"UAE tops in providing luxury to expatriates."

That won't ring true to Dubai's boys in blue, the thousands of labourers building the city - and the cleaners, retail assistants, drivers, gardeners, teachers, nurses, office juniors and all the others who keep it going.

But, mainly because the UAE gets a high ranking, HSBC's survey of expats has been given a lot of media coverage.

In what's claimed to be the world's largest expat survey, they had response from 2,155 expatriates across four continents about the opportunities and challenges that come with a life away from home.

What I can't find is who the respondents were.

Pretty obviously though, the results are referring to western, management-level expats and as we know in Dubai that's a tiny sample of the global expatriate population.

According to the results, while half of expats spend more on food, shopping and socialising in their new country of residence they also save and invest more than they did in their country of origin.

While I was reading the reports an e-mail arrived from a friend about the effect of Dubai's inflation at street level. It also shows how unrepresentative the much-publicised survey is of most expatriates.

Ten years ago my friend started using an automatic car wash, where 5 guys dry and vacuum your car afterwards. In 1998 it cost Dhs 15, in 2001 it went up to Dhs 20 where it stayed until 2006 when it went to Dhs 25. Because of Dubai's rents my friends moved to Umm Al Quwain and hadn't used the carwash for a while. Yesterday they did and the price is Dhs 35.

I'll just quote the e-mail:

I commented to Suresh (one of the cleaners that has been there since 1998 at least) about the high price.

He tells me "Yes, madam. Everything too much expensive now. After Diwali this year I will return home to my family. There in India I can work as a driving instructor and earn a better salary than I earn here (at the car wash he earns a basic salary of Dh950, with approx. Dh200 in tips every month) and I only work 8 hours (and not 12 hours like in Dubai) and my family is there.

I need to make savings for my children's education and I cannot do that here in Dubai. Now with the new visa laws, it will also be very difficult to bring them here, even if I stay and get a better job."

She related this to a colleague. He had a similar story.

From when he arrived in Dubai three years ago, cleaning and ironing a shirt cost Dhs 7. When he picked-up his shirts yesterday he was told that they now cost Dhs 11. The friendly attendant who knows him well apologized and said that next month they'll be Dh13, and not surprisingly "customers are leaving us now".

He went on:

"For me also, there is no more reason to stay in Dubai. I am going home to Bangladesh, there I will work in a call centre, I earn the same salary as here (Dh1,400 a month) but I only work 8 hours a day (and not 10 to 12 hours at the dry cleaners). There, I can live with my family and make many savings."

And my friend makes an interesting point:

Everyone talks about the "Brain Drain" in the GCC… of highly educated Arabs seeking employment in the West. What about the "Muscle Drain", i.e. all the service staff like waiters, delivery drivers, store attendants, etc. etc. etc. who can no longer afford to stay here?

Dubai is far from unique in becoming too expensive for the essential lower-paid people to live in, cities around the world are struggling with the problem. But we need so many more than most cities because of the frantic construction and expansion, so solving the problem is more urgent here.

Back to the survey and a sample of the headlines: "The United Arab Emirates is the most luxurious place for an expat to live" and "UAE tops in providing luxury to expatriates" and "High salaries pull in expats".

Unless you're a highly paid western managerial expat, you might want to treat them with some scepticism.

Expats enjoying Dubai's luxurious lifestyle...

Gulf News report is here.

The survey is here.

The true face of inflation

I'm sure that there can't be anyone living in Dubai who believes the official inflation figure of around 10%.

I suspect that even the people who come up with them don't actually believe it themselves.

Gulf News has compiled some figures on the real increase in food costs. They say:

"Basic food prices in the UAE have risen a staggering 36 per cent."

Staggering? Isn't it what anybody who buys food already knows?

They give some typical examples:

"*Price of Basmati rice has shot up more than 50% from Dh15 for 5kg to Dh22.70

*A two litre bottle of cooking oil has increased 80%, from Dh10.85 to Dh19.60

*Indian mutton has gone through the roof from Dh13 a kg last year to Dh28 per kg

*A whole chicken now costs Dh17.25 as compared to Dh10.35 last year

*A 30-egg tray costs Dh14.60 today. Last year it was Dh12.30"

It isn't only food prices. Far from it.

We have Salik road tolls that are new. Rents going up by huge amounts, in spite of the rent cap. School fees jumping by very large percentages. Travel costs up with taxes and fuel surcharges.

Wouldn't it be interesting to see the true inflation figures.

The Gulf News report is here.

