IPS, 11 July 2007 - Buoyed by higher oil revenues, the booming economies of the Gulf may have created thousands more millionaires in 2006 compared to a year earlier, according to a global study on wealthy individuals.

But, experts feel he figures do not reflect the true economic health of the region.

According to the latest World Wealth Report, released Jun. 27 by the global asset management group Merrill Lynch and the consultancy firm Capgemini, covering 71 countries, Saudi millionaires grew 11.8 percent to 89,600 but lower than the 15.4 percent growth in the United Arab Emirates (UAE). The UAE now has 68,100 millionaires, an increase of 9,100 over 2005.

The numbers would have been higher, but for a Saudi stock market slump by 49.4 percent and a downturn in UAE stocks, which plunged 57.3 percent.

Globally, the number of high net worth individuals -- people possessing one million US dollars or more in investible assets -- rose 8.3 percent to 9.5 million. During the same period, the number of ultra-high net worth individuals -- with more than 30 million dollars in liquid assets -- grew by 11.3 percent to 94,970. In all, the wealth of the world's rich increased 11.4 percent to 37.2 trillion dollars.

While the number of millionaires worldwide is forecast to rise by an annual average of 6.8 percent till 2011, the Middle East is tipped to witness the highest percentage change in wealth generation.

In another record of the wealthy in the region, 30 Arabs made it to the Forbes billionaire's list announced in March -- four from the UAE, 13 from Saudi Arabia, and four from Kuwait.

Though very small in number compared to the world total of 946, the per capita billionaire and high net worth individuals' figures of the UAE with its 4.2 million population, for example, is actually higher than that of Germany with 80 million population.

Further, the Forbes list only includes wealth from businesses and registers heads of state under a different category. As most of the oil industry and large industrial enterprises are state-owned in the Gulf region, the rulers of Saudi Arabia, Abu Dhabi and Dubai should also be added to the billionaires list.

In fact, regional magazine ‘Arabian Business' contradicted the Forbes list in April by listing 15 more Arab billionaires, including four more from the UAE.

However, economists feel that the number of millionaires and billionaires is not a suitable indicator and says precious little about an economy's health. They feel that the increasing rich-poor divide is a crucial factor.

According to Eckart Woertz, Economics Programme Manager at the Dubai-based Gulf Research Centre, there is an ‘'increasing social divide and erosion of purchasing power for the ordinary people, which are reasons for great concern.''

Revenues of the six-member Gulf Cooperation Council bloc have surpassed even that of China's huge foreign reserves, registering a record 1,600 billion dollars in foreign assets. Recent estimates valued Saudi Arabia's foreign assets at 250 billion dollars, Kuwait's at over 200 billion dollars, while the UAE's foreign assets are estimated at more than 500 billion dollars.

Addressing the International Arab Banking Summit last week, Ahmed Humaid Al Tayer, Chairman of Emirates Bank Group, said that the UAE's GDP, which continued its robust growth in 2006 to reach 163 billion dollars, up 23 percent over the previous year, ‘‘may well cross the 188 billion dollars in 2007,'' a surge of 15.3 percent over 2006.

On the ground, however, inflation and lack of commensurate rise in salaries have led expatriates to resort to loans and cards. As a result, the amount of UAE credit doubled between 2004 and 2006, according to Dubai-based credit agency Emcredit.

‘‘A wage hike by a couple of dirhams, dinars or riyals for an ordinary worker might benefit the region's economy more than the advent of another billionaire in the Forbes list or a few more millionaires,'' Woertz told IPS.

In 2005, petrol prices went up by a whopping 32 percent and prices of goods and services by 10 percent across the UAE. Further, rents increased by over 30 percent in Dubai, one of the seven emirates that make up the UAE, moving it 10 places up and making it a more expensive city to live in than Washington D.C.

According to a 2006 YouGov-Gulf News survey, almost 70 percent felt that the cost of living had increased by more than 20 percent over the year, while 26 percent felt it was higher by 40 percent or more.

‘'Rent, food and school fees have become incredibly expensive. We have decided not to go on vacation this year in order to balance our budget. If the same trend of high inflation and no matching hike in salary continue, we may have to sacrifice something else next year,'' Mustafa Basha, a Jordanian engineer based in Dubai, told IPS.

Though the official inflation in the UAE is just under double digits, another survey by recruitment agency Bayt.com and polling company YouGovSiraj revealed that salaries in the region rose only 15 percent on an average against a 24 percent rise in cost of living.

In a clear indication of what the priorities are, Anwer Sher, a former banker in the UAE, stresses on his blog -- aqsher.blogspot.com -- the need to create a "body similar to the Gates Foundation in Dubai," where each of the UAE "millionaires donates 100,000 dollars to, (the billionaires would have to donate 10 times higher) create an "endowment which will benefit society.''

This article is reproduced with the kind permission of the
Inter Press Service News Agency (IPS).
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