http://www.ft.com/cms/s/0/d4848c0e-9db8-11e1-838c-00144feabdc0.html

May 14, 2012 5:26 pm

Qataris adopt debt as a luxury accessory By Jenifer Fenton in Doha

“I never saved in my life,” says Ghazi, a Qatari businessman.

Since he began working 35 years ago, he has been in debt. He owes a lot of money, not for one loan but for “three company loans and a bank loan, personal loans, car loans – three car loans”, he says.

Ghazi is not alone. Seventy-five per cent of Qatari families

are in debt, most owing in excess of QR250,000 ($68,600), according to a 2011 Qatar National Development Strategy report. Some of this can be

attributed to the country’s most economically disadvantaged families struggling to make ends meet, but the report gave another reason for the indebtedness: Qataris are living beyond their means, in a “prevailing culture of extravagance and conspicuous consumption”.

While attracting global attention in recent years for its audacious international investments, Qatar is also experiencing another byproduct of rapid economic booms, as its citizens take on increasing debt.

The story is a familiar one across the Gulf, where extravagant living and a penchant for luxury have become as synonymous with the region as its desert environment. But as the fallout from personal and corporate debt crises from Kuwait City to Dubai shows, this spending can be as leveraged as it is lavish.

With his debts mounting, Ghazi, who manages a weddings business, plans to invest in property, and recently bought his daughter a Mini Cooper car. Doha’s streets hum with a growing fleet of expensive new cars, which some say are another indicator of the ballooning loan books at local banks.

“In Qatar, don’t judge by the car,” says Mohammed al-Qahtani, a former bank employee. While flashy possessions can turn heads, thanks to a culture of debt they are often not indicative of a person’s true financial status, he says, particularly in the case of young men. “The ones who travel, who don’t care about the plastic,” he says. “Young people, they go for show.”

Last year Qatari authorities tried to raise awareness about the depth of the problem, with a campaign titled “Debt is Disgraceful”, during which donations were collected to help pay money owed by debtors in prison or others threatened with criminal charges.

In a 2008 US diplomatic cable, released by WikiLeaks, one prominent Qatari royal is quoted as telling embassy officials that debt is creating “enormous societal pressure” affecting family life and increasing demands on the government, by creating a “welfare syndrome” where citizens think they can spend freely and be bailed out by relatives and the government.

Such bailouts have precedents in the region. In January, the United Arab Emirates announced a fund, worth more than $500m, that would help pay off the debts of about 7,000 low-income citizens. And since bailing out retail investors who made huge losses in a stock market crash in the early 1980s, Kuwait’s government has come under frequent pressure to clear the debts of its citizens. A 2010 bill passed by the country’s parliament required the state to pay an estimated $24bn of personal debts, but was rejected by the

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cabinet.

Mr Qahtani has three big loans outstanding. The first two were for QR244,000, with which he made what he considers entrepreneurial investments. “I bought business buggies, sand cars … toys from Ireland,” he says. Then there is a loan “that is between me and my wife. I owe her QR130,000.”

For Qatari citizens, personal loans are now capped at QR2m, with a repayment period of six years. Often little or no collateral is required. A citizen can typically borrow 72-times the total of their basic monthly salary, which, in a country where entry-level office workers often expect salaries of QR18,000, means big loans are for the taking.

All that is required for a Qatari to access such a loan is a statement from their employer certifying basic monthly salary.

Sarah, Mr Qahtani’s American wife, says she is still learning how to navigate the “competition of the bling” that has become part of Qatari culture. Delayed gratification through working, waiting and saving is not the norm, she says. “You just go get it.” The Qahtanis have three children and are expecting a fourth.

Although indebted, her family’s expenses are low. The rent for their house is covered by her husband’s employer, and Qatar has no income or sales taxes and provides free healthcare and education.

The state, while generous, hopes its awareness campaigns will encourage a change in local attitudes toward debt and spending. But such changes are easier said than done in a country where booming state energy wealth is flowing into citizens pockets at an increasing rate. In 2011, the government announced that salaries for its Qatari employees would increase 60 per cent, a rise that was quickly matched by many private-sector employers.

Mr Qahtani, who says he is more financially responsible than his eight siblings and many of those he works with, remembers the timing of the pay rise well. “Everyone in my work, they got a car,” he says.


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