March 20, 2008

“You are so lucky. All earnings in Doha are savings. No taxes!” Tito Eddie commented two years ago when he heard our next assignment would be Qatar. Even the sales ladies at Kuhn in Wassenaar were excited for us. Almost all our friends and acquaintances agreed that given the handsome wages and the low cost of living in Doha we were heading straight to paradise.

And, in fact, our first few months here seemed to confirm their impressions. I even remember bragging then about the cheap commodities around. But, that was two years ago and things have changed. During this short span of time, inflation had risen as rapidly as the economy had grown. And, although prices here relative to Europe’s may still be considered cheap, to the expatriates and to the locals themselves, they are nothing if not very steep.

Indeed, prices have doubled and in some cases even tripled since we arrived. I remember distinctly when Sema and I bought lobsters at QR40 a kilo when we just moved in to our transit apartment. The same kind of lobster now costs over QR100 a kilo. A tray of egg that sold at QR11 then now sells at QR27. Steak that used to cost QR55 at TGIF now costs QR80. Sema’s pampers and other basic commodities have also headed north. Even the cost of the biggest GTL project in the world had ballooned from $5 billion to $18 billion, according to the papers.

This should not come as a surprise since nothing is more real in this world than inflation, what with oil prices reaching unimaginable heights in the world market. But, if there is anything that remains unchanged here, it is the price of oil. Gasoline still costs QR0.80 a liter as two years ago. So, the global oil price hike should be a non-factor. What then is driving prices up?

Many are inclined to blame the uncontrolled rent increases for the skyrocketing inflation. Although rent caps exist, real estate owners often find loopholes that allow them to push their rates beyond staggering levels. It is not unusual for a house renting monthly for QR3,000 two years ago to now fetch QR10,000 a month or more, and that is without any added improvement. It is certainly a great way of grabbing their rightful share of the windfall from a rapidly growing economy.

Still others point their fingers at the trading community who manipulate and push the prices higher. Lately, there were indeed shortages of basic stuffs like egg, chicken and cooking gas, which resulted in a significant jump in their prices. Although one can easily concede the shortage of egg and chicken was due to natural causes like bird flu, it is indeed difficult not to associate the shortage of gas in the gas capital of the world with anything other than artificial price manipulation

Of course, one cannot rule out the possibility that inflation here is nothing but the basic supply and demand law following its natural course. With the huge influx of expatriate population, demand for basic goods is certainly outpacing supply by a huge margin. Two years ago, shopping at City Center on a weekend was a leisurely walk. Taking a taxi home was neither a problem because only a few would be waiting in line. Now, the place is so crowded it is almost impossible to move around especially with your shopping cart. There are all sorts of people around, with all the countries in world represented, all wanting to buy tilapia and mobile phones. If you go there after lunch, you can spend hours going in circles looking for a parking space. Of course, the queue for taxi extends almost a kilometer and the heavy traffic makes it even impossible for people to leave the parking area. If this is not inflationary then it is hard to know what is.

Whatever the cause, runaway inflation is getting to be a big predicament asphyxiating the whole Qatari society, expats and locals alike. And, not everyone can cope properly, if ever there is a way to cope with it properly.

Many expats have simply gone home. Oliver, our friend from Ritz Carlton, told us majority of our kabayans he knows found it impractical to stay and decided to go back to the Philippines instead. According to them, after deducting all expenses, their net savings practically amounts to what they would save in the Philippines. It is not worth being separated from one’s family for the sake of a meager amount. Of course, for Filipinos, it is not only inflation that is eating into their paychecks. The strong peso or the weak dollar is another cookie monster. Since the Qatari Riyal is pegged to the dollar, the strengthening peso means less value for their remittance. Before, at 15 pesos to the riyal, a QR2,000 - padala would come up to PhP30,000. Now, at 11 pesos to the riyal, your family will only receive PhP22,000 from the same remittance, with PhP8,000 disappearing as handsome profit into the pockets of currency traders. This has prompted some OFW groups to organize a “no-remittance” drive to force the Philippine government to exercise stricter surveillance over speculators or to do something about the strong peso.