Getting to grips with inflation

I've been banging on about the effects of inflation on business, and the economy in general, for a while, so it's good to see that important people are now going public with their concerns.

And it's very good to see the media actually reporting it.

They've previously taken the tabloid approach, even in the business pages - how inflation is affecting the 'common man' (how I hate that phrase) as the price of consumer items rises. It's been the same with the dirham/dollar peg, the stories almost all about the value of salaries dropping.

That's a real populist simplistic discussion. The real problem is the disastrous effect of inflation on the economy, on growth, on the very future of Dubai which is based entirely on our commercial success.

Without that success there won't be the jobs, the opportunities for people.

Today there's a report from Merrill Lynch, basically saying the Gulf states are getting it wrong, particularly the insistence on keeping the dollar peg, which is made worse by the refusal to revalue local currencies.

The peg means we don't have our own monetary policy, we slavishly follow American policies even though the economies are going at express speed in opposite directions.

The recent interest rate cut is a classic example of the problem. The US economy is plummeting south and they need to get more money moving around. Our economy is booming but in danger of overheating so we need to increase interest rates to slow the flow of money.

But we have to follow the US move and cut rates, throwing petrol on the fire.

There are worrying reports again today that as further interest rate cuts are probable in the US they'll be cut here again.

Contrary to the view expressed in the region, Merrill Lynch say that the pegs have become the main source of inflation.

Yesterday Abdul Aziz Al Ghurair, speaker of the UAE Federal National Council and CEO of Mashraq, was quoted in an interview with Reuters as pointing out that: "Inflation is our enemy No. 1...We really need to manage our control over inflation."

Other bankers have been warning of the dangers of inflation too, so it seems the seriousness of the situation is at last being discussed openly. And that can only be a good thing.

Refusal to allow price rises - even though raw material prices are increasing - and caps on things like cinema tickets are not addressing the problem. We really have to get to grips with the major causes of the problem, we need to take control of our own destiny. We're becoming an increasinly important business centre and we need to take control of our own economy.

Here's more detailed information:

Inflation a major policy challenge.

Inflation UAE's biggest enemy.

Dubai's new 5% rent cap

I've rambled on in the past about some of the things jeopardising Dubai's future, which depends entirely on us being commercially successful.

Poor telecoms with Etisalat's lack of speed and bandwidth, the TRA's refusal to allow VoIP, the huge costs caused by the roads & parking problems, the high cost of commercial property and the all-encompassing problem of high inflation. They make doing business in and from Dubai more and more difficult and costly, and alternative cities become more attractive locations.

Dubai's future depends on solving these problems, and solving them quickly.

Recently the Central Bank Governor announced that the government was setting up an agency to monitor inflation, reflecting the growing concern. The official inflation figure is around 10% but I don't think there are many residents who believe it's that low. It's a problem on a personal level, but the bigger picture is that it's seriously damaging Dubai's future.

With the insistence on keeping the dirham pegged to the dollar the government has little room to manoeuvre to control inflation. We have the ridiculous situation where we follow US interest rate reductions even though our economies are going in opposite directions.

A band-aid answer being used is to stop or limit price rises - but that really is a very short-term and unsustainable option.

Scenario - world wheat prices are rising steadily but bakers are not allowed to put up the price of bread. How long can they stay in business if their selling price doesn't reflect their costs?

Rents have been one of the major problems and today we have an announcement that at least this aspect of inflation is being tackled with a 5% rent increase cap being set for 2008.

Rent increases over the past few years have caused huge problems for people. There are plenty of stories of families having to go back home while the husband stays on in shared bachelor accommodation. A ripple effect of high rents is that tens of thousands are adding to the traffic chaos because they've had to move out to Sharjah, Ajman & Umm Al Quwain where accommodation is relatively affordable.

Company costs have increased dramatically if they provide accommodation as part of staff packages or provide an accommodation allowance. An example of another ripple effect of the situation is given by a friend who owns a business and pays accommodation allowance for senior staff. Because of rising rents he's increased the amounts as much as he can, but there's a limit to how much the company can afford and he knows their rents have gone up more than the increase he's been able to give. He's lost some valuable senior staff as a result.

We've had rent caps in Dubai for the past two years, 15% in 2006, 7% this year. For 2008 it's been set at 5%. It applies to new tenants and to tenants whose rents did not increase in 2007. For tenants who did have a rent increase in 2007 there can be no increase in 2008.

It's certainly a move to battle one of the big inflationary factors.

The story in Gulf News is here.