Dubai: Economy and finance experts in Dubai are backing the proposal to implement new policies including the introduction of a pension scheme, longer visa durations and sponsor-free visas for expatriates.
Analysts told Gulf News that by easing its policies on expatriates, Dubai will be able to attract more human capital and investments, drive domestic spending and ultimately sustain the emirate’s economic growth.
The Dubai Economic Council, an advisory body established by the Government of Dubai, and Deloitte have recently drafted a report that enumerates a list of policy recommendations that will enable Dubai to improve its sustainability and competitiveness.
The DEC suggests that, considering a huge proportion of expatriate incomes are sent out of the UAE every year, Dubai should introduce a state pension scheme for highly skilled expatriates, grant longer visa durations and allow certain professionals to get a visa without a sponsor.
This move, the report says, “could result in more expatriates staying in the emirate longer and investing their savings within the local market rather than abroad.”
According to the World Bank, expatriates in the UAE sent nearly half or around 40 per cent of their salaries out of the UAE in 2011 alone. Most expatriates’ visas currently have a lifespan of two to three years.
The DEC report points out that by granting longer visa durations to expatriates, Dubai could also drive more consumer spending and domestic investment, such as the case of Singapore, where foreign workers enjoy 10-year visas.
Also, by granting sponsor-free visas to highly skilled expatriates, Dubai will enable foreigners to take up part time or temporary jobs, or undertake business activities on their own.
“Easing restrictions on labour could attract more high skilled human capital in Dubai, support the transfer of specialized knowledge to local businesses and promote creation of start-ups,” the report says.
Alp Eke, senior economist at the National Bank of Abu Dhabi, says the DEC recommendations will definitely attract more foreigners to Dubai, “but the main impact will be on the creation of start-ups and increased domestic economic activity.”
Eke says that while Dubai is already attracting “a fair amount of human capital” compared to Hong and Singapore, the emirate could see more investments from non-GCC nationals, especially from Southeast Asia and possibly from Europe if the visa duration for expats is extended to more than three years. The GCC share, however, will decline.
Quoting data from the Dubai Statistics Centre, Eke notes that between 2010 and 2020, the number of UAE nationals is forecast to decline from 9 per cent to 5 per cent of the total population. As of 2014, GCC nationals constitute about 30 per cent of the investments in real estate.
Nevertheless, Dubai remains a leader in the Gulf Cooperation Council (GCC) region and the whole of Middle East and North Africa (Mena) in terms of diversification strategy, quality of life, political stability, education, healthcare, safety and crime levels.
“Dubai has grown impressively. Diversification efforts have been very successful. Currently, the oil sector constitutes only around 2 per cent of the GDP,” Eke says. Dubai also offers high quality of living to its residents, ranking first in the Middle East and North Africa and 75th globally in the 2014 Quality of Living Survey by Mercer.
“Given [these facts] and the attractiveness of Dubai, the next step would be to focus on competitiveness and improve regulatory framework. Dubai is clearly ahead of GCC and Mena economies, but is lagging behind advanced countries,” Eke tells Gulf News.
Edward Mainwaring – Burton, senior financial planner at DeVere Acuma, says Dubai can benefit from the implementation of a pension scheme for foreign workers.
He says that state-supervised pension funds can be compelled to invest, at least partially, in local assets. This way, the investment capital can be retained within the local economy and both equity and bond markets can enjoy greater stability over the long term.
“The current gratuity scheme has serious shortcomings in its structure. It is broadly misunderstood, easily manipulated by corporate accounting and there is no guarantee that the employee will use it to fund their retirement,” Burton says.
“An attractive or well-government pension system is an attractive part of any employment package and can be a deciding factor for a prospective member of staff choosing a new employer.”
“Employees without a managed pension fund risk financial difficulty in later life unless they seek independent financial advice to create a personal scheme. At the same time, staff retention can be boosted by sense of belonging and security within a well-structured system.”