Abu Dhabi-November 28, 2008: Men line up at this money exchange on Hamdan Street in Abu Dhabi, November 28, 2008. (Jeff Topping/The National) *** Local Caption ***  JT001-1128-Money Exchange Stock 7F8Q7675.jpgJT001-1128-Money Exchange Stock 7F8Q7675.jpg
Customers line up at a money exchange on Hamdan Street in Abu Dhabi.

Families' cash lifeline in danger



ABU DHABI // Developing countries are facing a "dire" fallout from large-scale job losses and a sharp drop in remittances being sent home by workers, a leading economist has warned. As families struggle to cope when cash from abroad dries up, it is feared that the added economic burden of workers returning home jobless from the Gulf could lead to social unrest in countries such as Pakistan that are already fragile.

Ralph Chami, Middle East division chief at the International Monetary Fund Institute, said during a visit to Abu Dhabi: "Everybody's worried about foreign direct investment, everybody's worried about everything else - the banking sector - but there's a crisis on the remittance side and it's hitting the poorest hardest. The impact is going to be quite dire." Remittances keep millions of families out of poverty and make up a significant share of many nations' GDP. The flow of this money may already have dropped by about 20 per cent from 2007 levels, Mr Chami said, citing estimates from the Overseas Development Institute.

The economist, who specialises in remittances and is the co-author of several papers dedicated to the topic including the IMF study Macroeconomic Impact of Remittances, last week delivered a speech on the same topic at the Africa Arab Gulf Relations conference in Abu Dhabi. Speaking on the sidelines of the conference, he said the drop in remittances could be even more acute over the next year as the effects of the credit crunch are felt in countries such as the UAE. The GCC employs about 13 million foreign workers, 66 per cent of whom are from Asia and 28 per cent Arab.

A fall in remittances has a deeper and more immediate impact than other financial flows; although the amounts transferred are generally small, they amount to hundreds of billions of dollars that go directly to support families. When these remittances stall, entire families are left without income. As well as fuelling consumption in developing nations, remittances work as "social insurance", so the humanitarian impact of a drop could be far-reaching, Mr Chami, said.

Remittances have also propelled property booms and spending. Being "counter-cyclical" they normally play a unique role in a country's economy, providing income in a time of need, so the current situation is unprecedented, Mr Chami said. "When an economy is not doing well, capital flows out of the economy, but normally remittances flow in, because when your parents at home are in trouble, you send them more money, not less."

In addition, when unemployed labourers return home and begin looking for work there may be further problems. "Again it's going to put pressure on the countries that are most vulnerable," Mr Chami said. The total made redundant in the UAE over the past few months is unknown but thousands have been laid off, with the construction and property sectors hardest hit. According to Proleads, a property consultant, about 45 per cent of the $1.3 trillion (Dh7.8trillion) of developments in the Emirates have been delayed or cancelled.

Filipino labour officials estimate that about 3,000 of their nationals have lost their jobs in the Emirates since last October. According to Kuwait's foreign minister, Sheikh Mohammed Al Sabah, up to 60 per cent of the GCC's development projects have been cancelled. It is not only Asian countries that depend heavily on remittances from the Gulf. Lebanon, Algeria, Morocco, Syria and Egypt are among those that export white-collar workers. In Lebanon remittances make up 20 per cent of GDP, Mr Chami said.

And the effects of the lost jobs are not just economic. Theodore Karasik, director of research and development at the Dubai-based Institute for Near Eastern and Gulf Military Analysis, pointed to the potential social unrest as thousands of unemployed men, many of whom may be owed wages, return home. "There's a certain amount of discontent because of the loss of income. If these workers become dissatisfied with life here and they have to leave, they bring that dissatisfaction back with them, which then destabilises their homeland," he said. "That to me is the real key, how much that will impact those countries."

The effect on Pakistan was a particular worry, he said. "Pakistan is a country that is already fragile. At this point, you have discontented workers going back, you have a Taliban movement that's gaining strength in the Swat valley, you have discord and the tension between Pakistan and India and the insurgency in Baluchistan. "As these workers go back, how will their home country absorb that?" lmorris@thenational.ae

KEY DATES IN AMAZON'S HISTORY

July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington

July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon

1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024

1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs

2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa

2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone

The biog

Favourite pet: cats. She has two: Eva and Bito

Favourite city: Cape Town, South Africa

Hobby: Running. "I like to think I’m artsy but I’m not".

Favourite move: Romantic comedies, specifically Return to me. "I cry every time".

Favourite spot in Abu Dhabi: Saadiyat beach


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