13 February, 2009

Most viewed article in the New York Times today

NYT: Laid-Off Foreigners Flee as Dubai Spirals Down
“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.

No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.
Is it that bad? Wasn't that story about abandoned cars refuted -- no larger than at any other time in the recent past?

UPDATE: The Guardian says,
At the airport, hundreds of cars have apparently been abandoned in recent weeks. Keys are left in the ignition and maxed out credit cards and apology letters in the glove box.

Officials put the number of vehicles at 11. "No one believes that. There are 11 cars abandoned just on my street," said Anne, 26, a fashion editor from London.
The Guardian story discusses the plight not just of the Westerners, but of the expats from the subcontinent:
unlike their British counterparts, construction workers from India, Bangladesh and Pakistan cannot abandon lives in the glove compartment of a 4x4. Most took loans to pay agent fees to come to Dubai, and their debts will follow them home. "I sold our land and took loans in the village to come here," said Imran Hassan, a 20-year-old Bangladeshi farmer. "I paid the agent £2,000 to bring me. He said I would earn 1,500 dirham [£287] a month, but we are paid 572 dirham. When I return people in the village will want their money but I have none."

A Welsh construction site manager said he had protested to his boss about the treatment of labourers. "We tell them to bring their clothes to work one day and then we send them home. It makes me feel sick. I asked why it had to be done so quickly and I was told a lot of them commit suicide and we don't want that on our hands."


Anonymous said...

God I hope it's true if only for the "crashed" real estate prices. I'm gonna buy me up some land and/or houses yo!

But seriously, the magnitude of Dubai's stupidity (and many, including people on here, and myself one of them) were talking about this, or something like this, ages ago) leaves me breathless.

Anonymous said...

More from the same story:

Some analysts say the crisis is likely to have long-lasting effects on the seven-member emirates federation, where Dubai has long played rebellious younger brother to oil-rich and more conservative Abu Dhabi. Dubai officials, swallowing their pride, have made clear that they would be open to a bailout, but so far Abu Dhabi has offered assistance only to its own banks.

“Why is Abu Dhabi allowing its neighbor to have its international reputation trashed, when it could bail out Dubai’s banks and restore confidence?” said Christopher M. Davidson, who predicted the current crisis in “Dubai: The Vulnerability of Success,” a book published last year. “Perhaps the plan is to centralize the U.A.E.” under Abu Dhabi’s control, he mused, in a move that would sharply curtail Dubai’s independence and perhaps change its signature freewheeling style.

I said that on a different post not 4 days ago. This is going to be very very fun to watch play out.

DUBAI JAZZ said...

John B. Chilton asks: is it really that bad?

“At the moment there is a readiness to believe the worst,” said Simon Williams, HSBC bank’s chief economist in Dubai.

Abu Dhabi Blogger said...

I am sure it is much worse than the 11 cars that the government claims are parked there. The whole world is going through what is now becoming an unprecedented financial crisis. Dubai is not insulated, neither is Abu Dhabi (My firm JUST started laying people off).
Whatever the economic situation, it is about time the region let go of this indigenous culture of secrecy. Transparency is progressive, secrecy is by its very nature, self-destructive.

Anonymous said...

Well we all loved the benefits for Capitalism on Steroids. Now we have to suffer the consequences and hope it just passes away and good times are back again. Perhaps this is what happens when one sells one's soul to the devil.

Just Grin and Bear it.
- FR

hemlock said...

layoffs are real but parts of dubai becoming ghost towns? where?

Anonymous said...

i think our situation is way better than europe and the states and many other parts of the world.

Anonymous said...

Anonymous said...
Well we all loved the benefits for Capitalism on Steroids. Now we have to suffer the consequences and hope it just passes away and good times are back again. Perhaps this is what happens when one sells one's soul to the devil.

Just Grin and Bear it.
- FR

Agreed. This is a "correction" that is due. As for Dubai and Abu Dhabi not being insulated. no, they arent, but Abu Dhabi has huge buffers in place. Same buffers that helped during say the 1st gulf war. Dubai doesnt have that. I dont think ghost towns are happening, but like I said, I hope it does happen at some point because I'll be buying.

L'Insolente! said...

$$ crisis? What $$ crisis? Bwaah haaa haaa!

Give us some stiff upper lip, the rest of you! :)

BTW, is there any Ferrari amongst the dumpred cars at the airport? It's okay to just drive them away if the owner gave them up, right? Say yes (to both!) somebody!!

rosh said...

"I'll be buying"

Me too.

"Ghost town"
"Debtors Prison" (?)

