Tim March helps his son Freddie with his school uniform.
Tim March helps his son Freddie with his school uniform.
Tim March helps his son Freddie with his school uniform.
Tim March helps his son Freddie with his school uniform.

Even the bus comes with a price tag


Kareem Shaheen
  • English
  • Arabic

As private schools open for a new term, many parents are complaining that the cost of sending their children to school has increased by as much as 20 per cent. School fees have risen to more than Dh50,000 (US$13,610) a year at some primary schools. But it is the added burden of transport costs that has some parents fuming.

Schools in Dubai were allowed to increase fees by between seven and 15 per cent this year. Elsewhere in the UAE, the increases were capped at eight per cent. Transport costs, however, are not regulated if schools outsource bus services, and in some cases expenses can spiral. Sami Mamoun Suleiman, a dentist whose three children go to school in Dubai, said transport costs have doubled for each of his three children this year, from Dh3,400 to Dh6,800.

"I'm frustrated, I'm going to explode," he said. "It's unnaturally excessive. It's a policy of arm-twisting by the schools." He said he would take his children to school himself because he could not afford to pay almost Dh21,000 for their bus travel. When transport fees were raised last year, the school attributed it to rising oil prices, he added. "Oil prices went down. Why didn't the fees decrease?"

Schools and transport companies maintain that the fee increases were necessary to cover the cost of revamping buses to comply with new safety regulations from the Roads and Transport Authority. Under the new rules, buses must be yellow, fitted with a device that limits the top speed to 80kph, and equipped with an electronic stop-arm. The cost of upgrading a bus to comply with the regulations is between Dh7,000 and Dh15,000, according to AH Malik, the managing director of Maverick Rental Transport Services, which specialises in school transport.

"It pushes up the cost, and we have to push the cost on to the parents," Mr Malik said, adding that the safety requirements should have been in place a decade ago. Schools that operate their own bus services are restricted by the same government regulations that cap school fees. But that does not apply if a school outsources its bus service. Susan Johnston, the principal at Al Salam Private School, said her school was forced to raise bus fees to Dh6,500 per student, which was the lowest price she could find. She attributed the bulk of the rise to transport companies having to use their revamped buses only for schoolchildren. "First of all it's expensive [to fit the specifications] and we can only work for your school," she said the companies told her.

"Last year we hired buses as well, but they had four or five jobs a day. The source of their income was from three or four places," Ms Johnston said. Now, "the whole income has to come from the school". Mr Malik said there was no explicit regulation that barred transport companies from using school buses elsewhere, but the new features made the vehicles unattractive to potential passengers. "I'm sure they wouldn't want to sit in a yellow school bus." Issa al Dossari, the chief executive of the RTA's Public Transport Agency, rejected the charge that the rise in costs was excessive. "What we want is safety as a minimum," he said. "The safety changes are not radical." The recession also plays a role in increasing operating costs and contributing to the rise in fees. Mr Malik said his company, which owned 55 buses, paid an average of Dh10,000 to hire drivers, many of whom worked in companies that had gone out of business. These drivers were asked to leave or had their visas cancelled, forcing the company to pay off their fines in order to hire them. The rules had "already pushed out a lot of the small operators" who could not operate within these margins, Mr Malik said. klewis@thenational.ae

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Another way to earn air miles

In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.

An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.

“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.

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.”