Dubai debt crisis hits world markets, Indian workers

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Mineguruji

28 November, 2009

It came as a shock to many, when Dubai government disclosed that it would not be able to service the 80 billion debt it has raised through Dubai World and property unit Nakheel.

THE DUBAI debt fiasco has not only taken the sheen off the desert El Dorado but it has also rattled the world financial markets. Big banks, financial institutions, infrastructure and real estate companies have been rattled hard as many of these have major stake in the Emirate on the brink of a financial breakdown.

It came as a shock to many, when Dubai government disclosed that it would not be able to service the 80 billion debt it has raised through Dubai World and property unit Nakheel. Dubai government said that it wanted the creditors to agree to a debt standstill as it restructures Dubai World and works around the finances to pay back.

Although the Dubai government has not said that it would not be able to repay the debt but the world markets took it as a huge negative signal as they are already suffering the great American financial meltdown.

While a large number of Indian corporates have said that they do not have a major exposure to Dubai but the debt crisis has proved to be a major dampener for the stock markets and has hit the sentiments hard.

The Dubai crisis has lead to a panic situation in the financial market as banks and financial firms lost in markets across the world. Another major negative for the Indians is the huge number of Indian labour force which will be directed affected by the Dubai financial crisis.

Indian infrastructure companies such as Punj Lloyd, DLF and other major realtors, however, have said that they do not have any exposure to Dubai. However, engineering major L&T and Bank of Baroda have strong presence in the Emirates but it is unlikely that they will suffer big problems due to the current situation.

As compared to corporates, individual Indians are more likely to be affected by the Dubai financial fiasco as 4.5 million Indians live and work in the Gulf region and they remit around 10 billion dollars every year to the country.

Dubai turmoil is likely to hit remittances and the worst affected would be Kerala, which has the maximum number of people working in Dubai and the Emirates. When Dubai sneezes Kerala catches cold and this is likely to be proved truer than ever as experts feel Dubai will face severe downturn in real estate and financial sectors, which are likely to affect remittances and jobs.

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COMMENTS (1)

A.S.Mathew

.Dubai's growth was too hard to believe. If you drive through one road, after a month, that place looks totaly different. This heaven was created, mainly on borrowed money with the expection of higher volume of tourism and finance. But the world-wide recession created a shorfall in Dubai, so the growth was stalled and the domino financial game which was running fast came to a sudden halt. Now Dubai does't have the money to go any farther. The drop in oil price, at almost half of the peak price reduced the income level of all the gulf countries. So, they are not in a position to loan more money to Duabi. Without a high capital flow to Dubai,mainly through loans from other oil producing countries, there is no short term solution to this problem. Even after fixing a short term solution, until the world economy starts moving fast, Dubai has to tighten the belts of expansion and cut corners everywhere simply to survive. Also, the U.S. and the western nations will play a political game to break Dubai from her economic relationship with Iran before Dubai can get economic aid from other pro-western countries of the gulf region.