Expats Living in the UAE Send a Staggering AUD$15.3bn Back Home
Expats living in the UAE send a staggering amount back home as was announced in the central bank of the UAE’s recently released 2017 third quarter economic review report. Some of the key facts included what percentage of workers are responsible for sending monies back to their home country and what countries received the most remittances.
A remittance refers to the transfer of money by a foreign worker to an individual in his or her home country. It’s essentially when the expat sends their income back home to help their friends and families financial needs.
This Q3 reports some staggering figures being sent by expats living in the UAE and is a clear example of the wealth being accumulated in the emirate. At present there is just over 22,000 Australian expats based in Dubai alone, accounting for a very small fraction of expats living in the UAE.
There has been a 2.1% increase since the previous year (2016) for the same period or equivalent to a AUD$888m increase in outflows. The report released the top countries for remittances in the following orders:
- India (35.7%) AUD$5.46bn
- Pakistan (8.7%) AUD$1.3bn
- Philippines (6.7%) AUD$1.03bn
- Egypt (4.8%) AUD$734.4m
- USA (4.1%) AUD$627.3m
- UK (3.7%) AUD$ 566.1m
Workers from Asia accounted for 82% of the UAE workforce and were responsible for sending just over 50% or AUD$7.85bn of remittances back to their resident countries. This just goes to show the significant amount of revenue being generated out of one considerably small country in comparison to others in the region like Saudi Arabia.
If we compare this to the 2016 annual figures, the US is responsible for the largest amount of remittances sitting at AUD$86.89bn. Qatar, a neighbouring country of the UAE, was responsible for AUD$15.62bn remittances in 2016.
A common remittance for expats living in the UAE is to send home their end of service gratuity they receive when their contract finishes with a certain employer. This gratuity is likened to some form of social security benefit to put towards retirement.
Recently there has been a development that expats in the UAE may be able to take place in some form of Pension scheme in the future. Currently, expats are compensated by way of an end-of-service gratuity which is calculated using one full year of employment salary with some modifications. The proposed pension scheme would replace this gratuity and make way for an investment fund, similar to a expat superannuation fund.
The proposal would mean that the expat’s employer deducts a monthly sum from their salary to be invested. This would mean at the end of service period the expat would be given a lump sum plus any interest and gains that may have accrued payable upon completion of service. The fund would accept employer contributions and voluntary member contributions; however, this is still up for discussion on the specific amounts that one can contribute. Furthermore, the proposal stated that the employer’s participation in the fund should be voluntary whether they are from the public or private sector.
This proposed scheme would provide a layer of protection for those expat employees whom work for a company that goes into liquidation, as the employee’s pension entitlement would be lost in such a case. If such a fund existed and the investment decisions were managed by a specialist investment firm this would provide a level of protection for the employee’s entitlement. The plan would have a positive impact both socially and economically on all parties of the production cycle and it would stimulate the national economy.
Expats whom move abroad for career progression often earn an annual income greater then they would back in their home country. It’s important to have a wealth accumulation plan whilst overseas on great incomes and understanding how portable that wealth is. More often than not Australian expats will retire back in their home country and therefore it makes sense to accumulate your wealth in your home country’s currency.
If your lacking a plan for wealth accumulation whilst your abroad it might be worth reviewing your current long-term strategy to eventually repatriate back to Australia. It’s important to make the most of your time overseas and have something to show for it when you come back. Are you doing anything to build your future?