Others find themselves suffering involuntary dislocation. During our last visit to Ryan, our barber, he said his job is on the balance. He didn’t know if they would still be there when we came back for our next haircut. It seemed the owner of the building was raising the rent yet again; the owner of the barbershop is negotiating for a more reasonable rate. Otherwise, either he leaves the place and moves to a cheaper location or raises his fees and becomes less competitive.

Some who no longer can afford the high rates of family houses have no choice but to send home their families who came to Doha with them and to rent a single room in a share accommodation instead. Life in these communal places is not the most comfortable, to say the least, especially because these are nothing else but private houses not really designed for accommodating individual boarders. Privacy is quite limited and, in most cases, you might have to share kitchen, dining room, toilet and bath with 10 or more other residents. But, since most of the time, one is at work anyway, these inconveniences are more acceptable then an exorbitant rent.

Many who do not want to send home their families have resorted to inviting one or two more families to move in to the house they are renting and then split the rent with them afterwards. This set-up works perfectly fine for them, although, after recent developments, this practice can no longer be done without the written permission of the landlord.

For the others, like construction workers, department store employees, hotel staff and some others, paying expensive monthly rent is certainly not a problem because they are all housed in buildings either bought or built by their employers. But, this does not mean they are not affected by inflation at all, because they still have to take care of food and other basic needs.

The Qataris are not spared of the problem either. Those with limited income, roughly 60 to 70 percent of the native population, are the ones suffering the most. These are normally retired people or families with few earning members. To cope with inflation, they have recourse to bank loans and credit cards. “There are large numbers of Qatari families who are so much in debt that, despite having several earning members, they are left with barely QR1,000 at the end of a month due to deductions for loans and credit card payments. You can imagine their plight,” a community leader once said.

The most obvious solution proposed by everyone is that the government should mandate salary raise for all. Some even think a 100% increase would be absolutely fine. In neighboring Dubai, construction workers are even rioting for wage increase because inflation has rendered their $200 monthly salary virtually worthless. But, others argue that any wage increase will only be soaked up by inflation because traders will immediately hike prices once they learn of the increase. Some counter saying that if this is the case, wages should be raised secretly.

At least, the Qatari government is not oblivious to the problem and is trying its best to solve it. Just last month, it passed a new law freezing all rents for two years. According to senior government officials, this will not reduce the current record rate of 13.74% inflation but at least it will stabilize it. There is not much they can do about the prices of imported goods and raw materials. But, taking soaring rents out of the equation is surely a right step in the right direction.

But, the freeze is not enough. The only way to address the estimated shortage of 50,000 housing units, which is at the root of rising rents anyway, is to build them. Barwa, owned primarily by state-run Qatari Diar Real Estate Investment, has already embarked on a major project of building low-cost houses of two or three bedrooms for low/middle income families. The rent would be QR3,000 for a two-bedroom unit and QR3,500 for a three-bedroom one. According to the chairman, 4,000 housing units are on track to be distributed next year to selected applicants. 11,000 applications from expats belonging to 71 countries including 500 Qatari families have been received. Another 6,000 housing units are scheduled to be built after that. These developments are indeed encouraging.

In the final analysis, inflation is like a bull difficult to grab by the horn. The fact that it affects even rich and powerful countries only goes to show it is a reality with complexities that are far beyond the control of any nation or group. As far as we are concerned, though, it helps to still have the prices in Holland as point of reference; any price hike here is still insignificant relative to what we were used to. On special occasions, Carol still buys Dutch tulips at half the price they fetch in Wassenaar. Sema and I still feast on authentic stroopwafellen that are much cheaper than those sold at Langstraat during koopavond. The only things we have limited our expenses on are steak and lobsters, but this is because of a different kind of inflation. Too much uric acid from red meat and crustaceans causes gout, a very painful toe inflammation.