What 2011 has in store for the country
So how do you think 2011 will pan out for you?
While some of us couldn’t wait for 2010 to end, there were others for whom the year gone by didn’t turn out to be as bad as could be. But now that it’s over, and we’re cherishing new beginnings of 2011, how will this this year shape up?
2011, for most people around the world, is year of hope.
Hope that things will take a decisive turn for the better this year. Hope that the stubborn global slowdown will give way to growth, however gradual. Hope that more jobs will be created this year than axed. Hope that there will be less natural disasters than last year. Hope that man will not die at the hands of man, and that optimism and courage will trump despair and fear.
While there’s a lot of hope, there are also indicators of what lies ahead.
We read the tea leaves, looked into the rear view mirror, and gazed into the crystal ball to present a few prophecies for the year.
Jobs: There’s good news for employees looking for a change this year as many sectors are expected to offer good job opportunities in the country.
“In 2011, sectors that are likely to be more robust are pharma, healthcare, FMCG, and technology (IT and telecom). Demand for talent is increasing as multinationals seek to increase their market share in the Gulf,” Michael Al-Nassir, Partner in charge of Middle East, Africa & India, Pedersen & Partners told Emirates 24|7, while talking about jobs at the top level.
Not only those, jobs in financial services, advertising and publishing are expected to open up as well. According to Bassam Gazal, HR firm Mercer’s survey practice head across the Gulf, the period of staff-reduction in the UAE is on its last legs.
“Two-thirds of the 140 firms we surveyed across the UAE told us they would raise headcount in 2011. Not one firm we spoke to was planning to cut numbers. This is a big shift in mood and in planning and we expect this optimism to deepen…,” he said.
So what are you waiting for? It’s time to dust off that CV and hit the job market.
Salaries: A sizeable majority of UAE residents did not see pay-hikes in 2010, and for a good proportion of employees, it was the second and, in some cases, third year in a row without any financial increments in incomes. Well, there’s no easy way of putting it – there’s still some pain left in the economy, and salary hikes, if any, will be marginal except for in niche jobs and specific sectors.
According to Mercer, UAE residents will see an average hike of just 6.2 per cent in 2011 – while that’s better than no hike at all, for a majority of the country’s expats, there won’t be much to write home about.
Rents: Now comes the real good news. Well, for most of us at least. Those of us living in rented accommodation (a huge majority) are now familiar of the effect of falling rents on our improved lifestyle and potential savings. 2010 was really the year when the tables turned in the rentals game in the country, and it became a tenant’s market instead of the landlord’s.
While earlier it was landlords who dictated terms and tenancies, in 2010 it was the tenant’s turn to offer what he thought was reasonable, or move on to the next available property (and there were plenty). As more supply hits the markets across the UAE, in varying degrees across different emirates, rents will continue to slide in 2011 as well, reckon most analysts.
According to a new assessment from property consultancy Landmark Advisory, with 48,000 new homes due to come on to the market in the next two years, property prices in Dubai may fall as much as another 20 per cent by the end of 2012.
Jesse Downs, Director of Research at Landmark Advisory reckons new properties will drive down rents, pushing values lower. “Rents are very important because occupier demand leads investor demand,” she explained recently. She expects that prices will drop 15 to 20 per cent by 2012 if the most residential buildings currently under construction go onto the market as scheduled.
Other real estate companies are also forecasting prices falls, including Cluttons and Jones Lang LaSalle. “There is still no parity between supply and demand,” said Paul Richard, Associate Director at Cluttons in Dubai, which estimates that 35,000 homes will be completed through 2012.
Whether it’s 48,000 new units or 35,000, surplus units in the market will mean just one off the two things for you: renegotiate lower rents with your existing landlord, or move to a better/more reasonable housing unit. Unlike the boom years, there are plenty available today.
Taxes: Will they, won’t they? Taxes, and Value-Added Tax (VAT) in particular, have been on and off the table so many times that you’d think it was a ping-pong game if the issue wasn’t so serious and close to the heart of most if not all expats here. Ever since the International Monetary Fund first recommended in its 2005 Staff Report that UAE should introduce some sort of taxation, possibly VAT, rumours about VAT and its potential date of implementation haven’t stopped flowing.
So far, however, UAE authorities haven’t categorically acknowledged or denied anything. Tax consultancy KPMG claims VAT is very much on the agenda of GCC countries and might be introduced in the next few years.
In November last year, Mark Rebello, Director of International Corporate Tax at KPMG in Qatar, said: “It [VAT] is on the agenda and has been discussed at high level within the GCC. I would suspect in a not too distant future, maybe as earlier as the year 2013, we may see VAT implemented regionally.” On the other hand, Jamal Fakhro, Managing Partner at KPMG in Bahrain and Qatar, thinks it would take “between two to five years” for VAT to be introduced.
Either way, implementing VAT is a complicated and complex process and it takes time for the system to be set up and training imparted once a decision has been taken. It’ll be fair to say that 2011 may not see the implementation of VAT in the UAE even if a decision to introduce it (or not) is taken this year. Let’s keep our fingers crossed on that one.
Utility Bills: They’re going up, whatever anyone else might tell you. Dubai Water and Electricity Authority (Dewa) has already hiked their charges by 15 per cent and a global gas price-dictated surcharge from January 1 onwards.
The Abu Dhabi Water and Electricity Company, on the other hand, is reportedly contemplating such a move, with the precursor being that, starting this month, it will be highlighting the government subsidy (86 per cent for Emiratis and 50 per cent for expats) on customers’ water and power bills.
Then again, 2010 saw the price of petrol in the country go up by 35 fils to Dh1.72/litre, with the stated objective of fuel distribution companies to bring it on a par with international prices. With crude at $90/b, refined gasoline works out to $101/b, or Dh2.33 a litre. Simple math shows that the price differential is 60 fils a litre, without adding distribution/operational costs.
A committee comprising the three UAE petrol distributors and which meets every other month is tasked with recommending increases in prices at the pump. Unless global oil prices see a major decline, which most oil analysts think is not going to happen, we’ll have to pay more for petrol this year even though the price we pay for our fuel is still among the cheapest ion the world.
So that’s how we think most of the issues that are close to your heart are going to flesh out this year. What do you think? If you disagree with our analysis, want to suggest another issue, point out a fact we’ve missed out or simply voice your opinion, please write to us below.
Here’s wishing you a very happy and prosperous new year 2011.
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