"3,000 cars sit abandoned in the parking lot at the Dubai Airport"

A few weeks ago, I flew off DXB's T3. I *was* at the parking lot, there weren't 3000 cars, not even close.

The lack of accountability in the media leaves me flustered 'cause it feels like they can sensationalize just about anyway, and get away with it.

FR, totally agree. Perhaps it's a correction or a slow down (subjective). I'd think this is how all economies function. And, in several ways, it's positive. Folks can break, breathe, evaluate from the past, and move forward.

Anonymous said...

I was scared that this economic crisis was happeneing. Then i became happy coz that meant cheap cars, cheap apartments, cheap everything thing else..and no traffic.

Now its a few months in, and the word is is that the economy will stabilize by mid 2009 and return in 2010... and i didnt gain anything from it.

Everything is still so expensive and traffic still bad.

And whats with these banks calling and sending me text messages everyday asking me to take out new loans and credit cards?

I am beginning to think this crisis in the UAE is all hyped by the media and doesnt really exist.

Anonymous said...

"I'll be buying"

Me too.

No, You stay over there in Sharjah you traffic lover you!!!!! Grrr!!!!

rosh said...

Anon 19:46 - similar scene here(NYC/tri-state). Home prices remain somewhere in hyper space, it's insane. Property taxes, more ridiculous. Nothing has come down, except of course, lots of snow. Oh! however, we've had excellent sales on clothes, furniture, cars, electronics - huge ass sales!! Shopping in America has become more diabolic - saaweet!

lol ABIT - Oh! I would if SHJ would allow non-arabs to buy/own property. Hell, I'd buy this *second* :p Horrendous traffic is more so given horrendous driving culture, lack of respect/sensibility - the roads aren't all that bad.

ayiyiyi said...

how many of us would walk around the streets of dubai wearing those wear-on placards announcing "Come to me, i will give you money so u can buy watever luxuries u plz! pay me back in easy installments"

i guess if u were comfortable doing the above, only then ud be fine placing ur money in a bank that is doing the same albeit in a more sophisticated manner via sms, billboards and cheesy radio ads!

serisouly how many of us are fine with our money being lent out to ppl so they can spend like crazy and run off when they can't pay it baq?

MT said...

in the silly world of economics where they have "invisible hands" and lots of cyclical theories - cycle of this and cycle of that - they shud call the idea of easy credit the "cycle of just-plain-daftness"

i mean come on - banks loan folks money they wud probably earn in an year and most likely save in 5 years and tell them to go spend however they want!

the result, ur market is flush with borrowed cash with ppl using the money to buy like there is no tomorrow. prices sky rocket. sales boom. companies increase production capacity. profits surge. we thinks we r booming. salaries rise to unsustainable levels to keep ppl from defecting to the competition and keep up with inflation.... when one day its time to pay the borrowed money baq :)

aah yes. then u realise essentially what these ppl were spending was probably what they wud have spent after saving up for months and months. instead of a earn, save and spend society we became a borrow, spend and payback (with zero savings) society.

where do most stand today. banks were blinded by the prospect of interest income to realise they were lending money mostly to ppl who never could pay back in the first place. sooo. our credit based economy has essentially spent on purchasing stuff they would under normal sane circumstances have bought over the course of maybe 3-5 years after saving up. so we had essentially 5 years of economic activity in a single year

the situation we are in now is the paybaq phase. this is the time when those who borrowed have maxed our their credit limits and need to paybaq. but how will they paybaq!???!?! basically the economy that thought it was booming and gave them super-ultra-high salaries to get loans in the first place now realises there is no sales - so u gotta leave. they have no income to paybaq from.

their bloated profits and salaries were coming via those folks buying up using bank borrowed money. credit based economies have burned through the money banks loaned. those who took the loans have no way to pay them baq. those who have the cash (that has essentially come via ppl who have borrowed from banks) no longer want to spend in 'uncertain times'. hence more money is vanishing from the economy as it stays tucked away in lockers causing more ppl to default - i.e. the cycle of just-plain-daftness :)

now instead of companies realising they need to retain their staff, they are makin another blunder - mass firings. instead the time is to rethink salary levels which were unsustainable in boom times. u gotta bring them to sane levels. there has to be a revision of the salaries and perks to bring them in line with the times. kicking employees out only means they are feeding the economic downturn AND
hitting their chances when the 'good times' come baq...!!

for most its a case of packing up and leaving. who is gonna payback when they can just walk out knowing full well no one is following them? they came, they borrowed, they enjoyed their big cars, fancy dinners, high flying lifestyle and now when the going got tough they are just walking away.

bailing companies out is no solution. this new mantra of "too big to fail" has to be kicked in the butt. u may like to hear what jim rogers has to say about the current state of the economy. search jim rogers on youtube.

