More expat job losses feared in Dubai

An Analyst at the Regional Investment Bank, EFG-Hermes, Raj Madha, confirmed that there will be redundancies, although it is too early to know the extent of it.

The government last week announced its decision to seek a six-month payment freeze on debts of one of the largest conglomerates, Dubai World, which owns the real estate developer Nakheel. The company is hoped to have liabilities worth $60mn, out of which, $26mn is debt.

The Government-owned companies are the biggest employers in the emirate, accounting for majority of expatriate jobs. Dubai World employs about 70,000 people globally. A representative of the company however declined to comment on whether there will be redundancies due to restructuring.

Any reduction in the working expatriate population in the emirate will further weigh down an already hit economy, which saw a decline by 50 percent on its real estate prices last year. The emirate has only less than 5 percent of oil sales contribution to its economy, with majority of income coming from service industries, trade, tourism and retail.

The tax-free lifestyle, coupled with high quality living in Dubai, was a major attraction to Western expatriates, who migrated to the emirate during its boom years. Majority of the country’s population (85%) are migrant workers, while the rest are locals or nationals.

According to John Sfakianakis, Chief Economist, Banque Saudi Fransi, it is more challenging for the government to lay off nationals, as the first down-sizing happens with expatriates and if only if required, nationals are downsized, and this could create discomfort.

Dubai is the second largest sheikdom in the federation of semi-autonomous emirates and is home to largest concentration of expatriate workers. About 1.6mn people live in Dubai, as per the latest government figures available.

Several thousands of foreigners were expelled in the emirate’s construction, real estate and financial services sectors, when the global economic recession hit Dubai late last year.

Real Estate developer Limitless, owned by Dubai World, currently has staff strength of 250, down from 750, while, Nakheel, during the boom period, had a head count of 6000, which now stands at 1000, according to Analysts.

Dubai World has reduced its global workforce by 15 percent to just below 70,000, one of the deepest cuts in the UAE last November, while Nakheel cut 15 percen tof its workforce.

However, recruiters are hoping that the Dubai World crisis will not trigger major expatriate job losses similar to last year’s scale.

Posted on 3/12/2009

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