Exiting expats impact economy – SPECIAL
REPORT
Kuwait Times
September 14, 218
As foreigners leave, services and real estate sectors slow
KUWAIT: “We sent our kids home today,” said Lissy Antony,
fighting back tears that welled up in her eyes as she walked out of Kuwait
International Airport’s departure area with her husband Antony Joseph. For
Antony and his wife, parting with their young children Alan and Alena was a
traumatic experience. And for their two children, aged 12 and 10, saying goodbye
to the country they considered their home presented a psychological and
emotional crisis.
As Kuwait introduces new rules and regulations as part of
Kuwaitization, thousands of foreigners are either being laid off or restricted
from taking up jobs in key sectors. While many expats are compelled to tighten
their belts by resorting to the painful remedy of sending their children home,
others are left with an even harder choice – leaving the country before things
get worse.
While some are quitting Kuwait because they lost their jobs,
others are doing it of their own volition in the face of a situation they call
“beyond their control”. As the number of foreigners leaving the country rises,
the impact has started to ripple through the economy, affecting sales in almost
all retail segments – from automobiles and garments to food and beverages and
household goods. “For decades, Kuwait remained an Eldorado for expats,
especially for Asians. Not anymore. I think it is time we folded up,” said
Riyas Ahamad, an Indian engineer working with an oil company in Ahmadi.
According to Expat Insider, Kuwait ranked last in a global
poll about working abroad. Respondents reportedly considered a set of
indicators including quality of life, ease of settling in and overall general
satisfaction. Kuwait came 68th, a position it already held from 2014 to 2016,
while it came second to last in 2017, the report said.
‘Lean and mean’
Large-scale retrenchments are taking place in the private
sector too. As part of cost-cutting, private universities and schools are
firing expats while organizations and hotels are easing out expat staff as part
of their new strategy to become “lean and mean”. Many Asian schools admit,
albeit secretly, that a large number of parents like Antony have opted to take
transfer certificates of their wards to relocate them to their home countries
amid radically “deteriorating financial conditions”. Several others are sending
their families home as they find it hard to balance their monthly family
budget.
“Be it the exorbitant fees for medical services, high petrol
prices, new visa regulations or taxation moves, the tide is inexorably turning
against expats,” said Alfred Williams, a lecturer at a private university in
Kuwait.
“In most consumer segments, there is a palpable drop in
sales. Usually there is a lull in sales during summer, but this time it has
been slightly higher,” an executive at a supermarket said on condition of
anonymity. However, he said no official estimates are available yet for the
quarter.
According to a recent report by NBK, growth in its consumer
spending index eased to 6.5 percent year-on-year in July. The consumption of
durables was flat in July with growth easing to 7.3 percent year-on-year from
10.8 percent in June, as the sector continued to feel the impact of seasonally
lower demand during the summer months. Sales of cars, furniture, and luxury
items were weaker, while spending on electronics picked up, the report added.
Flats for rent
If the sudden spurt in ‘Flat for Rent’ hoardings across the country’s residential areas is any indication, one can assume that demand for apartments is in a fairly steep negative price trajectory. “During summertime, usually there will be a drop in demand for residential apartments. This is the time when expats normally seek a ToR (transfer of residence). But this year, we see an unusual trend. The number is surprisingly high,” said Anand Kumar, a supervisor at a real estate firm in Mahboula.
According to Al-Shall economic report, percentage of vacant buildings dropped slightly in the first half of the year, as per PACI figures, increasing to 11.2 percent. They numbered approximately 22,800 buildings out of a total of 203,800 buildings (23,400 vacant buildings, out of a total of 202,400 buildings in the end of 2017, i.e. 11.6 percent).
Hundreds of residential apartments in Kuwait are lying
vacant currently amid declining demand and availability of newly-built
apartments. Interestingly, apartment owners have begun to show more flexibility
towards their customers, either to retain occupants or woo new tenants. In many
residential areas like Abbassiya, Salmiya, Mangaf and Fahaheel, building owners
have reduced rents to keep their properties occupied. As the rental market in
Kuwait is oversupplied currently, rent declines in the country vary from
roughly 2.5 percent up to 10 to 15 percent, according to some estimates.
“There were four flats vacant in our building two months
ago. But today, there are eight flats vacant in the building,” said Yousef, a
Pakistani taxi driver who stays near Don Bosco School in Salmiya.
Market experts are of the view that property owners and
tenants may be in the process of converging on a new lower equilibrium price in
tandem with building valuations and high vacancy rates for apartments –
approximately 13 percent – according to the Real Estate Association. “We
anticipate prices in this sector to stabilize only if the gap between demand
and supply narrows. We don’t expect this to happen anytime soon because
currently the market is oversupplied and the demand appears very weak,” said
Fakruddin Ali, a real estate expert.
According to experts, building prices remain in negative
territory. More than 75,000 flats in Kuwait are empty and need to be “absorbed”
by the real estate market in four to five years, a recent study warned.
The balancing act
Kuwait has adopted a two-pronged strategy in the face of a volatile oil price scenario to reduce dependency on oil and balance the demography by slashing the burgeoning expat population in the country. According to UN estimates, Kuwait’s current population is 4,206,085 as of August 2018. Expatriates account for about 70 percent of the country’s population, with 1.1 million Arabs and 1.4 million Asians.
“For policymakers, it is a tightrope walk. No doubt we need
to purge the illegal residents of the country and bring the number of expats
down to a sustainable level. At the same time, expats are a critical component
for the economic growth of the country and its sociocultural expansion. So the
focus must be on the quality of the expat population while we adjust the
demographics,” said Kareem Ibrahim, a professor at a private university in
Kuwait.
By Sajeev K Peter
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I read a story yesterday that there will be an anticipated 5 MILLION expats in Kuwait to complete the Silk City project. So, this is (from my perspective) a typical Kuwait scenario. Its cyclical. Purge the country of expats (knowledge, experience) and replace with more expats that need to adjust to the country, take time for the learning curve - even at work as each country has its own unique work environment. And all that only IF they decide to stay in Kuwait past a year. Regardless of the pay, it isn't for everyone.
Expats who have been in Kuwait for decades (the ones who are leaving now, by the way) are walking away with their knowledge of and loyalty to Kuwait.
