Oman joins in on the action

Oman, known to us as the country whre you can indulge in a spot of culture, is fully in on the construction action.

Oman's Blue City Investments 1 Ltd's plans to sell bonds worth $900 million to finance the development of an upmarket residential, hotel and leisure resort on the Indian Ocean coast, Fitch Ratings said.

That's pretty bold for a country that really wasn't interested in this whole boom. You need only to visit to realise that. However, the issue is this: The project is a private one, although it appears that it has the stamp of approval from Qaboos. Is that reason enough for Arabs to invest their hard earned cash, at a time where they are low on money after catastrophe on the financial markets.

No doubt, the Omanis are not the wealthiest, the other GCC Arabs are a little short on cash, and the Westerners won't see the value of being in Oman versus Dubai, where all the perceived action is. It will be interesting to see how this one develops. No GCC leader will want to see this fail, so if it gets into any problems, Qaboos will reign in some capital from his friends to make up the $20bn.

The UAE Price Watch

The point in monitoring baskets of goods is to view price differentials and to in same way, to protect consumers from some gross increases that go on. The point of publishing them could be to demonstrate the changes to the public. I thought this was a good idea in light of the obvious cost in goods that exist here. But on closer inspection, the only point of this weekly exercise is to prove that they are tracking the prices.

The ministry says it is producing the weekly update in the hope of boosting competitiveness among UAE supermarkets rather than tracking the country's inflation rate.

That's what they said when they released the second weekly list of goods.

In the first week, it was:

The purpose of this move is to spread public awareness and ensure a cap on price increases.

However, when the second release of prices were released, it was a second basket goods, unrelated to the first one. For me, the man on the street, that doesn't really give much value added. I'm sure that the Ministry is doing their job, and don't need proof by a weekly column in the newspaper.

How about this instead: A weekly column on 30 or so goods, and the percentage changes week on week, to get a better picture of what is going on. I can get the prices by visiting the stores myself, so what, apart from the proof that the Ministry is doing their job, does this exercise bring? After all, if the Ministry can't control prices, then we will be going down a very narrow road to hyperinflation.

That's my two dirhams worth. Well, actually one, as there was a hike.

CPI and Inflation in Dubai and the UAE

Firstly, John Chilton has more than adequately covered and referenced the housing weighting issues of the CPI as well as scepticism on the actual inflation rate.

My issue with using the CPI in such a changing economy is that it does not reflect the changing weight on a year by year basis. While it may be useful in mature economies, since it is possible when taking time-series measurements of financial instruments, such measurements can only sense if they are expressed in "constant" money terms. This is where the CPI is useful. People also can make important decisions after hearing the actual rate, since it supposedly measures the "rate of inflation."

But, in the UAE it doesn't. Why? The weight of housing as a proportion is always changing. We're not talking a few point here. We're talking big scale issues, that would affect the CPI significantly.

What you need to bear in mind is that the CPI is not an economic variable. It is a statistic that, at best, gives an inaccurate picture of the economic phenomenon of inflation. To calculate the monthly or an annual CPI, the Central Bank or another body takes a weighted average of prices of various things that consumers purchase, and then statisticians try to figure out the various proportions of different items in a "typical" household budget. For example, that weight may be that housing costs are 30 percent of household expenditures, food costs 20 percent, petrol another 15 percent, etc. But typical in the UAE, is wide ranging. The average is skewed. What about expat versus local? What's the best way of looking at it?

The problem is that it is very difficult to monitor. Legislation loopholes mean that that the housing proportion changes based on a landlord's whim and the the speculators frenzy. The predominance of imported goods depends on other countries, in the main, the distributers and how much the shops wish to pass on those price changes. And even though there is now a government price watch in place, Keefieboy's example of egg-stortionate price rises come into play, perhaps even for a short period of time.

My recommendation. Ignore the CPI. It's not accurate in this changing market where price changes are extremely difficult to control.

