Recession effect in the Arabian Gulf

By Javid Hassan

News that Abu Dhabi, the UAE capital and the oil-rich sheikhdom of the seven-member confederation comprising the United Arab Emirates, has extended a $ 10 billion bailout to Dubai shows that the Gulf region, too, has been caught in the depression triggered by the waves of global recession.

The rescue package was announced early this week as Dubai, struggling with an ailing construction industry, saw a large-scale retrenchment of construction workers, including thousands from India, as investors began to pull out of the emirate setting in motion a chain reaction in what was till recently a shining example of the UAE’s success story. Its image was further dented at the international level after an Israeli player was refused a visa for the Barclays Dubai Tennis Championships it hosts.

The $ 10 billion federal funding would enable Dubai to service its huge debt burden as it copes with a struggling real-estate market, where prices have plummeted by 25% on the back of the sagging demand for oil as well as the international liquidity crunch.

The crisis has taken its toll on Dubai’s economy. The expatriate community, used to high living, suddenly found itself in the grip of the emirate’s fading fortunes. Many expatriates, including Indians, had to abandon their cars at the airport and flee home rather than risk imprisonment for defaulting on loans. As many as 3,000 vehicles or more were found abandoned outside Dubai’s international airport in recent months.

The worst affected are the construction workers from Kerala who have been forced to return home, says K.U.Iqbal, journalist of Malayalam News from Saudi Arabia. He told HNN that the Kerala government has set up a Rs. 100-crore fund as part of its effort to rehabilitate the returnees and help them launch business ventures. The government has also decided to register those coming from the Gulf, so that they could benefit from a Rs. 10 crore emergency fund for providing interim relief.

The Andhra Pradesh government, too, is resettling these repatriates, mostly unskilled workers, through funds from the Rajiv Yuva Shakti Yojana for the purchase of agricultural implements, including tractors. There are several hundred thousand workers from Andhra Pradesh in Saudi Arabia, accounting for the largest segment of Indian expatriates in the Kingdom. In other Gulf states like the UAE and Kuwait, people from Andhra Pradesh form the second largest group of Indians after Keralites.

However, most of these workers are illegal migrants who had gone to the GCC states on visit visas and then disappeared to work at jobs without valid work permits. This puts them at the mercy of their employers, as they are unable to return home without the valid documents.

Many of the returnees, according to information available with HNN, were skilled and semi-skilled workers, such as fitters, masons, framers, finishers and shuttering workers who were employed on large-scale projects in the Gulf. The state government is trying to match their skills to the demands of the industry by holding employment fairs in collaboration with representatives of the construction industry. These fairs were held in districts with high illegal migration, such as Adilabad, Karimnagar, Nizamabad and East Godavari.

Since both the state and the central governments are pumping crores in the economic stimulus packages, especially for infrastructural projects, their experience could be utilized, if necessary, by giving them on-the-job training under the rehabilitation programme.

In Dubai and other Gulf states, worker advocacy groups, including the International Labor Organization (ILO), have mounted pressure for safeguarding the interests of hundreds of thousands of these construction workers. Their demands include ending the illegal but common practice of companies retaining the workers' passports and effectively preventing them from seeking other jobs under a rigid sponsorship system. The Saudi government is working on a new sponsorship regime which seeks to address these concerns. But the proposed regulation is still in the works at the Saudi Ministry of Labour.

Besides the construction industry, the ripple effect created by the economic recession has also impacted the media, especially in the Dubai Media City. One of the first casualties last year was the Dubai edition of Arab News which had to be closed down due to the drop in the advertising revenue. It is now the turn of ARY Digital, a popular Pakistani TV channel with its head office in Dubai Media City. Many employees of ARY Digital have not received their salaries for the last three months.

While denying the report carried by the Khaleej Times of Dubai, Tariq Wasi, head of operations for ARY Digital Network, however, confirmed that the Pakistani news channel was shifting its operations to Pakistan and had asked almost 30 per cent of the employees to move to the country.

Even The Khaleej Times has closed down “Young Times”, its weekly magazine for children, and laid off some of its staff, mostly in marketing, while other publications have put on hold all pay hikes and expansion plans, reflecting the seriousness of the situation.

Under these circumstances, aspirants for jobs in the Gulf need to weigh their options carefully, as even the Saudi economy, the biggest in the GCC, is expected to post a real growth rate of around 4 percent only in 2010. The global credit crunch and low oil prices have had an adverse impact on the non-oil sector, according to Samba Economic Monitor for January. The 2009 budget also shows a projected deficit of around 5 percent of the Kingdom’s GDP, which is in sharp contrast to its surplus budget during the oil boom era. But for now there is depression in the Arabian Gulf.