This document discusses the personal finances of expatriates living in the United Arab Emirates. It notes that a tax-free income is the primary benefit, but costs of living such as high rents and school fees present challenges. Additionally, some expatriates struggle with debt due to easy credit availability and a consumerist environment. However, Indian expatriates are praised as generally frugal savers who invest heavily and send money home to support families.

1. UAE expatriates and the bottom line
A briefing paper by The Economist Intelligence Unit
Sponsored by

2. 1 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
Contents
About this report 2
Introduction 3
Personal finance for professional expatriates 4
Cost of living backdrop 6
The savers 7

3. 2 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
About this
report
UAE expatriates and the bottom line draws
on The Economist Intelligence Unit’s Cost
of Living annual survey data, which track over
50,000 key prices in over 130 cities around the
world.
The report - sponsored by Friends Provident
International - was written by Jon Copestake,
The Economist Intelligence Unit's chief retail
and consumer goods analyst and editor of the
EIU Worldwide Cost of Living survey. The report’s
editor was Adam Green.

4. 3 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
Introduction
The case for living and working in the
United Arab Emirates (UAE) is compelling.
Expatriates make up around 90% of the
population and 95% of the workforce, suggesting
that if 7.8m people have made the move, they
must have done so with good reason.
Dubai and Abu Dhabi have long benefitted from
a benign business environment, helped by the
creation of nearly 40 business zones, which
welcome foreign investment and cater to a range
of industries. Multinationals have put down
roots, driving a diverse expatriate jobs market
from the oil and gas refineries of Abu Dhabi to
Dubai's International Finance Centre and Media
City.
Western expatriates play a prominent role.
The UAE is home to around 250,000 British
expatriates, the largest Western contingent. The
population of US workers is lower at an estimated
40,000 nationals, mainly in Dubai. Australian
numbers are lower still, with 7,000 expatriates
divided equally between Abu Dhabi and Dubai.
This compares with an Indian population
accounting for almost one-third of the UAE
population and working in a range of jobs from
the bottom to the top of the income scale.
It is not just the business environment that
drives economic immigration. The UAE is widely
perceived to be a regional safe haven. Laws and
cultural restrictions are more liberal than other
Gulf countries such as Saudi Arabia, and the UAE
is sheltered from regional instability. Dubai has
an advanced retail tourism sector, with sunshine
and shopping malls attracting millions of foreign
visitors every year. Factoring in a tax-free income
and the worsening economic climate in the West,
it is easy to see why the foreign-born population
of the UAE has risen so quickly.
But it would be naïve to paint Abu Dhabi and
Dubai as expatriate utopias. There are pitfalls,
and much will depend on where you are moving
from, whether you are moving with your
family and what type of job you hold. Equally,
a business-friendly environment does not
necessarily equate to a benign framework for
all employees. Those working in Dubai may face
hidden costs, high prices and a lack of personal
rights.

