Perspectives on the global economic meltdown

Suraj · Post by **Suraj** » 01 Dec 2009 00:07

I agree with Swapan Dasgupta that India should use this opportunity to help Dubai, in return for a greater Indian role there. Few seem to recall that the area was essentially an extension of India just a few decades ago, and even used the Indian rupee as legal tender. It is important that India builds overwhelming influence in a financial hub like Dubai, to channel greater investment into India. Greater influence will also enable us to obtain from them what they've not provided in the past, i.e. co-operation regarding criminals based there.

svinayak · Post by **svinayak** » 01 Dec 2009 00:19

Hari Seldon wrote:OMG, when it rains it pours, eh?

Now sri sri Niall 'Knowall' Ferguson is spinning yarns of what the rise and fall of empires portend for the current fiscal crisis afflicting the khanate.

An Empire at Risk

Check this out
http://www.c-spanvideo.org/program/id/215473

US Foriegn and Economic Policy
Participants spoke about U.S. foreign policy issues, globalization, the state of the world's economy, and America's future role in world affairs. They also responded to questions from the audience.

ldev · Post by **ldev** » 01 Dec 2009 00:27

Suraj,

If the rulers of Dubai are not inclined to listen to their big brothers in Abu Dhabi what are the chances that they will listen to the "Hindis" from India?

Dubai was always a momentum play (asset value play) as gamed by the rulers there. Everything was on track until the credit crisis which resulted in something inconvenient called "cash flow servicing ability of your loans" being brought back to the forefront. This is something which should be the bedrock of any debt but has been forgotten with the new fashions in finance.

The historic Indian connections were there in the time before the UAE was established as a nation and before the advent of oil wealth in 1974. Times have changed irreversibily. There will be no going back to that pre 1971 situation.

Let us not foreget that what the region has is oil and gas. Dubai has virtually no oil and gas. It makes far better sense for India to build bridges with those countries in the region that do have oil and gas such as Qatar and Iran across the waters. A defence relationship with Oman is far more mature and probably far more advanced.

Sure, if India has more money than it knows what to do with, it can throw a few billions down the Dubai roulette wheel.

RamaY · Post by **RamaY** » 01 Dec 2009 00:33

^^^

IDev-ji

This point goes against your post in National Agenda thread.

Let us not forget that what the region has is oil and gas. Dubai has virtually no oil and gas. It makes far better sense for India to build bridges with those countries in the region that do have oil and gas such as Qatar and Iran across the waters. A defense relationship with Oman is far more mature and probably far more advanced.

If Indian national agenda for next 40 years is to achieve energy security that is in line with its agenda on environment, then our geopolitical agenda need not depend upon the nations that do have oil and gas.

On the other hand, India becomes the lender in this case and can present the conditions that suit its national interests. Whether the state of Dubai can find a better deal is an open game.

ldev · Post by **ldev** » 01 Dec 2009 00:45

RamaY,

If you have been following the news re the Dubai debt situation, I believe that Dubai World in the past few months has been urged to sell some of their investments especially overseas to raise the liquidity necessary to honor payments becoming due such as this Sukuk Bond due on December 14 which has trigerred the crisis. They have refused to do so.

Exchanging money for land in the UAE ias you have suggested is a strict no no. I would think that if this is presented as a serious proposal, Sheikh Zayed the President of the UAE will laugh it out of the door.

The problems of Dubai are not because the UAE as a whole does not have enough money. Even the most conservative estimates of the Abu Dhabi sovereign fund place it at just above $300 Billion - enough to pay off Dubai World's upcoming debt. But the credit crisis has given Abu Dhabi an opportunity for a realignment of power within the UAE with Abu Dhabi getting the whip hand over Dubai. In this interneceine confrontation, outsiders such as India who make laughable propositions such as exchange of $10 Billion for land in Dubai will be laughed out of the door by Abu Dhabi.

As far as self sufficiency in energy is concerned, that should be India's goal for 2050. Obviously fuel for transportation will be probably one of the last few areas where oil will hold out due to its unique energy characteristics. Till such time, access to such sources of energy such as the Gulf and Iran should be developed, nurtured and protected and hence the Qatar and Iran relationships.

Suraj · Post by **Suraj** » 01 Dec 2009 00:51

ldev: I'm not advocating a return to the pre-oil relationship; that was just context. My position is that India must have control over its periphery. It is not in our long term interest to have a powerful financial hub close by that we do not have a tight economic bear hug with. I'll give you the Taiwan example - while their Pan Green faction strenuously advocates independence or at least a separate identity, they are under no illusion that their futures don't revolve around the 800lb gorilla next door.

That Dubai didn't listen to Abu Dhabi in the recent weeks/months is far too short term a view. It is in our interest to ensure that Dubai's long term economic future (particularly in view of the depletion of oil) is tied to India. Using an opportunity like the present one is just one step in that direction. That doesn't mean not engaging other countries like Oman and Qatar, and I don't see this as one or the other. They may be or have been hubristic, but hubris is denominated in $$.

Pulikeshi · Post by **Pulikeshi** » 01 Dec 2009 01:02

ldev wrote: If the rulers of Dubai are not inclined to listen to their big brothers in Abu Dhabi what are the chances that they will listen to the "Hindis" from India?

Because their brothers from Bigger "Hindis" India can perhaps balance them against big brothers in Abu Dhabi

Notice, being sensitive to internal takaleef is indeed causing us to be myopic to external opportunities.
I certainly understand, there are no guarantees, but heck is it not worth trying!

shravan · Post by **shravan** » 01 Dec 2009 01:04

Russia Today: Homelessness on rise as US pumps money into banks

http://www.youtube.com/watch?v=LbCyd4jO ... r_embedded

ldev · Post by **ldev** » 01 Dec 2009 01:23

Pulikeshi wrote:I certainly understand, there are no guarantees, but heck is it not worth trying!

