Economic certainty is growing due to a strong recovery

Covid-19 demanded a huge amount from workers throughout the world, particularly of those in the healthcare sector, many of whom faced grave danger. Huge changes were introduced to office life. Almost instantly the physical workplace was replaced with hybrid working, the daily commute with staying home. For many, the very certainty of employment disappeared. Globally, 114 million people lost their jobs.

The UAE is fortunate to be on the road to recovery from these tough times, due to clear leadership and a rebounding economy. And this week, residents saw yet more optimistic signs. According to the Cooper Fitch UAE Salary Guide 2022, which polled more than 600 companies, 35 per cent of businesses plan to increase salaries up to 5 per cent, while 4 per cent of companies will offer employees a raise between 6 to 9 per cent. A further 5 per cent of companies in the UAE will boost wages by 10 per cent or more. This means that roughly 43 per cent of businesses plan wage increases at an average rate of 3 per cent.

In tandem, the number of people predicted to have their salaries frozen next year has dropped significantly. According to a November study by Mercer, only 5 per cent of UAE companies are expected to freeze salaries in 2022, a number far lower than at the beginning of the pandemic.

It is too early to say that wage stability is out of the woods, but positive data on best and worst-case scenarios point to the emergence of a solid recovery. This is down to certainty brought about by a strong pandemic response, the huge commercial benefits of Expo 2020 Dubai and other in-person international events, the resurgence of aviation and the government's wider interest in the workforce and employment issues.

Last month, the government unveiled the biggest tranche of legal reforms in the country's history. Copyright laws were bolstered and investors and entrepreneurs were permitted to establish and own onshore companies in almost all sectors. This was a drop in the ocean of measures to make the country's working environment more dynamic. This week, a separate law will largely eliminate workplace differences between the public and private sector. This comes as part of a wider drive to get more Emiratis in the private sector. It seems to be working. More than 2,000 have done so within three months of the government making it a priority.

Further afield, the best global talent is being encouraged to make the UAE its home with this year's Golden Visa scheme, which grants recipients flexible residency for up to 10 years. People from around the world with experience in a set list of fields, particularly future-focused ones such as AI and programming, can apply.

A strong recovery is the basis for 2022's expected salary rises. But the two are intertwined. As the economy starts to offer workers more, the financial activity key to sustained recovery should gather pace. Going into 2022 and beyond, the ever-diversifying UAE workforce is set to become more resilient, secure and quite possibly better ofs financially.

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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If a business does not apply for the refund on time, they lose their credit.

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Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

Economic certainty is growing due to a strong recovery

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