With regard to inflation, even though an announcement today states that inflation will decrease from 7% to 4% by the end of the year, take that with a pinch of salt - the number may reduce, but we're really looking at a higher base.

Forget the basic concept of inflation or CPI for a minute. Take it down to its base level. What was your like for like outgoings 2 years ago, last year and now this year? How much does it cost to lead that same life, without dropping your quality of life, this year, compared to previous years. The answer is probably significantly more, no matter what level of income you are on. That's what you have to bear in mind. The man on the street has no control over inflation, in real terms. All you can do is change factors to accommodate the price rises, including dropping your the quality of life. The story in the Mercer Human Resource Consulting Cost of Living Survey 2006 is indeed that Dubai and Abu Dhabi are now the 25th and 30th most expensive cities in the world to live. But there should have been more of a highlight on quality of life. Neither city made it onto the top 50. Make of that what you wish. Is the glitz and the glam enough?

On Cranes

When I was a child, the word "crane" meant Crazylegs Crane from the Pink Panther cartoon. It was always called the "The All New Pink Panther Show", which bugged me because I felt cheated that it was never "all new", apart from the first time of course. It didn't matter, because I loved the closing credits which mixed cartoon with real life film, with that guy driving off with the usually super cool Pink Panther running behind like a maniac.

In later years, "crane" meant Dr. Frasier Crane, formerly of Cheers fame, spinning off to produce one the most amusing sitcoms of all time. (apart from Seinfeld!)

Mention the word "crane" now and you think Dubai, with people throwing statistics of the percentage of all cranes that are here to help build the uber-buildings.

Earlier this month, Dubai's Gulf News daily claimed the city harbors 24 percent of the world's construction cranes _ or 30,000 of 125,000 cranes worldwide. Less ambitious estimates range from 6 percent to 10 percent.

Binder believes there are between 1,100 and 1,200 tower cranes in the Emirates, mainly in Dubai, which is roughly 5 to 10 percent of the world's active tower cranes _ one of three varieties used in construction. Dubai harbors many thousands more mobile cranes and crawler cranes _ those on wheels or tracks.

In years to come, this period of growth in the UAE will be referred to as the Crane Years. Whether the actual percentage is 5 or 24, it's a hellova lot of cranes.

(The latest AP article on Dubai - Dubai Sprouts a Forest of Building Cranes )

Google chooses Cairo over Dubai

Setting up in the region usually points you towards the UAE, and it has to be a consideration for the number of companies coming here. Many choose Dubai due to the benfits associated to the freezones, especially those in Dubai. However, according to the unoffical SEO Blog, Google has plumped for Cairo rather than Dubai, because Yahoo appears to have got first footing in Dubai. If that is trues, that's particularly interesting. However, there must be other factors thrown in as to why a giant such as google would make the bold decision to pick Egypt. It may just be that the location of Egypt offers forays into two regions, namely the Middle East and Africa.

You may think you have it bad...

...but spare a thought for those in Kuwait who marvel at our supposed 'freedom'

The Hymen Repair Shop

One of my Local friends told me how mothers requested the sheet to prove the wife's "pureness". To this day, I do not know if he was jesting. But this article from USA Today showing the lengths that Muslim Girls go to 'restore their virginity' is an eye opener. In Islamic cultures, shaming the family name is similar to blasphemy.

The 6 month slide

2006 - the year of the sliding stockmarkets (courtesy of Emirates Today)


The crash has probably been reversely proportionate to perception of markets, creating that bubble effect. In Western markets if you had a 12% drop, similar to Kuwait's drop, sentiment would be very low. Dubai's 57% is a catastrophe. No worry. Everyone is still smiling. It's not just about the stock market after all, is it?

Word of the day: Diaspora

The term "diaspora", that I learnt today, is wholly relevant to the UAE, despite the word having being used in the context of Jewish communities.

Definition: Leaving Home or Staying in Touch. People who live informally outside a homeland while maintaining active contacts with it.