Yes. If one accepts the premise that Dubai was a gamed asset play, gamed by the rulers there, then yes, there will always be something for sale there at the "right price". The question is the "right price" and what exactly will India get for the price. It cannot be anything as blatant as land because that will go against the very nature of the UAE federation over which Abu Dhabi has veto power. Other assets such as Emirates airlines by virtue of also being asset value plays (consider its traffic patterns i.e. where do the bulk of its passengers/revenues originate) is effectively a levered play on Dubai itself. Therefore for paying a premium what India will get will be something nebulous.

In the last 12 months what Dubai got from Abu Dhabi was about $15 Billion - effectively a blank cheque - and what have they done with that money? Now when Abu Dhabi is asking for more control over assets in return for giving yet more money, the ruler of Dubai has stuck his heels in the mud - or sand I should say - and is playing brinkmanship with the creditors of Dubai World.

Do you think India will fare better?

RamaY · Post by **RamaY** » 01 Dec 2009 01:43

^^^

If PRC with its ~$8K PPP per capita GDP, and ~100 million below poverty line (<$1 per day) can aspire to be G-2 and influence (rightly and wrongly) and bully the neighboring Taiwan, which has $31K+ PPP per capita GDP, what is wrong in India attempting to influence important trade routes?

shyamd · Post by **shyamd** » 01 Dec 2009 02:21

The fact that you guys are talking about extending Indian influence over Dubai, is precisely why Abu Dhabi will and has stepped in already. There is talk of Emirates Airline transfering ownership via stealth (to preserve H&D) in London. Dubai has been knocking on doors of the (wealthy)Israeli's and Iranians(20% of the traders are shia Iranians - Trade with Iran is $14billion plus...director general of Sh Mo's office is said to be of Shia Iranian origin).) already.That was Dubai's veiled threat to Abu Dhabi to losen its belt and help them out. Abu Dhabi will help them out (they don't want Shia influence there), if you look at the activities of Sh. Mo and CP etc lately, a lot of time has been spent in Abu Dhabi lately. To be perfectly honest, the leadership is pretty hostile(not overtly) towards Hind at this present time despite Kangress being in power.

Cutting ties with Iran will be tough, there are a lot of influential iranians like the DG. US can't say much as Jebel Ali is the US navy’s largest overseas port that is able to berth an aircraft carrier. CIA has been given a free run in Dubai and one hears that the CIA has taken over the visa section of the US consulate to get in touch with Iranians applying for visa's.

Abu Dhabi has forced Dubai leadership to cut ties with Israel and Iran. Israeli policy makers/businessmen were walking in and out of Dubai relatively freely. Lev Leviev(the diamond guy) is best friends with the Dubai chaps. As a result of Abu dhabi's influence, these diamond merchants and shipping business from Iran will probably be shoo'd away. Dubai’s National Day Committee has been busy promoting slogans for the 38th anniversary of statehood:“Long live the UAE” and “Live united”.

csubash · Post by **csubash** » 01 Dec 2009 03:54

Hari Seldon,
I am not sure what you know of NHS. Even though NHS receives plenty of brickbats in the press it is the one which almost every UKstani will try to protect come what may. If you are a common man or even a person of better means the amount of health security it provides is unmatched. Health care in India or US can be phenomenally expensive & you are just one illness away from bankruptcy. Yes there are always in-efficiencies in a social system, but personally I feel primary education, health care (atleast primary health care) should be state funded. The HDI of western countries are not due to shiny hospitals or excellent tertiary care but the primary care, education groundwork done decades ago. As a side note don't get carried away by stastical jugglery in Dr.Fox's report which have an agenda. Statistics as you know can be cooked to one's taste. They are worth like the credit worthiness tissues supplied by the CRAs.

csubash

Hari Seldon wrote:Just when moi was veering round to thinking that the UK-stani NHS model was a better bet than the current dysfunctional one for the khanate, turns out the Uk-stanis are grumbling about the NHS and want privatization in.... Maybe the canadian model is best, eh?

Want to fix the NHS? Go private

One of Labour's great triumphs with the National Health Service is that people now go into hospital to die rather than to be cured. It seems to render the whole debate about assisted suicide utterly pointless. Who needs a Dignitas clinic when you can check into a hospital in Basildon and be relatively certain to be taken out in a box?

It is a further achievement of our monitoring, regulating culture that even the monitors and the regulators don't seem to have a clue how bad things are – or they certainly didn't in Basildon. This exposes one of the great pretences of the NHS: that it is there first and foremost for the benefit of patients. It isn't. It exists these days mostly for the benefit of various trade unionists who are fully paid-up members of the Brown clientele, and who earn good money as petty bureaucrats trying to "manage" things that, if they need to be managed at all, could be far better done by fewer people in much more efficient systems.
Set aside the masaledaar exaggerations and rhetoric and the point comes through anyway - that the NHS has become, like all gubmint projects - a den of sloth, nepotism, corruption, inefficiency and incompetence on a grand scale.

Hari Seldon · Post by **Hari Seldon** » 01 Dec 2009 04:59

^^^Tks for the perspective csubash.

Admittedly I know little about how the NHS works and is seen to work. Good for the thread to get inputs from people on location.

shyamd · Post by **shyamd** » 01 Dec 2009 05:08

The article is a bit over the top... People have access to both Private and Govt treatment in the UK anyway. The NHS isn't so bad, yes it is pretty inefficient in some areas and they are desperate to cut costs in certain areas. But quality of healthcare is good enough. BTW the NHS has reached unsustainable levels and mark my words you will see some level of redundancies post elections. csubash is right though.

ldev · Post by **ldev** » 01 Dec 2009 05:18

RamaY wrote:^^^

If PRC with its ~$8K PPP per capita GDP, and ~100 million below poverty line (<$1 per day) can aspire to be G-2 and influence (rightly and wrongly) and bully the neighboring Taiwan, which has $31K+ PPP per capita GDP, what is wrong in India attempting to influence important trade routes?

Read what shyamd has written. There are other issues besides money involved. And if Dubai was open season, you can bet that the Chinese with 2.3T of fx would be able to handily outbid India. Their 2.3T is twice the combined sovereign wealth funds of KSA, Kuwait, UAE and Qatar.

