Mohammed Qasim Al Ali, the chief executive officer of National Bonds, says financial illiteracy is“endemic” in the region. Jeffrey E Biteng / The National
Mohammed Qasim Al Ali, the chief executive officer of National Bonds, says financial illiteracy is“endemic” in the region. Jeffrey E Biteng / The National

Lack of financial planning is 'endemic' in the Gulf



With the increasing weakness in the global economy, saving for the future has never been more important.

But according to the 2011 National Bonds GCC savings index, residents across the region are not feeling the urgency to stash their cash in readiness for a rainy day.

Sixty-eight per cent of the 1,107 respondents polled in Saudi Arabia, Kuwait, Oman, Bahrain and Qatar, admitted their savings are less than they had originally planned and 64 per cent said they save less than a fifth of their earnings.

Even more worrying is the fact nine out of 10 Saudi residents and 84 per cent of other GCC countries believe their savings are not adequate for the future.

"Lack of awareness about the importance of savings and a lack of financial planning is endemic in this region and this research shows how deep the problem is," says Mohammed Qasim Al Ali, chief executive of National Bonds. "People are managing their lives on a day-to-day basis and not over the long-term.

"National Bonds took the initiative to launch this index not for its own sake but for the sake of inculcating a savings culture and sending the right shock waves around the region. Somebody needed to hit the alarm bell and say 'look this is now a national issue in every country in the GCC'."

The GCC index, now in its second year, is designed to complement National Bonds' UAE savings index and provide a comprehensive overview of regional saving habits.

Polling both expatriates and nationals with a minimum household income of Dh5000, the index works by amalgamating the respondents' answers into a base value that can be used as a reference to measure changes in savings sentiments.

Over the last year Saudi Arabia showed the biggest increase in savings sentiments closely followed by Kuwait and Oman while Bahrain and the UAE showed a decrease.

"Because of the uprising, Saudi offered financial aid to its citizens so the potential to save was better because they have more money coming in," says Mr Al Ali.

But while Saudi residents are making more effort to save, people in Qatar, one of the wealthiest nations in the region, are doing the opposite with the biggest decrease in savings sentiments.

Mr Qasim Al Ali attributes Qatar's poor saving habits to the nation's excessive wealth, love of luxury goods - 19 per cent of Qatari respondents admitted spending more on luxury items - and the government's recent pay increases of 120 per cent to military officers and 60 per cent to civil workers.

"The Qatari government is sharing the wealth with the citizens, but it might lead to inflation later on because there is more money to spend. Qataris should be the highest savers in the GCC but unfortunately they are not," he says.

"This is one of the root causes of the lack of savings culture in the GCC because people are looked after by their governments with free education, free hospitals and no taxation. All of these contribute to people depending on third parties whether it's their parents or the government and they get locked into their living standards. Once they're locked in, it's difficult to let go of the nice things they have so going out twice a week to a restaurant and impulse buying at the mall becomes a habit."

This habit is something Rachel Morris, a strategic communications consultant, who moved to Qatar in 2007, has noticed recently.

"I see more new cars than ever on the streets here and more luxury cars. I also noticed many more people travelled this summer than previous years and for longer," says Ms Morris, 40 from Australia.

"After the new pay rises, people are worried about price rises as some companies may take advantage of the added cash flow. This remains to be seen."

Rupert Connor, a senior consultant at Acuma Wealth Management in Dubai, says Qatar's poor savings outlook is caused by the nation's phenomenal growth in the last few years -something that particularly affects expats such as Ms Morris.

"Saudi Arabia is more established than Qatar in that its residents are, career-wise, further down the line. Often when moving to a new country one arrives with a debt burden, which is often the priority before savings. There are relocation and set up costs to consider. It is my thoughts that Qatar will see an increase in national savings in the next few years."

Interestingly, while Qatar has the highest percentage of respondents who saved less than last year at 28 per cent, it also has the highest percentage of respondents, 29 per cent, who saved more.

"Originally I was saving less," says Ms Morris, who adds that her greatest luxury is travel. "When I first moved here it was very expensive. Rents were especially high. But I have changed jobs twice since coming here and am now working for myself. This involved a significant investment at first, but I would say over the last five months, I have been saving considerably more."