5. 4 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
Personal finance for professional
expatriates
A tax-free income is the primary cost-of-living
benefit in the UAE. Expatriates working
in Dubai or Abu Dhabi have zero levies against
income. An expatriate earning US$100 ,000 in
the UAE realises the full amount. Elsewhere the
same salary would result in a take-home pay
of just US$66,000 (in the US), US$70,000 (in
the UK), US$72,000 (in India) and US$73,000
(in Australia). The relative gains in taxation
slightly favour single people, since those with
spouses and children tend to benefit from some
tax allowances in their home countries. A single
person earning a gross salary of US$100,000 in
New York can enjoy the same standard of living
(and spending) on less than half that amount in
UAE. Nonetheless, as a whole, it is the tax-free
environment that has proved a major draw for
expatriates.
In addition to the tax benefits, the cost of some
goods and services are lower than in Western
countries. Abu Dhabi and Dubai are 38% and
42% cheaper than Sydney, respectively, based
on the basket of goods used by The Economist
Intelligence Unit's Worldwide Cost of Living
survey. The gap is less pronounced but still
significant for London (35% and 37%) and New
York (27% and 30%). Of course, this is not true
of India, a major source of UAE expatriates. The
same basket of goods in Dubai and Abu Dhabi are
respectively 55% and 62% more expensive than
New Delhi, and 70% and 75% more expensive
than Mumbai.
The cost-of-living benefits, however, need to
be balanced against a variety of challenges.
Property costs have a major impact on the
personal finances of expatriates. Spiralling
rents have forced Dubai to issue rental caps
on accommodation, while prices in Abu Dhabi
remain unconstrained. Rental practices are
difficult to navigate and can require big initial
outlays. Landlords have traditionally asked
tenants to pay for entire rental periods of six
or 12 months in advance. This is easing into
the more accepted global etiquette of paying
monthly, but rising rents have led to sharp
practices from some landlords who attempt
to evict tenants mid-period to secure higher
rents. Preventative legislation is in place, but
enforcement is patchy and tenants may face rent
rises with 90 days’ notice.
In absolute terms, rents in Dubai and Abu Dhabi
for high-end accommodation compare favourably
with those of London, New York and Sydney, but
not New Delhi. Mumbai rents are traditionally
high, and for one-bedroom apartments closely
match those of the UAE. Also, residential
compounds commonly include facilities such as
gyms and pools, providing an added benefit. But
while expatriate-level rents in London and New
York are higher, they sit atop a very different
rental market with a wider range of options and
prices available.
In the UAE, the situation is more polarised, and
expatriates tend to have little choice but to
rent high-end accommodation. Clearly, these
dynamics are advantageous to expatriates who
own property in the UAE, but the majority prefer
to rent because they rarely settle for the long

6. 5 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
term. In addition, many are uncomfortable
with the legal environment or the “boom and
bust” property trajectory in recent years. Lastly,
new regulations since the 2009 property crash
mean expatriates need far higher initial down
payments to buy property.
Schooling is a second challenging expenditure
for expatriates. Research by The National, an Abu
Dhabi-based newspaper covering the UAE, puts
average annual Indian school fees in the UAE at
AED22,000 (US$5,995) while average British
school fees in the UAE are more than double that,
at over AED50,000. These averages mask big
disparities, with some annual fees rising as high
as AED 94,000. Fees are set to rise again, with
schools expecting to increase fees by between
1.7% and 3.5% in the coming year, which will
come as a shock to some expatriate families.1
The rising cost of education has made expatriates
reconsider the length of their stay in the UAE.
Fees tend to ratchet up at secondary-school
level, driven by the salaries needed to attract the
quality of teachers required. As a result, some
expatriate families plan their stay to coincide
with a move home when their children reach
secondary-school age. This allows them to set
career goals in five or ten-year periods and
provides an opportunity to re-evaluate when
a natural break in their children's education
occurs.
At the day-to-day level, professional Western
expatriates also face some cost of living
increases. With no domestic agricultural sector,
most food demand is fulfilled by costly imports.
Popular brands have a premium attached,
and goods of assured quality may come with
a disproportionately high price tag. The term
"hostage expatriate market" is commonly
used for cities such as Luanda in Angola, where
businesses impose extortionate prices in the
knowledge that expatriates can afford to pay.
Dubai and Abu Dhabi do not quite fall into this
category, but price differences for expatriates in
terms of the costs of common goods and durables
are more extreme than in cities like London and
New York, where such differences do not exist.
1 http://www.thenational.
ae/business/personal-finance/
help-is-here-for-uae-
expats-facing-rising-private-
school-fees.