Suraj · Post by **Suraj** » 01 Dec 2009 05:32

Not all of the Chinese forex reserves are part of their own sovereign wealth fund. Their main SWF (CIC) is approximately the same size as India's forex reserves (~$285 billion); Abu Dhabi's SWF is three times larger. About $1 trillion of Chinese reserves are locked up in US treasuries and assorted debt holdings, of which they bought an additional $250 billion within the last one year.

I don't see what's the point in arguing that we should keep our hands off because Abu Dhabi or Beijing has a bigger purse. Dubai retains a significant economic relationship with India, and it is in our interest to tie them to us. They are a major export transhipment point, and subcontinental traffic is a major part of Emirates' business model. It is not in our long term interest to sit idle when we have an opportunity to buy influence on the cheap, regardless of who bids against us.

vera_k · Post by **vera_k** » 01 Dec 2009 06:33

If this article in Mint is right, at least the Dubai real estate market seems to be populated with many Indian companies. Perhaps one way to handle this is to extend favorable credit lines to the private sector to take advantage of imminent low prices in Dubai.

RamaY · Post by **RamaY** » 01 Dec 2009 07:03

I heard that a non-local cannot own a business in Dubai. Is it true?

Idev_ji!

I know how outrageous my idea was. But how would you feel when you read in times/post about indian offer? And who knows, the horse may fly. The history witnessed even strange outcomes.

Karma may play one of its tricks and millions of Indian labour might get some relief at last.

munna · Post by **munna** » 01 Dec 2009 07:36

RamaY wrote:I heard that a non-local cannot own a business in Dubai. Is it true?

To entrench the Emiratis in ownership positions at least 51% of the stake should be with the locals in concerns outside of Free Trade Zones.

Hari Seldon · Post by **Hari Seldon** » 01 Dec 2009 07:38

Have admittedly dumped hajaar on the wall st types but to be fair, can't say say that there is *no* decency, human warmth and goodwill in wall st anymore....

Cities find the fine print is costing millions

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28 percent and rising, while home prices have plunged 39 percent since 2007.

Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

{Wow. all the more reason to have the rating agencies merge with the big I-banks now I guess...}

During late-night strategy sessions, Joseph L. Harris, Detroit's then-chief financial officer, scoured the budget for spare dollars, going so far as to cut expenditures on water and electricity. "I figured the [utility] wouldn't turn out our lights," says Harris. But there wasn't enough cash, and in June the city set up a payment plan with the banks.

The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, faces a $300 million budget deficit — and few ways to make up the difference.

Now Detroit must use the revenues from its three casinos — MGM Grand Detroit, Greektown Casino, and MotorCity Casino — to cover a $4.2 million monthly payment to the banks before a single cent can go to schools, transportation, and other critical services. "The economic crisis has forced us to move quickly and redefine what services a city can and should provide," says Bing. "While we face a tough road ahead, I believe we're on the right path." UBS declined to comment.

Detroit isn't suffering alone. Across the nation, local governments and related public entities, already reeling from the recession, face another fiscal crisis: billions of dollars in fees owed to UBS, Goldman Sachs and other financial giants on investment deals gone wrong.

Now, as many of those deals sour, Wall Street is ramping up its efforts to collect from Main Street.

"The banks stuffed customers with [questionable investments] and then extorted money from the customers to get rid of them," says Christopher Whalen, managing director at research firm Institutional Risk Analytics.

The New Jersey Transportation Trust Fund Authority, for instance, must pay nearly $1 million a month at least until December 2011 to Goldman Sachs on derivatives deals tied to municipal debt—even though the state retired the debt last year.

The Chicago Transit Authority, having entered into complex arrangements to lease its equipment to outside investors and then lease it back, could face termination fees of $30 million. The investors could collect penalties because American International Group, which backed the arrangement, has seen its credit rating tumble.

Am saddened, I must say. That said, the potential for revolution among the amrikhan popn is not to be discounted. Let the pitchforks loose!

Singha · Post by **Singha** » 01 Dec 2009 08:25

inspite of citizens anger, they are mostly sheep who will gather around the flag should some strings be deftly pulled. it is also a 'soft' police state.

the patricians and oligarchs will continue the loot

amit · Post by **amit** » 01 Dec 2009 15:36

Here's another report on the Dubai mess

Nothing spectacular but one thing caught my eye. Look at the amount of scorn heaped on the hallowed Moody's in this The Telegraph (UK) report. Wonder what gives? Any of you guys have any ideas what this is about?

Even so, most financiers are inclined to view the situation in Dubai as still containable. Moody's yesterday reaffirmed its credit rating for the UAE as a whole. They have taken it as a positive that both Abu Dhabi and the UAE have said they will not be guaranteeing Dubai World's liabilities.{And these a**holes pontificate on India's credit worthiness}

There is a sort of mad logic, I guess, in the Moody's analysis. The rating agency notes that the Dubai World restructuring has effectively reduced the UAE's contingent liabilities by highlighting the limits of government support for indebted state-owned companies.

Moody's also takes comfort from the assurance it has been given from Abu Dhabi that its sovereign wealth fund alone is worth more than twice GDP. There may be a liquidity problem, but there isn't a solvency issue.

Reassured? Me neither. The credit rating agencies wouldn't see a juggernaut heading towards them even if standing slap bang in the middle of the road facing the oncoming traffic. Moody's was still rating some CDOs as triple A right up to the point they became worthless. {this takes the cake, what a broadside, what's happening? Is Moody's planning to downgrade to a realistic level UKstan's rating?}

The report has some other interesting nuggets:

The reality is that the whole region is alive with actual and threatened acts of default. What's going on at Saad Group in Saudi Arabia is in some respects a great deal worse. Much of the money seems to have gone walk about, with local creditors being given preferential treatment over international lenders.

Once one company tries to run away from its debts, copy-cat defaults are certain. Suddenly everyone wants the same debt forgiveness. Historical ties to the region mean that British banks are in the thick of it.