According to the index, there were also startling differences in spending habits around the region. Oman, for example, had the highest percentage of respondents spending more money on groceries, utilities and transportation whereas Qatar spent the most on luxury goods and travel. And eating out was one of the biggest expenditures across the region.

"Disposable income is the key factor here and how this varies from GCC country to country," says Mr Connor. "In Saudi Arabia the individual has less to spend his or her money on and therefore more disposable income to save. It should be no surprise that the residents of Qatar spend more."

But Mr Connor says GCC residents are by no means the worst savers around the world.

"This lack of saving is a common theme throughout the West also. There is clearly not enough education when it comes to saving in this part of the world and generally it is not something people want to think about."

Changing this attitude is the primary objective of National Bonds, currently the leading Shariah-compliant savings scheme in the region with over 630,000 customers.

Yet the scheme has failed to make significant inroads regionally with only 2.2 per cent of bondholders from the GCC.

"That is because our focus is the UAE. It also means there is a lack of awareness regionally about National Bonds," says Mr Al Ali, who adds this is even more reason to spread the message to save.

But with the survey highlighting the region's preference for saving into a conventional savings or current account over more elaborate options such as gold, children's education schemes or savings schemes linked to a prize draw - National Bonds may have some work to do to convince residents it is the best option.

"We are being realistic," says Mr Al Ali. "We have a lot of influence inside the UAE and we need to do a lot of things here first so we cannot spread our resources across the GCC. But we are hopeful these shock waves will send out the right message to the decision-makers and they start to take action.

"Saving is a culture that cannot be created or led by a single institution. It's a combined responsibility of everyone in society: family, employers, schools, governments and the media.

"We are now graduating students from universities that are spenders not savers and who will become public employees rather than work in the private sector so the whole culture has to be changed."

Among the company's initiatives to achieve this are new payment options such as its cash-collection service from your home for amounts of Dh5,000 to Dh40,000, and an educational financial-planning programme that kicks off this month with a pilot session with a large Dubai-based corporation.

Mr Al Ali adds: "We want to build more awareness about the importance of financial planning and savings. If you don't know the basics of financial planning, you will always be in trouble."

Singham Again

Director: Rohit Shetty

Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone

Rating: 3/5

PAKISTAN SQUAD

Abid Ali, Fakhar Zaman, Imam-ul-Haq, Shan Masood, Azhar Ali (test captain), Babar Azam (T20 captain), Asad Shafiq, Fawad Alam, Haider Ali, Iftikhar Ahmad, Khushdil Shah, Mohammad Hafeez, Shoaib Malik, Mohammad Rizwan (wicketkeeper), Sarfaraz Ahmed (wicketkeeper), Faheem Ashraf, Haris Rauf, Imran Khan, Mohammad Abbas, Mohammad Hasnain, Naseem Shah, Shaheen Afridi, Sohail Khan, Usman Shinwari, Wahab Riaz, Imad Wasim, Kashif Bhatti, Shadab Khan and Yasir Shah. 

Closing the loophole on sugary drinks

As The National reported last year, non-fizzy sugared drinks were not covered when the original tax was introduced in 2017. Sports drinks sold in supermarkets were found to contain, on average, 20 grams of sugar per 500ml bottle.

The non-fizzy drink AriZona Iced Tea contains 65 grams of sugar – about 16 teaspoons – per 680ml can. The average can costs about Dh6, which would rise to Dh9.

Drinks such as Starbucks Bottled Mocha Frappuccino contain 31g of sugar in 270ml, while Nescafe Mocha in a can contains 15.6g of sugar in a 240ml can.

Flavoured water, long-life fruit juice concentrates, pre-packaged sweetened coffee drinks fall under the ‘sweetened drink’ category
 

Not taxed:

Freshly squeezed fruit juices, ground coffee beans, tea leaves and pre-prepared flavoured milkshakes do not come under the ‘sweetened drink’ band.

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Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Rating: 2/5
 
match info

Union Berlin 0

Bayern Munich 1 (Lewandowski 40' pen, Pavard 80')

Man of the Match: Benjamin Pavard (Bayern Munich)

Electoral College Victory

Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate. 

 

Popular Vote Tally

The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.

Company%20Profile
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COMPANY PROFILE

Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed 

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”


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