Apr 11 - 17, 2005



Buying a car is a risky business anywhere. Whether the vehicle is new, old, three-door, five-door, red or blue, the purchase will always involve an element of chance.

In the UAE, it is not uncommon to see an advertisement in the classified section of a newspaper that reads: "One lady owner". But how true is that, and should it be more believable here? Whatever the answer, the fact is, it happens.

Dealers are raising the price of a car on the understanding it has been driven by a woman for a majority of its life. The added element in the UAE is the line that the car has been driven by a British woman.

Salem Salem Al Shaali, criminal lawyer and former police officer, explained where the law stands on the issue. "It is a criminal offence to advertise something incorrectly," Al Shaali said. "There is a fine line, however. The fact the car has been driven by a lady owner is just a way of giving an idea about the car's history. "It is not a criminal offence to say this. Chances are, at some point in the car's life, it would have been driven by a female. "The offence is committed when the salesman goes a step further."

Al Shaali said he has dealt with many vehicle disputes over the years and said they are on the increase. "I am certain there are people out there whose intention is to dupe the customer. They will tell as many lies as necessary to make the sale."

Omar Jassem has been selling used cars for more than 14 years. "I don't know why people insist on saying the car has been driven by a lady owner," he said.

"What guarantee does that really offer anyone? There are no statistics that prove ladies are better drivers than men.

"The information that should be checked is who the car is registered with, whether the mileage is a correct and true reading and if the service history is up to date. The lady driver advert is a misconception in today's society." Jassem thinks people try to sell the car based on the stereotype that the lady driver is more careful, tidy and respectful towards the vehicle. "Some people may think it guarantees they are not buying a car that previously belonged to a male racer." He thinks the statement should not add any extra value to a car and anyone trying to push this should be approached with caution.


Dubai's information infrastructure ranks first in the Arab world and is 18th in the world, according to a recent study.

The Internet penetration rate in Dubai stands at 39 percent, which is slightly lower than those in most advanced economies, but is relatively higher while compared with general Internet usage in developing countries, according to the Madar Research Special Report on Dubai Knowledge Economy 2003-08. The report was published by Rutgers University, the State University of New Jersey, and included a number of Arab countries.

"The recognition earned by Dubai on the regional and international fronts is clear evidence that the collaborated efforts exerted by different government departments in Dubai are reaping fruit. We are glad to know that we are moving on par with the highly advanced countries as far as technology is concerned. This fact reflects the far-sighted e-vision of General Shaikh Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai and UAE Defence Minister," said Saeed Bin Bleilah, director of Dubai Naturalisation and Residency Department. Dubai's key information and communication technology indicators, particularly its mobile phone density and Internet penetration, are also comparable to those of key cities in the most developed countries.

Dubai's mobile phone density, pegged at 90 percent, is higher than the average mobile phone density in Western Europe, which varies between 80 and 82 percent, according to the study.

The personal computer (PC) penetration in Dubai is set to increase by 20 percent, as younger users, particularly university students, increasingly become dependent on PCs, and the business community expands, according to the study.

"The fact that mobile phone penetration in Dubai far outweighs fixed line penetration is a reflection of the Endeavour of the emirate to deploy the most recent technologies. We are committed to increase the information technology spending per capita in Dubai, which is estimated to be $450 (Dh1,653) in 2003, in order to utilize the international advancements in the IT industry to further develop the growth of the emirate and improve the quality of life of its citizens and residents," added Bin Bleilah.

Meanwhile, the study reported that Dubai's IT spending of 2.7 percent was below developed country IT spending averages, which range between 5 and 12 percent.





In March, oil prices touched $57 per barrel, and there was not even the slightest murmur of a world recession or slowdown of the economy. One wonders what happened to the doomsday scenarios that said in the early Nineties, though on the back of political turmoil, that if the price of oil was higher than $35 per barrel for any sustainable period of time there would be a world recession?

We live in a world where total demand for energy is rising and consumption levels will not taper off as easily as one would imagine. China, as an example, today consumes 2.8 million barrels per day, and that is more than 10 per cent of OPEC's daily production.

Current estimates suggest that at the rate China is growing, its share of consumption will increase even further.

The reality is that, today, world demand for energy is higher than supply, added to which is the fact that even OPEC's sustainable production, estimated to be 29 million barrels of per day, is not enough to create a cushion to meet demand easily.

World economies are expanding and energy consumption is a strong element of this expansion. China's growth of more than 7 percent, considering its massive population base, is more than likely to create demand pressures.