The whole region and the stoopid banks built up exposure on the assumption that oil would hover in the region of US$145 a barrel. Now with oil below US$80 thanks to the economic crisis, the chickens are coming home to roost?

But wait Brit banks are the worst hit in the crisis. What will poor Gordon bhai do now?

Banks which have so far managed to avoid the worst of the banking crisis, notably Standard Chartered, now find themselves up to their necks in sand, to the delight of rivals which take great pleasure in the 'goody two shoes' of the industry getting its comeuppance. With the crisis showing signs of spilling over into the developing world, the previously good are being felled alongside the bad.

Royal Bank of Scotland, which during the boom seems to have acted as lender of last resort to almost anyone who rolled in through the door, has predictably discovered an exposure of up to £2bn to Dubai, of which possibly as much as £500m could be at risk once creditors have received the prescribed hair cut.

For RBS, Dubai is just another bad debt among many still to be written off, yet it serves to underline recent warnings by the International Monetary Fund that the global banking industry is still less than half-way through the process of loan impairment, with perhaps as much as another $1.5 trillion to come. Western bankers have been reckless with our money just about everywhere else, so it should come as little surprise that they've had their pockets felt in the bazaars of the Middle East too.

And this one is juicy:

Only the politicians, who constantly barrack the banks for not lending more, don't seem to realise it. In the meantime, they are doing enough borrowing for all of us. Western governments may have saved us from the worst horrors of cold turkey by propping the economy up with public debt, but in the process they are steadily bankrupting themselves, and if they don't act soon, they'll end up like Dubai.

And this para is important not because of Dubai but for its implication for our Cheeni bhais:

As to whether this is the beginning of another earthquake, that depends crucially on how markets choose to react. Such as it is, the recovery in markets is only skin deep. Driven by short-term sentiment and massive policy action, it seems wholly to ignore the long-term fundamentals, which remain grim for many Western economies. After a long period of over-consumption financed by excessive borrowing, a seminal change is under way which will in time force the deficit nations to save more and borrow less.

If the bolded part happens who will buy all the stuff produced in the factory of the world?

Philip · Post by **Philip** » 01 Dec 2009 18:36

The shameful manner in which Indians are treated.It's past time to treat the f******g Arabs in similar style!

Truly they say that "EMIRATES" spells,"English Managed,Indian Run,Arabs Taking Enormous Salaries".

There is a huge shortage reportedly in India itself in the construction sector (Maharashtra was badly hit after Raj T's infamous edict to all North Indians to leave crippled the industry last time),so whu should we allow outr nationals to worklike slaves in ther desert,when they can earn decent salaries at home in the same industry? We should not allow unskilled "slaves" to be treated so inhumanly in a Muslim country that treats Indians worse than beasts of burden.

Sacked by text, the Indian workers who built Dubai

They were treated as slave labour by their Arab paymasters. But at least they had a job – until now

By Andrew Buncombe in Delhi
KARIM SAHIB/AFP/GETTY IMAGES

Asian workers make up a large proportion of Dubai's labour force. India in particular is expected to be hit by the loss of jobs and money sent home in remittances

There was no need to panic, insisted the minister. The Indian government was closely monitoring the fall-out from the crisis in Dubai but was not expecting a flood of migrant workers returning home. The current problems would likely soon blow over.

But Sajid and many of his colleagues from the north Indian city of Meerut would take issue with the comments of Vayalar Ravi, the minister of overseas Indian affairs. Having returned from Dubai to India for the Muslim holiday of Eid, dozens of them have received text messages abruptly telling them their jobs no longer exist and that they should not return to the Gulf.

"It was early morning when I received a text from my office telling me I need not bother returning to Dubai," said Sajid, who had been working making tiles. "My contract has been discontinued and my work permit stands terminated. [My office] said my dues will be sent through the post and my belongings will be duly returned."

Restructuring plan fails to lift Dubai stocks
Gulf state turns its back on Dubai World's $59bn debt

As news from Dubai continued to send stocks and spirits tumbling – yesterday it was revealed that Dubai World, the heavily indebted property arm that last week asked for extra time to pay back more than $60bn, was not guaranteed by the emirate's government – the shock waves were also resonating through the communities responsible for providing Dubai and other cities in the Gulf with much of its low-cost labour.

There are millions of poor, impoverished labourers from South Asia in the Gulf region. Indeed, the long-enjoyed boom that saw cities such as Dubai carve out a new niche for excess and opportunity was built on the backs of such migrant workers, who are often treated as little more than bonded labour. Drawn from India, Pakistan and Bangladesh and often paying hundreds of dollars to a middle man to secure a job, these workers – on arrival in the Gulf – find conditions are often atrocious and that they have virtually no rights. Many have complained of being prevented from leaving.

The upside of the hardship for the large numbers of South Asians who make their way to the Gulf – Indians are said to make up more than 40 per cent of the population of Dubai alone – is the amount of money that gets sent home in remittances. Figures suggest that in 2007, Indians living in the Gulf sent a total of $27bn to their families.

For some states, the money sent home is a considerable slice of the total economy. In Kerala, for example, such remittances make up around 22 per cent of the state's income.

Speaking from Thiruvananthapuram, the state's finance minister, Thomas Isaac, said he believed that even if the Dubai crisis did not rock India in its entirety it would affect Kerala "very much". "Half of the workforce in the United Arab Emirates are Malayalis [people from Kerala] and it seems certain that the construction activity in Dubai is going to take a hit," he said. "The impact is that the Dubai real estate market will decelerate."

Mr Ravi, the central government minister, did not agree. Having spoken with Indian consulates in the Gulf, he said authorities believed that while the Dubai World crisis would have international implications, it would not lead to large job losses for migrant workers. He said, however, that despite such an assessment, the government was planning to announce a comprehensive package to rehabilitate those Indian workers who do return from the Gulf. "It will take some more time to operationalise the fund," he added.

But for Sajid and his friends in Meerut, in the state of Uttar Pradesh, the harsh reality has already struck.

