Dubai Financial Crisis unlikely to affect Indian jobs
As Dubai’s financial health seems to be worsening due of its burgeoning debt, it raises questions about its economic prospects and how it may impact jobs in the city-state.
On Wednesday, the Dubai government said it will ask creditors of two of its flagship firms, Dubai World and real estate developer Nakheel, for a standstill on debt worth billions of dollars as a first step towards restructuring. Dubai World, the conglomerate that spearheaded the emirate’s breakneck growth, has USD 60 billion liabilities and will seek a six-month “standstill” on its debts with all lenders.
In the past decade or two, Dubai undertook spectacular real estate projects to re-invent itself as a tourism and finance hub. Dubai’s population rocketed to 1.5 million, as white-collar professionals from around the world took plum jobs in a country marketed as a liberal enclave in the Gulf sun. However, Dubai’s debt troubles have exposed the fallacy of its once much-vaunted “model” of raising shining cities in the desert with foreign residents, finance and labour.
Indian jobs safe
The Indian government, however, believes the debt fiasco may not affect jobs of Indian residing in the state.
“The Dubai crisis is unlikely to impact the employment, salaries and remittances of Indian expatriates staying in the region,” Indian Finance Secretary Ashok Chawla told media persons. “Remittances did not suffer even during the height of the larger global crisis [during 2008].”
Chawla said the government was yet to study the issue and its possible implications on the Indian economy and corporates.
‘Need to assess impact’
The RBI Governor Duvvuri Subbarao said an assessment of the impact of Dubai’s debt problems was needed before deciding on a response.
“We should not react to instant news like this. One lesson of the crisis is that we must study the developments, and I think we must measure the extent of the problem there and how it impacts India,” Duvvri Subbarao told reporters in the southern Indian city of Hyderabad.
“I have requested my officials to study this, and if necessary we will certainly communicate in the public about what the implications likely are,” he added.
Subbarao said India’s financial integration with the global economy was deeper than its trade integration. “We were affected because were more globally integrated than we had consciously recognised,” he said.
Impact on Indian banks
On concerns that Indian banks may have exposure to Dubai World, and other real estate companies in the region, Reserve Bank of India Deputy Governor Shyamala Gopinath said the regulator will need to understand if, and how, exposure was there. “We need to get information from the banks whether their overseas branches have exposure to Dubai World, how much is it and what is the state of the debt,” she said. “We would call for information from banks.”
