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Sunday, May 24, 2009

Word of Advice Part 2

I tried to touch on the economic factors at work here in the U.A.E. as well as the rest of the world in my Part 1. Now I will explain how certain peculuarities of life here combine with these factors to make things a little more difficult for the expat trying to make a living here.

Most companies in the Emirates who hire employees from abroad have what is called "expat packages". These include free housing (or housing allowances), school tuition for dependents, free medical insurance, transportation and of course the negotiated salary. Another perk is the Settling Allowance. For me it was a lump sum 5 figure amount that was deposited into my local bank account a few days after reporting to work. The purpose of this is to ease your transition into a foreign country and to give a new employee the means to set up house. That means appliances and furniture to start.

The Settling Allowance is usually not a gift. In my case if I left my job after the first year I would owe 60% of the allowance back to the company. If I left after two years I would owe 30% and if I stayed for three years I would owe nothing. So it is kind of a loan or deferred salary. And a very good reason to stick-it-out.

Another thing is that when you open a bank account here, you are literally bombarded with credit card and personal loan offers that have obscenely high limits. Combine this with the presence of every high-end retailer of automobiles, fashions, home decor, gourmet restaurants, rock concerts and every other angle of "the good life"and the temptation factor is high.

So you have a newcomer with a tax-free salary, free or subsidised housing, massive credit limits, $10,000+ cash in the bank and a job that seems it will last forever. You can see the temptation to buy that Porsche he or she always wanted and furnish the villa with all the best stuff within the first few months of moving to the Emirates. The banks are very helpful in arranging that. I got a 5 year loan, no money down, for a brand new car after being employed for only a month.

Fast forward six months to a year in our new employee example. The global economy tanks and the new expat is told he or she is being made redundant (fired) and in addition to losing the residence visa, the employee will have 30 days to find another job or be deported. Let's say the expat owes $70,000 in auto and personal loans in addition to the portion of the settling allowance to the company (may be waived in involuntary dismissal).  Also if the employee signed a lease-rent is usually paid in advance for 6 to 12 months-he or she would lose that too, at least another $50.000. 

The U.A.E. is unlike Western countries in that are no bankrupcy laws allowing an individual protection from creditors for a while to work things out. You go to prison, simple as that. So you see the danger of indulging yourself in the many temptations here until you are sure you are on stable ground.

In a nutshell, you get fired (or get tired), have to leave, and you owe money, the employer tells the bank, the bank tells the government, the government tells Immigrations and you get stopped from leaving the airport and possibly go to jail instead of home. I don't know what happens after that but I am sure it is not pleasant.

My advice to anyone here already or thinking about relocating here for employment is to be as frugal as possible during your first year. Don't get credit cards or take out personal loans from local banks as so many that I have seen do. It's easy money but one could end up paying dearly for it. 

Keep your debt back in your home country where there are laws to protect you. Keep as much as you can of your settling allowance in savings. Don't do as I did and buy a brand new car with a 5 year loan commitment. Instead get a cheap car on a month-to-month lease. Accept free company housing if offered, don't sign a long-term lease on your own.

The whole idea is to keep your local U.A.E. debt to a minimum until you are sure that things are going to work out well for you.  This is especially true for families. If you get too much underwater money-wise and things turn sour, you will have a problem.

This is a good place to live if you know the rules and toe the line. Long term is the way to look at it to save money in the Emirates, but that is not always going to happen in today's screwed up economy. You never know what is going to happen in this volatile part of the world, either. Keep it light, you'll do alright!

Monday, May 18, 2009

A Word of Advice, Part 1

Abu Dhabi, Dubai and the United Arab Emirates as a whole are very wealthy venues that are usually regarded as somewhat immune to the Global Financial Crisis. As a matter of fact, this area is relatively secure considering the fate of many other countries. But because of the interconnectivity of money and finance across the world there is some pain being felt here.


Dubai, being bereft of natural resources but fortunate in location and has a natural port, cast its lot with international trade, finance, real estate and tourism. We all know what has happened to those lately.


Abu Dhabi boasts a large percentage of the world's petroleum resources and has counted on that income for decades but the recent economic disasters in other countries have depressed demand for oil and the price per barrel dropped from $150 to $50 in a matter of months.


Two sister cities, one rich but plain and the other poor and glamorous only 40 miles apart are undergoing a "sea change" for very different reasons. It is rumored that Abu Dhabi is pouring billions into Dubai to keep it afloat and prevent a total meltdown of the banks and financial markets there. Abu Dhabi remains relatively healthy.



All of this has an effect on expat jobs in the region. You probably have read about the hundreds of abandoned cars in the Dubai airport parking lots from fired expats leaving in droves. Some of it is true and some is journalistic license. The real estate, financial and construction industries have been hurt lately to be sure due to the slowdown of outside investment capital, but there are still rare opportunities to be had.


This region will recover faster than others. I think we are seeing a temporary knee-jerk reaction with jobs and salaries declining across the board. That can go on for only so long until the brain-drain is realized, recruiting becomes more difficult and hiring begins again. There is a multitude of projects to be finished and infrastructure to be managed here and talented people will be needed to accomplish this. There is too much at stake. Expat expertise will be in demand here for decades to come.


In the meantime, things will be stagnant for 2009 and good jobs will be hard to find here in the Emirates as well as most other places. But the U.A.E. has a lot of money derived from desirable natural resources and not from taxing its citizens or residents. That makes all the difference.


In the next post I will discuss the financial mistakes that most new expats make (me included) and how to avoid them especially in these uncertain times. Employment here may seem like a good alternative to what is available in your home country, but there are some serious pitfalls to be aware of which I will cover in part 2.



Friday, May 1, 2009

Take 10

These guys at my apartment complex are taking a well-earned break from the triple-digit noonday temperatures and the unrelenting sun. They were back at work shovelling gravel a few minutes later.