Another migrant labourer who had lost his job in Dubai, Noor Mohammed, wept as he told the Times of India: "We had wanted to save money to get our families to the UAE. Our dreams lie shattered."

Slaves and skyscrapers: The workforce feeling the heat

*The UAE's huge construction boom of recent years has been fuelled largely by south Asian migrant construction workers, who work in the grimmest of circumstances. Human Rights Watch estimated in 2006 that at least half a million migrants are paid a little over £100 a month for their work in a country where the average per capita monthly income is close to £1,300. There is no indication that their circumstances have improved since. Migrants can end up working 12 hours a day or longer, six days a week, in fierce heat. In 2005, the Indian Consulate registered 971 deaths of its own nationals, at which point it was told to stop counting. Suicide among the men is rife, with 100 or more of them dying by their own hands in 2007. Such conditions come as a grim surprise for newcomers lured by agencies with promises of lavish pay, only to find their passports confiscated, wages slashed and huge debts owed. And they form a sharp contrast to the lives of the wealthy western ex-pats in finance, IT and tourism – 50,000 to 150,000 of them, on vast tax-free salaries.

Thomas Mendelsohn

Raja Bose · Post by **Raja Bose** » 01 Dec 2009 21:21

Philip, Are they treated any better in India? - that too for lower salaries. For the guy who is a daily wage labourer, he is willing to sacrifice his comforts (and sometimes his life) in order to get relatively better wages for his family. No easy answers here, unfortunately.

KarthikSan · Post by **KarthikSan** » 01 Dec 2009 22:01

^^^To add to it, what will the effect of all these returning workers be on wages in India? Now you suddenly have skilled (welders, plumbers, electricians etc) and unskilled labor in the hundreds of thousands if not millions in the job market. Does the Indian construction industry have the capacity to absorb all this extra labor?

ramana · Post by **ramana** » 01 Dec 2009 22:30

RB and KS,
So is the idea to let them rot in Dubai?

KarthikSan · Post by **KarthikSan** » 01 Dec 2009 22:43

ramana wrote:RB and KS,
So is the idea to let them rot in Dubai?

No. I'm just saying that there shouldn't be any pretensions of milk and honey flowing in the construction industry in India. I personally know a few people (welders and electricians) who left for the Gulf just last year after years of working for my dad's company. They had decent salaries if not huge and they were treated like family but they found something attractive in the Gulf compared to India. That to me means Indian wages are still not as good as the Gulf. Let them come back and share in India's growth. And let's hope V. Ravi can put together a good rehabilitation package and not some election stunt like offering every returnee X amount of rupees. I think this may bode well for India in the long run if these folks are given good vocational training and placed in the manufacturing industry.

Marut · Post by **Marut** » 01 Dec 2009 22:47

Unskilled labour maybe treated quite unfairly in India - I have seen it myself so will not try to gloss over it - but that is no reason for them to be left to the whims of the sheikhs in the middle of a desert in a god forsaken place. Whilst the conditions in India aren't the best they are certainly better than the inhuman conditions they live and work in the Gulf. The money is the only thing that keeps these labourers soldiering on. Also things have improved enough in India over last few years so these folks will actually be treated much better than in Gulf. Of course they will not be minting money like the Gulf and they will have to live with that.

WRT to excess supply of skilled workers, we have never had enough of them in the first place! Why do you think the Chinese workers were being allowed into India? The return of these workers will be a very good thing for us as it will reinforce the supply of qualified labour and help jumpstart our quest for creating and upgrading our infrastructure and other facilites. God knows we have long ways to go on this front. GOI has already announced ambitious plans for roads and other projects. With more powerplants and such being built we will definitely keep all of these folks busy for quite sometime. All the GOI needs to do now is to put their money where their mouth was. Rest will resolve itself pretty quickly!

IMVHO, this is a very good opportunity to kickstart our construction industry into a higher level similar to the one we had during the Golden Quadrilateral project days. The amount of opportunity made available at that time led to many companies improving their practices and innovating along the way to accomplish their tasks within the set targets.

Marut · Post by **Marut** » 01 Dec 2009 22:58

KarthikSan wrote: No. I'm just saying that there shouldn't be any pretensions of milk and honey flowing in the construction industry in India. I personally know a few people (welders and electricians) who left for the Gulf just last year after years of working for my dad's company. They had decent salaries if not huge and they were treated like family but they found something attractive in the Gulf compared to India. That to me means Indian wages are still not as good as the Gulf.

There is no way Indian wages will compare with the ones in Gulf. The main attraction of the Gulf is the higher salaries combined with the employer usually taking care of food, accommodation and transportation. This results in most of the salary being remitted back home. This money is way more than what you can pay here. But the downside is that they can't have their families with them for most part and there is no social or cultural life for them other than their fellow workers. Just as some of your dad's employees went to gulf and stayed on, a few of friends' family also went to Gulf but came back in a few years as they didn't think the money was worth the sh1tty(their words, not mine) life they had to live out there. So it's not always about money. People have to make the choice based on what their priorities and goals are.

Let them come back and share in India's growth. And let's hope V. Ravi can put together a good rehabilitation package and not some election stunt like offering every returnee X amount of rupees. I think this may bode well for India in the long run if these folks are given good vocational training and placed in the manufacturing industry.

V Ravi will most probably do some electoral stunt for sure, given that the Mallus will be a pretty big group in the Gulf returnees and he has to cater to his constituency. But a more workable and sustainable approach will be to initiate various infrastructure and building projects along with encouraging the private sector to start the same. This will create many more jobs which can quite easily absorb the influx of the labour from Gulf. This along with starting more ITI type vocational training institutes has more chance of success.

Suraj · Post by **Suraj** » 01 Dec 2009 23:00

This topic was discussed in the economy thread a few months ago. Skilled and semi-skilled labour availability in India is not easy. This requires construction companies to train people, and pay wages above what they'd otherwise pay if labour were readily available. The return of these labourers will have positive and negative implications. The increase in the number of skilled craftsmen and construction workers will be good for the construction industry. One of the negatives is the social pressure due to people returning home and displacing the Biharis and Oriya expat labourers who are common in the south.

