Do not send money home, do not make big purchases and keep money intact to sustain yourself during these difficult times. This is the advice offered to expatriates in the UAE by Salah S. Al Halyan, Founder and Director of Gulf Insurance Consulting and Managing Director of Baizat, a financial consultancy.
With several companies in the UAE struggling to meet operational costs owing to a loss of business inflicted by COVID-19, they are resorting to layoffs, salary reductions or asking staff to proceed on leave (both paid and unpaid).
In an interview with Gulf News, Al Halyan recommended UAE residents facing economic hardship to sign up for financial assistance initiatives.
Stressing the challenge of maintaining a healthy cash flow for both companies and individuals, Al Halyan, who is also a financial consultant and certified insurance consultant, said the UAE economy will not go back to what it used to be, but will instead be scaled down. The cost of living in the UAE is going down, so don’t expect to get salaries given previously, he advised.
Companies are being forced to scale down the scope of their business owing to the impact of COVID-19. They are finding it hard to pay salaries
“Companies are being forced to scale down the scope of their business owing to the impact of COVID-19. They are finding it hard to pay salaries. Most private sector companies have lost their earning power and income. Even if the economy is re-energised now, it will be difficult for most companies to continue at their earlier pace of activity,” Al Halyan added.
Adjust to new circumstances
A significant proportion of UAE residents have taken a hit to their income. But with opportunities for spend being limited now, people are being advised to adjust to the new circumstances and be frugal.
“Most people who are working from home now do not spend as much money as they did earlier. They don’t go to malls or eat out at restaurants. Now, most people prefer to cook at home, both for financial and hygiene reasons. Most Emirati families earlier depended on help for domestic chores, such as a maid or nanny. Forced to stay home, they have become self-sufficient. This will trigger a change in lifestyle for most Emirati as well as affluent expat families,” Al Halyan explained.
The financial expert assured residents facing a salary cut that if it doesn’t affect rent payment, then they needn’t be worried. “Rent accounts for the biggest chunk of your income. Your entertainment expenses have reduced significantly. So, if you can manage to live within limited means in these emergency situations, a salary cut is not a cause for much concern,” he told Gulf News.
Right to end-of-service pay
Several employees who have been dismissed by employers in the wake of the Coronavirus pandemic are having trouble getting their end-of-service settlements. With companies facing a cash crunch, they are falling short of funds to meet this financial obligation, which employees are entitled to.
“We have a system to protect people’s wages. Within this system, there is a requirement for companies to set aside some funds as a reserve. The reserve will accumulate as the employee logs in more time at the company. Usually, this is given to the employee in the form of end-of-service benefits when they leave service,” Al Halyan informed.
Advocating the need for pension and retirement schemes for private sector employees, he said this would force employers to set aside money for staff’s end-of-service benefits. The employee can save money for their family and future under this scheme. When an employee finishes his stint at the firm, s/he can choose from two options: access this money as cash upfront or get it as a regular source of income every month after retirement. The absence of such schemes is now causing problems, the senior financial consultant remarked.
Opportunity for novice investors
The COVID-19 outbreak has made people with savings more smart in their investment decisions. The current situation presents a good opportunity for amateur investors to test the waters. “For instance, if you are an expat renting property, this is a good time to consider buying the asset. Put in your savings as a down payment and then use a long-term mortgage to fund it because it works out cheaper in the long run than paying rent. Don’t buy something very expensive, instead buy an affordable property and mortgage it for 15 years. If your financial situation goes awry, you can always rent it out to pay the mortgage,” suggested Al Halyan.
Most people in the UAE live without any objectives and financial goals. If you have children, start planning your ward’s university education
The investment expert also warned people to read extensively or consult with a financial advisor before investing in asset classes like shares or bitcoins. You have to be very careful about which companies’ shares you invest in, he observed.
“Most people in the UAE live without any objectives and financial goals. If you have children, start planning your ward’s university education. Plan your post-retirement income and start investing now,” said Al Halyan.
Beware of online scams
He also warned residents to be wary of online investment scams and get-rich-quick schemes. “A lot of online ads claim they can teach you how to make, for instance, $10,000 (Dh36,700) a month by sitting at home. Avoid such schemes and if you are a victim of such a scam, report it to the authorities so you can prevent others from being cheated,” Al Halyan pointed out.
Good time to start a new business?
To a question on whether it is a good idea for residents to invest their hard-earned end-of-service payment in a new business, Al Halyan advised them to study the market needs and identify a niche. With some companies likely to shut shop, it may create a vacuum for a particular service in the UAE.
“Some companies in the UAE might shut down some departments to focus on their core business. They might close down their marketing, PR or advertising divisions. Many opportunities will come out of this situation. Make a business plan and study the market well. This is a good opportunity for someone to start a small business. If you are smart, have good contacts and good marketing capabilities, you are good to go. The UAE has the infrastructure to facilitate new businesses,” he observed.
“Roles in the government are mostly administrative, regulatory or supervisory in nature and therefore not productive. Emirati graduates must only consider working in the private sector, either as an employee or start their own business. Several expatriates have come from outside the UAE, faced challenges and succeeded in establishing their own business. Why can’t Emiratis do it in their own country? This is a problem across the GCC where most citizens prefer to work in the government,” he added.
Citing statistics to highlight the workforce disparity, Al Halyan said the government sector accounts for 33 percent of the total workforce in Saudi Arabia; the public sector accounts for 22 percent of the GCC workforce; while in Europe, the government sector accounts for only 8 percent of the total workforce. “The number of Emiratis working in the UAE private sector is only 3 percent. This imbalance needs to be addressed immediately,” he pointed out.