It is worth noting that a great deal of price pressure comes from speculators who are taking massive position on the futures exchanges, and this is visible if one looks at the activity on oil exchanges. However, speculation may give some fillip to keep prices robust but its role is perhaps marginal because prices have raised on underlying demand pressures. In a historical context, I do feel that price of oil, adjusted for inflation, and is merely catching up with what its real value should have been. If one were to take 1970 as the base level for oil prices and compare the prices today and adjust them for inflation, then the jump from $3 per barrel in 1970 to above $55 today can be explained as something not out of reach of the realm of possibilities.

Some months back, I had argued that a price above $38 per barrel would be sustainable only through the demand side of the market, and it would seem that this is indeed the case. While prices will inevitably adjust and we might see a slip in the price of oil, the interesting thing is that the world has adjusted to the reality of strong oil prices.

From the side of the oil producers, since 1998, when oil prices dipped to close to $11 per barrel, there has been a straight upward run, barring a small correction in 2002. The effect of this massive increase in oil revenues has been a huge boom for the economies of the oil producers, and, in a sense, is also fuelling the strength in the world economy as a major amount of this cash is being reinvested and also being used to expand the economic base of these countries. There is a serious build-up of infrastructure in a number of oil producing countries and the results of this is that global demand for goods and services, in a sense, is the recycling of petro-dollars into mature economies.

There is a strong chance that oil prices will correct in the summer of this year as demand may slow down, and even though oil prices had a higher volatility in the recent past, price adjustments could be exaggerated. However, the cyclical nature of oil prices cannot be ignored. Though the old parable of summer softness in oil prices did not hold up in the past year or so, one cannot be sure whether we will have a soft oil price scenario. In some measure, this will depend upon the production and export capacity of OPEC producers.

Current rig count and infrastructure is stretched and this might be the case for some time to come, suggesting that this is what speculators are banking on.

For the moment, one thing is certain: the world seems to have taken stronger oil prices in their natural stride and contraction of the economic base does not seem to be setting in on account of oil prices.




The salary increase for government employees may not cause budgetary deficits due to strong oil prices but could fuel inflationary pressures, experts have warned. Equally, relocation of labor may take place as government jobs will now attract more nationals. "Currently oil prices are high and there are surplus revenues. Oil prices are projected to remain strong in the short-term and the potential surpluses will foot the bill for enhanced salaries. So a budgetary deficit is not a big worry," said Dr. Ali Bolbol, Senior Economist at the Economic Policy Institute of the Arab Monetary Fund (AMF).

"But two to three years down the line, if oil prices fall, we might see a budget deficit, but if there is a medium- to long-term expenditure profile, the government need not worry about weak oil prices.

"However, the worry is cost-push inflation in the short-term. The increase in salaries should not lead to a corresponding increase in prices of goods and services [consumer goods and private and government services]," he said.

Moreover, extra money in people's hands could lead to demand-pull inflation, he added.

"But that can be neutralized by the Central Bank which might drain away from the system an equal amount of money to ensure that money supply remained the same. Central Bank's resort to contracting money supply when they anticipate demand pull inflation to maintain overall money supply."

Abdullah Sharafi, director of Gerab National Enterprises, and analyst forecast an increase in prices of goods and services although the salary hike has an overall positive impact, boosting the morale of the working class. "As most government employees are nationals those with additional disposable incomes will be circulated within the country. But one should expect domestic inflation as demand is increasing faster than supply in, say, housing. The population is also growing very fast."

The hike in salaries is timely because the cost of living has risen considerably. In 2004, rents in Dubai went up by 26 percent whereas the salary increase was barely 2.5 percent.

Not surprisingly, with attractive salary packages in government departments, there might be a higher demand for public sector jobs by nationals. "The private sector will have to offer higher salaries to attract nationals," said Bolbol.

Whether the increased salaries would lead to higher savings and investments depends on the individuals and the size of the increase. "At the lower level it may initially lead to conspicuous consumption, leading to some savings in the long-term. But at the higher level, one could expect savings," said Sharafi.

However, given the bullish property and stock markets, there is a good chance of the increased income finding its way into stocks due to the number of public offerings and the higher returns from such investments. The average oil price last year was $37 a barrel and for this year it is projected at $40-$60 a barrel. "Given the record oil prices since last year, the UAE's oil income is projected to be over $25 billion last year and with oil prices still flying high it could be higher this year. What would go towards the hike in salaries is not a very high amount as the total number of employees in the government sector is not very large," said an analyst at the Emirates Securities and Commodities Authority. Official figures show that the total number of government employees in Abu Dhabi stood at 73,118 in 2003.



(Courtesy Gulf News)