If you can put up with the occasional government crackdown, interruptions in Internet and cellphone service and a bodyguard following you around, then the Middle East has become a better place to work in the past year for expatriates, at least from a cost-of-living point of view.
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Of 18 Middle East and North African (MENA) cities surveyed in March for cost of living relative to a benchmark of New York, all but two showed substantial declines from a year ago, according to a survey by the global human resources consulting firm Mercer. Among the biggest drops, Cairo fell 41 places to rank 128th among 214 cities covered in the global survey. Tehran dropped 27 places to No.130 and Dubai 26 places to 81.
A lot happened in the region between March 2010 and March 2011, but the decline in living costs for expatiates generally had more prosaic reasons than toppled leaders, mass protests and civil war. The biggest factor was that many of the region’s currencies are linked to the US dollar, sending costs down for expatriates living on dollar incomes, said Nathalie Constantin-Metral, a senior researcher at Mercer.
“As the dollar depreciated against other currencies, it pushed down
relative costs,” she told The Media Line. “Other cities around the world
have gone up in the ratings, while Middle East cities have gone down.
If you look at the cost of living in local currencies, costs have
remained quite stable.”
Although the list of top-10 top-cost cities was relatively stable, the
expense of keeping someone housed, clothed, fed and entertained jumped
in dollar terms in Australia, where the local currency gained 14% on the
dollar in the year ending in March. Asian cities also grew more
expensive because of the limited housing supply meeting expat standards.
Latin American cities became costlier for expats due to a strong local
currency in Brazil and high inflation elsewhere.
Mercer’s survey measures the comparative cost of more than 200 items,
including housing – the single biggest factor – transportation, food,
clothing, household goods and entertainment.
The only two MENA cities to show a relative rise in costs were the Saudi
Arabian capital of Riyadh, which rose nine places to 135th, and Beirut,
which advanced five to no. 75.
“Generally speaking, the cities in the Middle East are quite low in the
ranking relative to New York,” Constantin-Metral said. ”In Riyadh,
however, rental accommodation costs have increased quite a lot. There is
rising demand and limited supply. In Beirut, prices for accommodation
have also increased quite strongly and to a lesser extent so have prices
In fact, by global standards the Middle East is a relatively cheap place
to live if you are collecting a dollar salary. By far the most
expensive city in the region is Tel Aviv, but it ranks only 24th. After
that, Abu Dhabi comes in at 67 and Beirut at 75. The big expatriate
center, Dubai, ranks 81 in the Mercer survey. Four cities rank among the
world’s cheapest, including Manama in Bahrain, Kuwait City, Doha in
Qatar and Rabat, Morocco’s capital.
However, Constantin-Metral pointed out, the costs do not include
security, which has likely become a bigger factor for expatriates living
and working in the region this year.
The cost of living in Dubai for expats fell because of declining rents
and a tepid economy still struggling to recover from the real estate and
financial crisis that hit in 2008. Many tenants have been moving from
larger units to smaller ones due to reduced household income and a “more
cautious approach” towards household expenditures, Mercer said.
Jones Lang Lasalle said in a report that after sharp falls in 2009 and
2010, villa rents in Dubai grew 4% in the second quarter in certain
"established areas.” But, it said, apartment rents continued to decline,
by 1% in the three months and by 3% from a year earlier.
Cairo’s big 41-place drop in costs was largely due to the deprecation of
the Egyptian pound that followed the mass protests and strikes that led
to President Husni Mubarak’s ouster last February and the resulting
sharp slowdown of the economy. The pound was down more than 8% at the
end of March 2011, compared with March 2010.
But if it had relatively little impact on costs themselves, the Arab
Spring did have some impact on collecting data for the survey.
The main factor attributable to the Arab Spring was in collecting data.
Bahrain’s capital Manama was gripped by protests followed by a Saudi-led
crackdown over the course of March, while in Libya civil war divided
the country between government and rebel territories and paralyzed the
economy. As a result, the data for Manama and Tripoli reflect September
2010 prices, except for accommodation, which is from March 2011,
Interestingly, even as relative costs are stable or in decline, Mercer
says that the Middle East’s expat executives are in-line for pay raises
this year. A survey of multinational companies in June said that across
the region, which excludes North Africa but includes countries as far
east as Pakistan, executives are set to increase compensation an average
of 5.7%. Among the biggest increases will go to countries that have
suffered violence, including Pakistan (13.5%) and Bahrain (6%),
according to the Mercer estimates.