RamaY · Post by **RamaY** » 01 Dec 2009 23:09

Raja Bose wrote:Philip, Are they treated any better in India? - that too for lower salaries. For the guy who is a daily wage labourer, he is willing to sacrifice his comforts (and sometimes his life) in order to get relatively better wages for his family. No easy answers here, unfortunately.

KarthikSan wrote:^^^To add to it, what will the effect of all these returning workers be on wages in India? Now you suddenly have skilled (welders, plumbers, electricians etc) and unskilled labor in the hundreds of thousands if not millions in the job market. Does the Indian construction industry have the capacity to absorb all this extra labor?

Since most of the skilled labor (welders, plumbers, electricians etc) moved to Dubai type opportunities, the domestic construction sector is pulling semi-skilled labor from rural India. This resulted in significant strain on the agriculture sector, which is labor intensive. I know for a fact that In Andhra the farming-labor shortage is so severe that people are willing to invest in capital intensive automated equipment.

To my knowledge, the return of millions of skilled labor will have the following impact
- Eases the stress on farming industry, making the food grains a little affordable (provided the cost-savings are passed to the customer)
- Brings in skilled labor with their exposure to somewhat efficient processes, procedures. This might improve the overall efficiency of infrastructure sector (managing large projects achieves PRC level efficiencies, as we discussed in other threads)
- Takes out the wind from PRC sails as ~25K Chinese labor will be sent home. China has to find work for these people who are exposed to a democratic world

- In the long run it will be beneficial for the labor sector. The overall working conditions and even pay gets better in India. They will have a better alternative (close to home) to the abuse of arab-sheiks. And eventually they can demand more from future Dubai employers

Raja Bose · Post by **Raja Bose** » 01 Dec 2009 23:33

ramana wrote:RB and KS,
So is the idea to let them rot in Dubai?

From our perspective it might seem that they are rotting in Dubai. From their perspective, they feel they rot even worse in India while getting paid worse - how does one answer that? The point is that we cannot claim all is fine and dandy in India without making some fundamental changes in terms of wages and working conditions. All empty rhetoric about "working for the country" and "one's own home country" is meaningless if the inhuman sheikh who pays a higher wage is replaced by the lesser-inhuman desi who pays a lower wage. India is not the west - people still subscribe to strong family bonds across all levels of society and are willing to endure extremes if it ensures their family's well being.If you ask the workers they will unanimously say that work conditions in Middle East are really bad and they would rather not be there. However, if you ask them if they will go back to India - they will say that they would like to but good opportunities need to be there first.

ramana · Post by **ramana** » 02 Dec 2009 03:01

RamaY wrote:I heard that a non-local cannot own a business in Dubai. Is it true?

Idev_ji!

I know how outrageous my idea was. But how would you feel when you read in times/post about indian offer? And who knows, the horse may fly. The history witnessed even strange outcomes.

Karma may play one of its tricks and millions of Indian labour might get some relief at last.

Robert Fisk of Independent doesn't think so.

X-post form ME thread...

Philip wrote:A very happy Eid to all! I'm sure celebrations are breaking out all over the Middle east and the Gulf,but one worthy sheikh who must be wringing his hands is the dear old Sheikh of Dubai.I poasted in the Eco thread yesterday the news of the Dubai World woes,which have sent shock....sorry,stock markets worldwide into a tizzy.More bad news from the land built on sand is expected.In this crisis,as the Chinese say,there is always opportunity.Does it lie with India as this report from veteran Middle East insider,Robert Fisk states?

Robert Fisk: India may hold whip hand in this power game
Friday, 27 November 2009

Dubai has shocked investors by asking for a debt standstill at Dubai World, the government's flagship holding company

Allah was kind to Dubai yesterday. Just when the emirate's unspeakable wealth appeared on the point of collapse – stock markets, of course, naturally 'trembled' – along came the feast of Eid al-Adha and sent all the kings and emirs and sheikhs off to their diwans to celebrate the decision by the father of monotheism – the Prophet Ibrahim himself – not to kill his son Ismail. But then again, Sheikh Mohamed bin Rashid al-Makhtoum, knew that the week-long holiday in Dubai would close down the local markets even if it couldn't stifle the rumours.

Among the latter came the old canard that Sheikh Mohamed will have to hand over his immensely profitable Emirates Airlines to his Abu Dhabi cousin, the ever-beneficent Sheikh Khalifa bin Zayed bin Sultan al-Nahyan, who seems to spend much of his time bailing out Dubai's outrageous tourist and oligarchical ambitions. Indeed, Dubai may have the tallest tower in the world and the largest man-made island but it would help if it paid off the Japanese company that has just built the emirate's first metro system – even if trains to the airport cannot carry passenger baggage.

There are, however, two basic truths about Dubai which, predictably, have not found their way into market speculation or newspaper analysis. The first is that Dubai may soon find itself a satellite not of its Abu Dhabi capital but of India. The biggest merchants in Dubai are Indian – they run the gold market, even the bookshops in Sheikh Mohamed's playpen – and west India is only two hours' flying time away. In fact, until 1962 – and you have to be an oldie to understand the emirates' economic world – the Indian rupee was the currency for most of the Gulf, including even Kuwait.

Related articles
Dubai debt shock knocks £14bn off bank shares
Traders 'panic' as LSE hit by double whammy
Leading article: The collapse of an economy that was built on sand

Johann Hari: A morally bankrupt dictatorship built by slave labour
Hamish McRae: Dubai crisis will prompt investors to look critically at sovereign debt
Search the news archive for more stories

Sheikh Mohamed's angry dismissal of his three top executives a week ago will not change this, although it might curb those who took too much advantage of the Dubai boom. The ruler may indeed have to reflect upon the future of Emirates, not to mention the invalid Dubai World, if he is to appease his friendly cousin up the road in Abu Dhabi, but in the end the emirs all know that Dubai – like the US and British banks that crashed so spectacularly this year – is too big to abandon. If Dubai World really defaults, then the rating agencies will start downgrading the whole shebang and the sheikhs and financial elite of the UAE will find it hard to get money.