7. 6 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
Cost of living backdrop
Broader factors are also shaping expatriate
personal finances. Benefits such as pension
schemes, a key component of salary packages
in Europe, North America and Australia, are
largely unsupported in the UAE, although this
may be partly driven by a recognition that many
expatriates will have moved on before they retire.
Those who benefit from the tax-free environment
usually have no option but to make provision for
their own retirement, although much will depend
on the package negotiated with their employer.
Secondly, provisions for school fees, once a part
of many expatriate packages, are starting to
come out of the typical contract for professionals
in the region as competition for jobs heats up.
Second, there is the consumerist environment,
which challenges the financial discipline
of some expatriates. With shopping firmly
ensconced as a leisure activity in UAE, especially
in Dubai, Western expatriates often struggle
to keep control of their purse strings, with
some incurring high and occasionally ruinous
debts. Low long-term interest rates and easily
obtainable credit have driven a debt-fuelled
spending spree. Others have engaged in risky
investments that proved vulnerable to market
shocks such as the 2008 global financial crisis or
Dubai's near-default thereafter, when a number
of foreign investors fled.
Part of the problem is the cost of consumer
credit. According to one study last year, the
average annual percentage interest charged on
credit cards issued in the UAE stood at 37.75%,
compared with 17.5% in the UK.3 Another factor
has been a hangover from the financial crisis,
with job losses further undermining the ability of
expatriates to service the debt that resulted from
their pre-2008 excesses.
Faced with a personal credit bubble, the response
from the UAE authorities has been mixed. In 2011
the UAE Central Bank capped personal loans at
20 times the monthly salary of borrowers, but
consumer credit has continued to rise. Next year a
national credit bureau should be fully operational
to provide banks with credit data about
consumers and thus enable lenders to make
more informed choices about their customers.
However, it is not the first time such an institution
has been announced, and the quality of credit
data has been questioned in the past.
There are also tougher regulations in place since
Dubai’s 2010 crisis. Expatriate loan defaulters
now face an enforced travel ban until their debts
are cleared. Indebted expatriates unable to find
employment in Abu Dhabi and Dubai face the
“Catch 22” of being unable to clear their debts by
working elsewhere. Jail terms for loan defaulters
are not uncommon, offering a stark warning
for expatriates to consider all the financial
implications before making the jump into the
UAE.
2 http://www.
thenational.ae/
thenationalconversation/
editorial/uae-credit-card-interest-
rates-are-too-high.

8. 7 © The Economist Intelligence Unit Limited 2014
UAE expatriates and the bottom line
The savers
Of all the expatriate groups in the UAE, the
Indian contingent is most famed for their
frugal financial behaviour. Indians form by far
the largest foreign-born community in UAE,
and while construction workers make up a large
portion of the community, there are increasing
numbers of professionals. The Indian Embassy in
Abu Dhabi lists over 40 major Indian companies
with offices in UAE, with the majority operating
in highly skilled technology or finance sectors.
From high to low incomes, the personal finance
behaviour of the UAE’s non-resident Indians
seems to be quite uniform: they are frugal
and money-conscious, resisting many of the
spending temptations that bedevil some Western
expatriates, even when they have similar
financial resources. One 2013 survey showed that
non-resident Indians put aside an average of 70%
of their disposable income for investment and
saving. The UAE-India “remittance corridor" is
also cheaper than from other locations. Specialist
money transfer firms such as UAE Exchange, Al
Ansari, Emirates NBD and Western Union, charge
fixed fees as low as AED15 on transfers to India
and the Philippines. For UK expatriates, the fee
can be two or three times higher. While there is
some variation - fixed rates of up to AED80 can
apply for express payments - the average cost of
sending US$200 to India from the UAE is about
US$5. Sending the same amount to India from
Australia will cost three times as much.
Family support is a significant goal for
remittances, with over 80% of Indian
expatriates in the UAE having between two
and five dependents to support, usually in the
subcontinent. India’s less developed pension
system compared with Europe or North America
drives expatriates towards supporting their
parents and children rather than taking out
pension schemes. Some 90% invest heavily in
their children's education in the expectation
that, in turn, their children will be able to
support them when they reach old age. Many
also receive advice from family members on
where to save and invest back in India. Earning in
dirhams translates favourably into a comfortable
retirement, especially given the current weakness
of the Indian rupee.
For investment opportunities, India is also an
attractive prospect for the savvy, better-off
white-collar Indian investor– and remittance and
investment flows from the UAE to India signal
clear interest among wealthier non-resident
Indians in investing back home and taking on
more risk.

9. While every effort has been taken to verify the accuracy
of this information, The Economist Intelligence
Unit Ltd cannot accept any responsibility or liability
for reliance by any person on this report or any of
the information, opinions or conclusions set out
in this report.
Cover image - © Filipe Frazao/Shutterstock

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