Indians screwed up Dubai prosperity: Bankruptcies impact India

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Indians screwed up Dubai prosperity: Bankruptcies impact India

Posted on 28 November 2009. Tags: Dubai

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Dubai was overrun by Indians. THey used it as a base to attempt to spread India Inc to the Middle East. Now the chickens have come to roost. Dubai provided about 20% of the GDP of the Bharati (aka Indian) state of Karela. With many businesses going bankrupt in Dubai the migrant workers are headed back home. Other nationalities are also affected, but most of the Pakistanis were in Abu Dhabi and Saudi Arabia etc. A large section of the population of Dubai was Indian. Dubai has very strict bankruptcy laws. It is impossible to stay in the state, if one does not have a job. So the migrants are leaving in droves. The impact of the financial downturn in Dubai impact the New York stock exchange, but its impact on Mumbai is in incalculable.

Despite the brave front put up by Indian government, the debt crisis that has enveloped Dubai World threatens to hit the struggling Indian overseas labour market that is largely dependent on short-term Middle East job contracts. The latest crisis comes at a time when official estimates have admitted that unemployment rates have spiralled to 30% in the Middle East in the last one year.

Industry sources say unemployment figures could be higher than the official estimates and that remittances to India – $43.5 billion in 2007-2008 – are certain to be much lower this year in the wake of the continuing recession in the region. The Dubai World’s debt just adds to the bad news.

UAE is the favourite destination for a maximum number of overseas Indian workers – 3.4 lakh people went to the country in 2008 – but the number has been fast declining as Indian workers are unable to get new contracts or extensions in the country that’s in the grip of recession.

It’s well known that when Dubai sneezes, south India, especially Kerala, catches more than just a cold. Last September, when Lehman Brothers collapsed triggering the great recession, the arrivals at Chennai, Hyderabad and Thiruvananthapuram airports wore a grim look. The news of Dubai World’s inability to repay the $59 billion debt has triggered similar fears among the relatives of immigrants back home.

However, the minister for Overseas Indian Affairs tried to allay such fears. “There were some concerns during the beginning of the slowdown an year ago, but now we are not expecting any exodus (return) of Indians and India will not be affected by Dubai’s debts,” Vayalar Ravi told TOI on telephone.

OIA secretary K Mohandas added that large scale retrenchment was unlikely even though labour movement to UAE had come down. “There are some countries like Saudi Arabia where labour movement has increased,” he said adding, however, that the increase was negligible.

However, the government of Kerala, where overseas remittances contribute 20% of the state GDP,

does not sound too optimistic. “We do not yet know the magnitude of the crisis. On the face of it, the problem looks serious. Now we will have to wait and see its impact on other sectors, and whether there will be a credit freeze,” Kerala finance minister T M Thomas Isaac told TOI.

“If it (Dubai debt crisis) affects the real estate sector, we have enough reasons to be worried. Only after the (Id) holidays are over in the Gulf, we will come to know more,” Isaac said.

Over 5 lakh Indians have returned from Dubai since September 2008, of which two lakh are Malayalees. Almost 60% of these people are technical or non-technical skills professionals. “Over 50 lakh Indians work in the Middle East of which 20 lakh are from Kerala. We do not expect large number of returnees now,” K V Mohankumar, CEO of Kerala NRI group, Non Resident Keralites’ Affairs (Norka).

According to Norka, 10 lakh Malayalees live and work in Dubai, along with 4 lakh people from Andhra Pradesh and and 4.5 lakh Tamils.

The situation in the past year has prompted the OIA ministry to introduce a welfare fund for emigrants in distress. Services like a toll-free helpline, a counselling facility and a facility to extend contingency based legal, medical and emergency relief assistance are on the anvil to provide a safety net to a large and vulnerable work force in the region.

The minister has also announced setting up of an Indian Workers Resource Centre (IWRC) in the region and a “Return and Resettlement Fund” that will provide for a contribution-based scheme to incentivize the return and resettlement of overseas workers. Details of the proposal are being worked out.

However, bankers here are not losing sleep over the Dubai World crisis, yet. “The original impact of the Dubai crisis has already happened. I do not see any further impact coming in,” said Venugopalan M, managing director & CEO, Federal Bank. “I don’t see any further reduction in remittances as well.”

The news of Dubai rescheduling its debts fails to surprise some. Jinu Rani George, a senior official with a builder group that has considerable interests in Dubai, said it was expected. “We are in Dubai for 27 years now. But from November 2008, when recession fears began, we have not been getting any money from the government or municipality. So we put a freeze on all our projects. Now, we do high volume business mostly in Abu Dhabi.”

She said groups like Nakheel, a subsidiary of Dubai World, and Dubai Properties, a unit of Dubai Holding, had sacked almost 80% of their employees.

During the last 10 months a number of Indian professionals have moved from Dubai to the oil-rich emirate of Abu Dhabi not just in search of high-paying jobs but also job stability.

“We knew things were shaky in Dubai. Its diminishing spending power brought projects to a standstill. The only option was to move to Abu Dhabi and luckily we found employment here,” said Biju Haridas, a management professional in Abu Dhabi.

“The emirate of Abu Dhabi will bail out Dubai with conditions, but those conditions will never be made public,” said an Indian diplomat in UAE. Dubai debacle likely to hit workers, remittances. 28 Nov, 2009 0042hrs IST TNN[ Himanshi Dhawan & Rajesh Chandramouli ]