary in order to get a new hire up to the same level of performance, in addition to the leaver's end-of- service payment.
The supply equation has also completely changed since 2007, as despite a more realistic pace of growth and increasing involvement of nationals in the workforce, a new type of expatriate is looking at the region.
We are seeing an increase in expatriate talent from Europe and the United States, from those searching for international experience in fast-growing markets. For example, in Spain and Greece where more than half the population under the age of 35 is unemployed and job creation has come to a standstill.
Therefore, in contrast to 2007 to 2009, new expatriate hires are now being taken on at lower salaries than the existing market rate; the reverse of previous expatriate hires who were recruited at the mid-point or top of pay bands. Sign-on bonuses have also all but disappeared, making it easier for companies to justify new hires.
Companies have learnt a lot from the recent past about how to deal with inflation and take the appropriate degree of business risk in reward decisions.
This time around, we should see fewer knee-jerk reactions and short-term fixes, and more long- term thinking about managing talent. Whether the IMF forecasts are accurate or not, it is a good time for companies to take stock of their offering - and make sure their employees understand and value it.
Vijay Gandi is the regional director at Hay Group in the Middle East
KEY DEVELOPMENTS IN MARITIME DISPUTE
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
Company%20profile
%3Cp%3EName%3A%20Tabby%3Cbr%3EFounded%3A%20August%202019%3B%20platform%20went%20live%20in%20February%202020%3Cbr%3EFounder%2FCEO%3A%20Hosam%20Arab%2C%20co-founder%3A%20Daniil%20Barkalov%3Cbr%3EBased%3A%20Dubai%2C%20UAE%3Cbr%3ESector%3A%20Payments%3Cbr%3ESize%3A%2040-50%20employees%3Cbr%3EStage%3A%20Series%20A%3Cbr%3EInvestors%3A%20Arbor%20Ventures%2C%20Mubadala%20Capital%2C%20Wamda%20Capital%2C%20STV%2C%20Raed%20Ventures%2C%20Global%20Founders%20Capital%2C%20JIMCO%2C%20Global%20Ventures%2C%20Venture%20Souq%2C%20Outliers%20VC%2C%20MSA%20Capital%2C%20HOF%20and%20AB%20Accelerator.%3Cbr%3E%3C%2Fp%3E%0A
The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 258hp from 5,000-6,500rpm
Torque: 400Nm from 1,550-4,000rpm
Transmission: Eight-speed auto
Fuel consumption: 6.1L/100km
Price: from Dh362,500
On sale: now
Factfile on Garbine Muguruza:
Name: Garbine Muguruza (ESP)
World ranking: 15 (will rise to 5 on Monday)
Date of birth: October 8, 1993
Place of birth: Caracas, Venezuela
Place of residence: Geneva, Switzerland
Height: 6ft (1.82m)
Career singles titles: 4
Grand Slam titles: 2 (French Open 2016, Wimbledon 2017)
Career prize money: $13,928,719
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
MATCH INFO
Manchester United 1 (Rashford 36')
Liverpool 1 (Lallana 84')
Man of the match: Marcus Rashford (Manchester United)
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Difference between fractional ownership and timeshare
Although similar in its appearance, the concept of a fractional title deed is unlike that of a timeshare, which usually involves multiple investors buying “time” in a property whereby the owner has the right to occupation for a specified period of time in any year, as opposed to the actual real estate, said John Peacock, Head of Indirect Tax and Conveyancing, BSA Ahmad Bin Hezeem & Associates, a law firm.
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