This definition implies a distinction between those who leave home and those who stay in touch. These are overlapping but not identical concepts. Some of those who leave home do not stay in touch, even though many of them do. Some who stay in touch never left home - they were born and raised outside the homeland but, for various reasons, want to return or create links with a place they think of as their home.

The word, diaspora, has been used for both of these concepts, but we need to be able to distinguish between them. Actually, the word dispersion is often used as a synonym for diaspora. Historically, they were just different versions of the same word, in two separate languages.

Can we use diaspora and dispersion to make a distinction? Dispersion is the act of leaving home, and diaspora is the act of staying in touch. Dispersions link up with studies of migration and immigration. Those who leave home often settle elsewhere and, in due course, become part of the hostland where they make new homes for themselves. Thus dispersions tend to dissolve to the degree that their members eventually lose their old identities and take on new ones. Much of the literature on "diaspora" is, substantively, part of the literature on immigration and assimilation. It tells the story of those who left one home and created new homes in a different place, perhaps for a temporary period of time.

The UAE is a collective of temporary and permanent diasporas.

Eurabia, Londonistan and Al Washington

The Cartoon debacle amongst other things brought home the issues of integration of the West and Muslims. Is there an issue? I think so. The Pew Global Attitudes Project highlights that Muslims and the West view each other in a negative way, while the Economist believes that integration is possible. While both sides of this argument require high amounts of analysis that I am neither qualified nor able to go into, it warrants your attention. From the other side of the coin, the UAE represents Islamic values trying to compromise to Western ones, with some success. But with compromise comes negative perception from both camps: the stricter Islamists view the move towards the West as a play to the devil while the right wing west considers anything related to Islam as potentially having a terrorist agenda. We are no doubt living in a time of conflict, but the UAE represents an opportunity in more ways than one. Above all the daily squabbles, will that balance be established? If anything, the UAE is the closest thing to it thusfar.

Sectoral Emiratisation

My position is clear on emiratisation. Qualified UAE Nationals who meet the skills, education and other specifics of the jobs at hand should be first preference for positions. The country is, after all the country of the UAE Nationals.

However, I believe that fully emiratising a certain industry, especially within a lead time of 18 months, presents a number of problems. While there are a hugely disproportionate number of UAE Nationals out of work, this solution is potentially a quick fix that does not cater for the longer term.

UAE Nationals may be forced down career routes that they do not intend to follow, just because of the lack of overall jobs. Indeed, work arounds have existed for a number of years to get emiratisation levels up by pulling the incumbent expatriate out of the company, and recruiting him or her as a consultant to the UAE National. While this may solve the problem somewhat, it creates an extra burden on the organisation. Emiratising complete HR departments, for example will result in an increasing amount of work for the number of HR consultancies that exist within the region.

A longer term solution would involve a shadowing of general positions, but strictly enforced, so that theory is reinforced by on the job type training. While this may be the aim with the latest legislation, 18 months within one sector does not do justice to the more technical areas of HR, such as OD, Compensation and Benefits and Manpower Planning.

The problem is a big one. Swapping expat secretaries with UAE National ones, does not benefit the long term career prospects, since it reduces the expectation of education levels, since, in theory, these type of positions do not require much more than a diploma or higher diploma, which is relatively easy to obtain. What should be promoted is the forced education to a minimum of degree level or at worst, the carrot approach should be adopted whereby UAE Nationals should be offered larger incentives to complete their education to graduate and, ideally, post graduate level.

The lack of adoption of emirtisation by the banking insurance and trade sectors is based on the fact that there is a skill gap in an increasingly competitive arena. Whether this latest announcement will result in the desired end state is debatable. There is some merit to it, but, a long termist solution is needed to: one; increase the average education level of UAE Nationals; two, create transition periods to achieve company emiratisation levels; and three, to integrate UAE Nationals rather than force and employer into a corner. With a larger amount of UAE Nationals joining the job pool every year, Tanmia will have larger problems when they try and decide which is the next sector to emiratise.