There's always been a cosy relationship, of course, between haughty, starchy old Abu Dhabi and playboy Dubai. Sheikh Mohamed likes tourism and foreigners and racehorses and even the Russian oligarchs whose henchmen apparently fought a gun battle in the world's tallest building a few months ago.

Abu Dhabi, holder of the world's sixth largest crude oil reserves, believes in industry and art, occasionally poking gentle fun at its bling emirate to the east; the creation of Ettihad Airlines – ever expanding in the face of Emirates Airlines' success – was both a joke and a warning.

But deep in their golden mosques, the ruling family are asking themselves some serious questions this Islamic holiday. Why was the call for a moratorium on debt so crudely and unprofessionally put together?

As one fine source – Independent readers must take on trust how high up the ladder he is, but he should have known of this announcement and didn't – said privately last night: "It came as a shock and a surprise to everybody, not only to me but to anyone I know. All the information I had till yesterday was that everything was in hand. We had the finding for everything coming due this year – there was the $10 billion [£6 million] issued back in February and then nearly $8 billion over the past month – the money's there.

"So it's a puzzle, particularly since it was very clear, to people who knew, that the bond coming due in December was a litmus test. Everyone was planning to repay it. The people of Abu Dhabi didn't know this was going to happen. The market did not expect anything like this."

Too true. If Dubai World and all the other conglomerates symbolising Dubai were already in the process of being restructured, why Wednesday's extraordinary statement? There was talk in Dubai last night of a "Diwan revolution" although you'd think this had commenced when Sheikh Mohamed started ditching his top guys seven days ago. As one financial journalist in the Gulf put it: "To get a six-month standstill on payments for creditors, you can't just announce it before you've talked to them. They're not going to get the creditors to accept this in a couple of weeks."

Unless, of course, Sheikh Mohamed planned the whole fandango with Sheikh Khalifa. Unlikely, since Dubai's decision to allow foreigners to buy property in the emirate was taken without any reference to the nation's laws – or warning to Abu Dhabi. Or, rather than worrying about London and Tokyo, perhaps we should be watching the Indian stock market...

More from Robert Fisk

http://www.independent.co.uk/opinion/co ... 28753.html

[/quote]

What does the last bolded sentence mean?

Hari Seldon · Post by **Hari Seldon** » 02 Dec 2009 05:41

Re the Dubai mess, Bill Buiter opines:

Of the estimated $80-$90 bn Dubai owes to the rest of the world, probably between $50 bn and $60 bn is owed by private companies like Dubai World and Nakheel. The rest is sovereign debt. To put things in perspective, when Lehman Brothers went into bankruptcy protection, it owed more than $600 bn. We are talking systemically small beer here.
...
The impact of a debt deferral, debt restructuring or debt default by Dubai World and Nakheel on the wider economy of Dubai would be minor. Most of the damage has already been done. Construction has ceased on many of Nakheel’s crazier projects. Property values have collapsed. With a population that is more than 80 percent expatriate, the main effect on employment will be felt by the non-native Dubai population, and by their countries of origin, who will be getting lower remittances and who may have to absorb returning expatriates.

Of course, from a desi POV, Dubai unraveling impact is no less than that of the Lehman implosion perhaps.

More from Buiter on what Dubai debacle means for 'sovereign' default prospects elsewhere.

The massive build-up of sovereign debt as a result of the financial crisis and especially as a result of the severe contraction that followed the crisis, makes it all but inevitable that the final chapter of the crisis and its aftermath will involve sovereign default, perhaps dressed up as sovereign debt restructuring or even debt deferral. The Dubai World and Nakheel debt standstill and possible default is of systemic significance only because it may well be a harbinger of future sovereign financial distress, in Dubai and elsewhere.

From Dubai to Iceland, Ireland, Greece, Hungary, Italy, Portugal, Spain, Japan, France, the UK and the USA, the sovereign debt burdens have been at current levels during peacetime only on the way down from even higher public debt burdens incurred during wars. Watching the public debt to GDP ratios rise to levels likely to reach or exceed 100 percent of GDP by 2014 is deeply worrying, especially with structural primary (non-interest) deficits as high as they are. The political economy of fiscal burden sharing, inside nations and between nations, will be a major field of enquiry for economists and political scientists during the years to come. I am pessimistic in that regard about countries characterised by deep polarisation and political gridlock. This includes nations as different as Greece and the USA.

It is clear that nations whose public debt is mainly denominated in domestic currency and whose central bank is either not very independent or can be make dependent by the government of the day are likely to choose inflation and exchange rate depreciation over default as a way out of fiscal-financial unsustainability. That category would include the USA and, to a lesser extent, the UK. Because the ECB faces 16 national governments and national ministries of finance, the power and independence of the ECB are much greater vis-a-vis any Euro Area member state than the power and independence of any central bank facing a single national government and Treasury. That is regardless of the formal independence criteria laid down in laws, treaties or constitutions.

The practical implication of this is that the ECB will not monetise the government debt and deficits of small European Area member states. Only Germany can really push the ECB around, partly for historical reasons, partly because it is the largest and most powerful Euro Area and EU member state and partly because of the geographic reality that the ECB is on its territory – in the final analysis the German government can order a siege of the Eurotower …

For small peripheral European nations, the threat of sovereign insolvency is therefore a real one, unless EU fiscal solidarity can be relied upon to bail them out. When Ireland was about to be swept away by a wave of global financial mistrust triggered by the Irish government’s decision to guarantee effectively all liabilities of its banks, the then German Finance Minister Steinbruck made the amazing statement (which he obviously had not checked with his coalition partners, his Chancellor or his voters) that the Eurozone countries would not let one of their own go into default.

