Chronicle of the Middle East and North Africa

Ultra-Rich on the Rise in the Middle East, Defying Global Trends

The ultra-rich in the Middle East benefit from an economic model that leads to concentrated wealth and income, despite overall economic growth.

Ultra-Rich in Middle East
Aerial view of the Atlantis The Palm, luxury hotel resort located at the apex of the man-made Palm Jumeirah archipelago off the Gulf emirate of Dubai. KARIM SAHIB / AFP

Ali Noureddine

This article was translated from Arabic to English

According to data provided by the consulting firm “Knight Frank,” ultra-high-net-worth individuals experienced significant losses in 2022, incurring a staggering $10 trillion (around 10 per cent) decline in their wealth.

These losses were mainly attributed to various global economic instabilities, energy crises and the far-reaching repercussions of the war in Ukraine.

The Middle East reverses the global trend

The company typically categorizes individuals as ultra-high-net-worth (UHNWI) when their investable assets exceed $30 million, encompassing real estate holdings such as primary and secondary residences. These estimates serve as a gauge for evaluating the outcomes of their endeavors and investments, as well as the extent of wealth and income disparity within society.

In Europe, the UHNWI population faced a substantial decline of nearly 17 per cent in their total wealth. The continent experienced the compounded impact of energy conflicts, inflation and economic recession. The Americas saw a 10 per cent decrease in total wealth for this group, while Australia witnessed an 11 per cent decline and Asia as a whole experienced a 7 per cent decrease.

As a consequence, the global UHNWI population decreased from approximately 602,000 people in 2021 to only 579,000 people in 2022, representing a 4 per cent decline within a year. However, the number of individuals in Asia belonging to this category actually increased by 6.5 per cent, which exceeded the global decrease.

The situation in the Middle East, however, presented a stark contrast. During 2022, the region witnessed a general increase of 16.9 per cent in the number of ultra-high-net-worth individuals, reflecting a unique trend globally. The Middle East emerged as the fastest-growing region in terms of the UHNWI population.

Among the countries in the Middle East, the United Arab Emirates ranked first worldwide in terms of the growth rate of the UHNWI population, with an increase of approximately 18.1 per cent. The number of ultra-wealthy individuals residing in the UAE reached 1,116 after this significant increase in 2022.

Similarly, the Kingdom of Saudi Arabia experienced a noteworthy UHNWI growth rate of 10.4 per cent, ranking fourth globally. Based on the current trajectory, it is expected that the number of ultra-wealthy individuals in Saudi Arabia will increase by 79 percent by 2027.

It is worth noting that according to the “Henley & Partners” index, Dubai emerged as the Arab city with the highest number of wealthy residents, totaling 68,400 individuals. Abu Dhabi secured the second position with 24,200 residents, followed by Doha with 21,500 residents. Additionally, Riyadh is home to approximately 18,100 millionaires, while Cairo hosts 7,400 millionaires.

Reasons behind the rise of UHNWI in the Middle East

Contrary to the prevailing global pattern, several developments in the Gulf countries played a significant role. The UAE, known as one of the largest tax havens worldwide, offers a favorable environment for establishing companies with streamlined bureaucratic procedures, low transaction costs and a predominantly liberal and open economy. These factors make it attractive for businessmen seeking to safeguard their wealth or bypass sanctions imposed on their countries.

For these reasons, the UAE, particularly Dubai, in 2022 became a preferred destination for Russian businessmen who sought to invest their wealth in a secure economic environment away from Western sanctions. The ease of concealing ownership of companies, real estate and investments, coupled with simplified administrative processes, incentivized Russian businessmen. Additionally, Dubai’s active real estate market allowed them to invest their liquid assets in relatively safe and easily convertible assets.

Years before the Ukrainian war, the UAE introduced the golden visa program, granting long-term residencies of up to 10 years to professionals and businessmen. This factor facilitated Russian businessmen’s choice to turn to Dubai. In 2022, The New York Times reported that numerous Russian businessmen opted to transfer their wealth from European banks and markets to Dubai out of fear of Western sanctions.

Meanwhile, Riyadh experienced a surge in business activities in 2022 due to tax incentives offered by authorities in exchange for companies relocating their regional headquarters to the city. Saudi officials aimed to attract over 480 international companies’ regional headquarters within the next seven years through such incentives. Saudi Arabia’s commitment to open market policies, particularly in Riyadh, helped draw the capital that had previously avoided entering the Saudi market.

In the same year, Qatar reaped the rewards of its previous investments by hosting the World Cup. Revenues from the tournament, combined with public spending on its organization, revitalized investments across various economic sectors in Qatar. Consequently, by the end of 2022, Qatar achieved 8 per cent economic growth in the last quarter, directly influenced by the event and the increased gas prices in international markets.

In contrast to the majority of the world’s economies grappling with global inflation and soaring energy prices, the Gulf economies experienced financial surpluses stemming from the rise in oil and gas prices. These surpluses contributed to increased public spending which, in turn, stimulated economic activity and private sector performance in the region. This disparity between the investment outcomes of wealthy individuals in Gulf countries and their counterparts in Western countries can be attributed to these factors.

Tax policy problems

While the influx of foreign investments into Middle East markets, especially the Gulf markets, has its positive aspects, the increasing wealth of the local elite and the growing social disparities between this elite and the rest of society raise concerns about the tax policies contributing to such levels of inequality.

Currently, the Middle East region exhibits one of the highest levels of income inequality globally, with just 10 per cent of the adult population accounting for 61 per cent of the total income. On the other hand, 50 percent of the population acquires a mere 9 percent of the income. By comparison, in Western Europe, for instance, the top 10 per cent of society garners no more than 36 per cent of the income, while in the United States this group accounts for 47 per cent of the income.

This disparity in the wealth accumulation of the ultra-rich in the Middle East can be understood in the context of the prevailing economic model, which allows for the concentration of wealth and income among a limited segment of society while achieving overall economic growth.

This factor is influenced by tax policies, the types of economic activities pursued in Middle Eastern countries, and the quantity and quality of jobs generated by economic growth. Economies reliant on rentier activities often prioritize the accumulation of financial surpluses among the wealthiest, rather than focusing on expanding the number and quality of private sector jobs and enhancing public services.

Therefore, given the positive economic growth witnessed in some Middle Eastern countries over the past year, it is crucial for ultra-rich individuals to stimulate discussions about the effectiveness of economic and tax policies adopted in these nations. It is also essential to engage in dialogue regarding other economic dynamics that contribute to the concentration of wealth and income, which is particularly prevalent in the Middle East region.

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