The Dubai financial crisis has fuelled fears among families of over two million migrants from Kerala working in the Gulf, with worries of massive job losses and its fallout on the state’s economy, heavily dependent on remittances.
The crisis erupted last week, when the Emirate said it would delay payment on debt issued by Dubai World, a leading investment firm, sending waves of panic across global markets.
While experts have forecast job cuts and a steep fall in remittances if the present trend continued, another view is that Dubai is resilient enough to overcome the current bad patch.
State Finance Minister, T.M. Thomas Isaac says, he is very “anxious” about the possible slowdown in construction activity in the Gulf, following the crisis which would badly affect migrant workers from Kerala.
“A majority of workers in the construction sector in the Gulf are from Kerala. We are really anxious about their future,” he told PTI here.
“I think the world economic recession is finally taking its toll on the Gulf region also,” he said.
On Dubai World asking its creditors for a ‘standstill’ on paying back its USD 60 billion debt until May 2010, Isaac said it might be a way of politely saying they needed a six-month moratorium.
Irudarayarajan, a faculty member with the state’s premier economic and social research institute Centre for Development Studies here has said, “we should not be too much worried about these things. Similar fears were expressed during the crisis in the Gulf last October, but nothing happened,” he told PTI.
During the last crisis, experts had predicted some five lakh people would return from the Gulf and that the Kerala economy would be hit hard, but no such thing happened, Irudayarajan said.
“Dubai is still alive, though construction activities are a bit slow. Basically the problems of Dubai will be relieved as other Emirates are doing well. A strong Abu Dhabi itself can bail out Dubai in a crisis,” the economist said.
He does not think the crisis would affect either migration from Kerala or remittances from the Gulf. “Migration and remittances were not affected in the last crisis also,” he said.
Irudayarajan said he had conducted a study on South Asian migration to the Gulf, which found that besides India, migration from Pakistan, Bangladesh, Sri Lanka and Nepal had increased in the last 10 months and people were still going.
Agreeing there would be some short-term problems with the crisis, he said it would be solved “at the end of the day.” “What government should do is to create a conducive atmosphere for people willing to return to their country, as there are enough job opportunities here if people are willing to work.”
The Kerala government is as yet clueless about the crisis and its possible impact on the state. Finance Minister Isaac reacted cautiously, saying the whole dimension of the crisis is yet to be known.
“It is crucial to understand the impact on major financial institutions who have lent money to Dubai World before we can gauge the extent of its impact on Kerala,” he said, echoing the general feeling that the state would have to feel the pinch, if the situation snowballs into a meltdown hitting the Gulf badly.