Executives in Dubai these days agonise before they muster the courage to check office e-mails in the morning. Until you have seen the last message, you can't be sure the day's mail doesn't include that much-feared one line which advises you to "get in touch with the HR department as your services are no longer required".
The fear and sense of helplessness is palpable across the UAE. Businesses, companies, employers and employees, everyone's going through the agony as they try to second-guess the effects of the global financial crisis on them. There is panic everywhere. Companies are refusing to pay creditors even if they have the cash, on the ground their debtors haven't paid up either. Banks have stopped lending, and credit card agents who till the other day harassed people with their 'incredible' offers have disappeared from the scene. Probably most of them have lost their jobs and gone back to their home countries.
A recent survey among UAE residents revealed that one-third respondents had at least one close friend or family member who had lost his/her job in the last three months. People are even avoiding the shopping malls and there is a visible easing of traffic on the roads. All non-essential purchases have been put off; the compulsive shopping Dubai is famous for has taken a backseat. Supermarkets, grocery shops and even small corner shops are reporting a loss of business. There are reports about people abandoning cars at the airport and taking flights home, leaving big liabilities behind.
The big rush has instead shifted to the labour/immigration offices, mostly for cancellation of visas. In January alone, official statistics say 86 per cent more residence visas were cancelled in comparison with the same time period last year. The figures are over 54,000 last month, compared to 29,000 last year. This works out to an average of 1,700 everyday, at least 200 more than the 1,500 cancellations daily being 'rumoured about' in private conversations.
On its part, it's nothing short of a double whammy for Dubai. The first crisis was brought about by its own real estate bubble, long overdue for a correction anyway.
Unfortunately, that coincided with the global financial tsunami, which has blown away even the so-called invincible fortresses of global finance.
The coincidence may be somewhat surprising but Dubai's current state of affairs has an organic link with what has been happening here in the past 2-3 years. On view are two sides of the same coin: the head denoting greed and the tail standing for fear. Last year was marked by no ordinary greed, but one of epic proportions, with everyone—individuals, companies, institutions and even the government—overcome with an obsession to make money. Developers kept raising the price bar, only to realise the market was ready for more and more. In fact, the real estate boom that brought the world here was driven all the way by speculation, much less by fundamentals.
Irrespective of what was being built on the ground, or whether anything was being built, properties that existed on paper were being flipped to make money multiple. Whoever was not 'in' was considered good for nothing. The boom even created a new segment of business class and community, whose social circles discussed nothing but flipping for profit. Obviously, this party could not go on forever—and it has finally ended.
It is now the time for fear to get full play. It seems everyone has become suspicious about everything. Property prices in prime locations have dropped by 40-50 per cent compared to September levels. Prestigious properties are being offered in distress sale, and still there are no takers. Even if there are buyers, there is nobody to provide the money. According to various estimates, nearly a trillion dirhams worth of projects in the UAE have been delayed indefinitely or have been put on hold as developers struggle to find resources to go ahead. On the casualty list are some proposed world-beaters, including the one-kilometre-tall tower that was supposed to dwarf the Burj Dubai, the current record holder.
The fallout on the Indian construction worker is plain to see. In the camps which house them, there is nothing but gloom. Employers are finding it difficult to pay salaries. Some have not even given out return tickets. There's a growing number who want to put together some money and catch the next flight home. There's little to hope for in the Gulf.
The problems have been confounded by the huge market debt that the Dubai government and its entities have run up. Investments made with market borrowings have all gone sour and billions are required to service repayments coming due. The market was expecting support from Abu Dhabi, which is apparently not quite forthcoming. Whatever little has come has strings attached for Abu Dhabi itself is smarting under the loss of billions of dollars gone down the drain in bad investments and many more billions evaporated due to the fall in oil prices.
There has of late been some reassuring news from Abu Dhabi, with the Central Bank subscribing $10 billion out of a $20 billion fixed interest-bearing bond programme that Dubai has launched to bolster finances. But it's too early to see how far this will restore lost confidence while concern stays strong about debt being serviced with additional debt.
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