The year that has passed since then has made this implicit commitment to a Eurozone, let alone an EU cross-border sovereign bail-out rather less credible. All EU sovereigns are, to varying degrees, in fiscal dire straits. We may well see in the next few years the first sovereign default by an old EU15 country since Germany defaulted on its debt in 1948. If the travails of Dubai wake us up to that possibility, they will have done some good. Sovereign defaults are not acts of God. They are the result of choices. If we continue to play the political game in a business-as-usual mode, there could be quite widespread sovereign debt restructuring throughout the advanced industrial world. If we grow up, we can avoid the worst.

Sobering thoughts, those. Sovereign default by an EU15 state will send mkt tremors that jackup bond yields across the board everywhere, seems like to me...

Suraj · Post by **Suraj** » 02 Dec 2009 06:07

Can't happen. Most, like UK, have AAA rating onlee

Hari Seldon · Post by **Hari Seldon** » 02 Dec 2009 06:10

About Truth being sometimes stranger than fiction and all ....

Arming Goldman With Pistols Against Public

“I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names…..

Has it really come to this? Imagine what emotions must be billowing through the halls of Goldman Sachs to provoke the firm into an apology. Talk that Goldman bankers might have armed themselves in self-defense would sound ludicrous, were it not so apt a metaphor for the way that the most successful people on Wall Street have become a target for public rage.
...
Common sense tells you a handgun is probably not even all that useful…As for carrying a loaded pistol when you venture outside, dream on. Concealed gun permits are almost impossible for ordinary citizens to obtain in New York or nearby states.

In other words, a little humility and contrition are probably the better route.

Until a couple of weeks ago, that was obvious to everyone but Goldman, a firm famous for both prescience and arrogance. In a display of both, Blankfein began to raise his personal- security threat level…He keeps a summer home near the Hamptons, where unrestricted public access would put him at risk if the angry mobs rose up and marched to the East End of Long Island.

He tried to buy a house elsewhere without attracting attention…Then, Blankfein got permission from the local authorities to install a security gate at his house two months before Bear Stearns Cos. collapsed…. Blankfein somehow anticipated the persecution complex his fellow bankers would soon suffer. Surely, though, this man who can afford to surround himself with a private army of security guards isn’t sleeping with the key to a gun safe under his pillow. The thought is just too bizarre to be true.

So maybe other senior people at Goldman Sachs have gone out and bought guns, and they know something. But what?..

There you have it. The bailout was meant to keep the curtain drawn on the way the rich make money, not from the free market, but from the lack of one. Goldman Sachs blew its cover when the firm’s revenue from trading reached a record $27 billion in the first nine months of this year, and a public that was writhing in financial agony caught on that the profits earned on taxpayer capital were going to pay employee bonuses…

No, talk of Goldman and guns plays right into the way Wall- Streeters like to think of themselves. Even those who were bailed out believe they are tough, macho Clint Eastwoods of the financial frontier, protecting the fistful of dollars in one hand with the Glock in the other. The last thing they want is to be so reasonably paid that the peasants have no interest in lynching them.

Read it all.

Yves at naked capitalism meanwhile, opines

This isn’t hard to understand at all. Goldman ran afoul of one of Machiavell’s big rules: “Men sooner forget the death of their father than the loss of their patrimony.” Or its 21st century variant: “You can take from all of the people some of the time, and some of the people all of the time, but you cannot take from all the people all of the time. ” But the banksters, and Goldman in particular, have been determined to push the limits of those formulas, and are learning, much to their surprise, that they neglected to consider the intensity of the backlash that might result from their considerable success in extracting rents from the populace. Or did they?

For the record, in the 1980s, people in the industry were greedy on a much more modest scale. A nice (and I mean nice, not ostentatious) apartment on the Upper East Side, private school for the kids, summer home, nanny, and a BMW or equivalent meant you were successful. And pretty much all i-Bankers, those at Goldman included, were careful not to flaunt their wealth. There was genuine horror when the story broke that Mike Milken made $500 million in a single year. It was seen as not as a titanic achievement, but as confirmation that something crooked must be up at Drexel.

In all seriousness, having grown up in a parts of the country where hunting season (deer and turkey) were a big deal, I get nervous when people who have little or no history of using firearms start toting them. There are rules most people who use guns routinely are taught, and my experience is that those individuals are far more careful than newbies who have seen way more movie and TV gunplay than real world use.

WTH...

Hari Seldon · Post by **Hari Seldon** » 02 Dec 2009 06:21

Suraj wrote:Can't happen. Most, like UK, have AAA rating onlee

IMO, there's truth to that too. The legitimate pvt parties buying long bonds (those with maturities of 5 yrs or more) are no longer around. Even the cheenese have wizened up and bid for short term treasuries, aajkal.

The only parties still buying long bonds are the central banks themselves via their infamous QE schemes.

And we by now well know that the central banks cannot be bankrupted because they print their own money.

So, am sure the reasoning in high brow banking circles must be that the current sham can sustain forever. Good luck with that is all I can say.

ramana · Post by **ramana** » 02 Dec 2009 07:40

Hari, Can Singapore, Hong Kong or Macau get Dubaied?

Reason why I ask is read the Fisk article.

Just like Lehman everyone knew it was on the brink and suddenly loans get called.

Nandu · Post by **Nandu** » 02 Dec 2009 07:53

Some details on the Dubai "bonds".

http://norris.blogs.nytimes.com/2009/12 ... tle-reward

svinayak · Post by **svinayak** » 02 Dec 2009 07:57

ramana wrote:Hari, Can Singapore, Hong Kong or Macau get Dubaied?

Reason why I ask is read the Fisk article.

Just like Lehman everyone knew it was on the brink and suddenly loans get called.

I predicted this sometime ago.
The global financial system from London is from the old money - Bank Of England.
Dubai, HK, Singapore were the outpost of this system and it was growth after the WWII

Reckless debt, risky investment has taken the foundation of these smaller center which do not have large mortgage backed assets to save them,.

The old system and the bankers are resetting the financial system so that these risks are taken away and balance is restored.