Remember we in the emirates are still not as badly affected with the cancer that is easy credit. not as bad as the US or britain. we STILL have a chance to correct ourselves. so lets learn from mistakes other economies have made and fix our system. its not too late

Dubai Entrepreneur said...

Here is what I think. I think Abu Dhabi is bluffing. I don't think they have the 'buffer' they claim to have.

Bluffing is a good move, but I really doubt these guys have the money they say they do. Arabs have always been good at pretending to have more than they did.

All in all, I think Dubai is better positioned for the long-term haul over Abu Dhabi. I think Abu Dhabi needs to grow up and stop acting like a jealous little brother.

Tough love, whatever. This is pure envy and it looks ugly.

So, you're wondering, what makes me think that Abu Dhabi is bluffing? Injecting money into Abu Dhabi banks is what gave it away.

Go ahead, laugh. Many people have laughed at my predictions. I'm pretty good at them though. And yes, you'll have this make-belief-banker ABIT telling us all about his family and his daddy and brothers and uncles.. and how they have the money's world in Abu Dhabi.


Bush Mechanic said...

Somebody mentioned ghost towns...Empty towers in the Marina, or how about the completed and empty suburb on the Outer Bypass Road behind the Arabian Ranches. Or the almost completed housing developments that seem frozen in time

Lirun said...

abu dabi must be suffering too with the price of oil dipping from over 140 six months ago to around 40 a barrel these days..

im not sure how easy it is for them to dish out money..

are recovery plans being discussed by the government..

if people are fleeing in panic maybe its a good time to revise the laws to do with debt and perhaps consider that a mass exodus of foreigners (given that demographic composition) could totally ruin the country..

Anonymous said...

If they amend the banking ruule for debtors by reducing the intrest and some additional options add with the current scenario like pay this much percentage of outstanding and get rid on the loan..I'm wishing!!it may happen!!all the people will pray for this world..

Dubai Andrew said...

I think this is the time to start giving 2nd class citizens to expats living or born in Dubai for many years. I am not saying give us your passport but allow us to live in Dubai freely and without a sponsor, allow us to start our own business without a local agent or sponsor..now its the time Dubai, if this move is not made, people will just get up a go. Property in the US is far less then here, so why would I buy a house in UAE without citizenship, when I can get a US citizenship, buy property in the US, live in the US and have my rights like a normal human being.

Anonymous said...

lol ABIT - Oh! I would if SHJ would allow non-arabs to buy/own property. Hell, I'd buy this *second* :p Horrendous traffic is more so given horrendous driving culture, lack of respect/sensibility - the roads aren't all that bad.

How is it that I know a Pakistani dude who bought an Apartment there?

And you're wrong. The roads are very very bad.

Anonymous said...

People are leaving Dubai & comming to Abudhabi hoping to find work;however, I don't know how much Abudhabi can take?!!!!!!!!

rosh said...

ABIT: It is the current law - also read the fine print on adverts of homes for sale. Perhaps Pak dudy bought his place at the onset - else he's got a home in AJ/SHJ border, or he's got the mama of all wastas.

Seriously, as you drive away from city center into suburbs and towns on afternoons/weekend mornings, it's quite nice.

L'Insolente said...

MT, wow, me impressed! U smart fella.

Beg to differ on the mass firings though. By 50% only. Differ I mean. You got it no doubt, smart as you are! It's for the others see, lest they think I mean reduce firings by 50%. Or something like that.

Wanna know why I differ? Call me, too tired to write long impressive paragraphs like you :p

i*maginate said...

I checked the NY times link after some dinner-party conversations. It seems the crunch is over-hyped in the UAE, though not baseless.

Of course high overheads during the crisis need to be met with lay-offs, but this should not spell complete disaster and mayhem.

AD has the cash and demand, but DXB always has, and still will too ;-) So if any Ferrari owner wants to pack their bags back to Bolton, let me have the keys :)

Sunil said...

can someone please clarify an important point here.....in the USA if you get into a purchase money mortgage, you might lose your down payment when you default, however the bank cannot come after your personal assets or put you in prison. in all the time ive spent in dubai and as an avid real estate investor i have never heard the debtor prison issue brought up. is it the case that you are personally liable for the mortgages you get into in dubai if you can no longer make the payments? any thoughts on this? so basically property investors in dubai have to make sure they have enough cash to pay for the property in the event of a job loss? this just does not sound right. with no jobs there wont be cash to pay for the homes and thus you lose your visa and have to leave the country. but being put in prison? i am not so sure this sounds right.....

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