Tuesday, March 17, 2009

Foreign Worker Expulsions Hit South Asia

As the global economic crisis continues to take its toll in US, Europe, Middle East and East Asia, South Asian workers overseas are being let go in large numbers

Faced with rising unemployment in Malaysia, the Kuala Lumpur government on Tuesday said it will reduce the number of foreign workers in the country to 1.8 million by 2010 from the present over two million. This decision has serious implications for tens of thousands of South Asians, mostly from Bangladesh, India and Nepal, who currently work in the island nation.

Malaysian minister Syed Hamid Albar said the authorities had managed to reduce the number of foreign workers by 60,000 since last March, according to media reports. Last week, the minister ordered the cancellation of 55,000 visas granted to Bangladeshis in 2007, eliciting protests from Bangladesh.

Though reliable unemployment figures are hard to find in the United Arab Emirates, there is evidence to suggest that joblessness is rapidly growing in the Gulf region. Dubai police have found at least 3,000 automobiles -- sedans, SUVs, regulars -- abandoned outside Dubai International Airport in the last four months. Police say most of the vehicles had keys in the ignition, a clear sign they were left behind by owners in a hurry to take flight. It is believed that the owners of these vehicles are mostly foreign workers from South Asia who have lost their jobs after Dubai's real estate crash, according to a DNA report.

As unemployment surges around the world due to the global economic crisis, the South Asian nations relying on large remittances from their nationals overseas will be particularly hit hard.

The United States government announced that employers cut another 651,000 jobs last month, driving unemployment up to 8.1 percent. Job losses in December and January were even higher than previously reported. There is anecdotal evidence that many of those losing jobs in IT and high-tech sector are H1-B visa holders. Laid-off foreign workers are scrambling for temporary visas and seeking advice from immigration attorneys about how long they can legally stay in the country while hunting for jobs.

In Asia, in China, the urban unemployment rate officially stands at 4.2 percent. However, the Chinese Academy of Social Scientists says it is closer to 9.4 percent. In China, rural unemployment is not measured because of the difficulty of doing so.

Also in Asia, in Japan, unemployment hit 4.4 percent by the end of 2008, rising at its fastest rate in 42 years. Growing lines at food banks have been one result.

In India, unemployment officially stands at 8.2 percent. However, that number is thought to largely reflect unemployment in the organized sector of the economy, which comprises just 10 percent of the country’s workforce.

In Africa, in South Africa, economists expressed “surprise” as the unemployment rate fell to 21.9 percent at the end of last year, down from 23.2 percent several months earlier.

In Europe, unemployment in Germany stands at 8.5 percent, and in Britain, it is 6.1 percent, the highest in ten years.

In Latin America, Mexico’s unemployment rate is 4.3 percent. However, anyone in Mexico who is 14 years or older and who has worked one hour a week is considered “employed.”

Until recently, the general deterioration in regional trade balances in South Asia has been offset by large remittance inflows, which represent a sizable, and generally increasing share of GDP: during 2007, 14 per cent in Nepal, 8 per cent in Bangladesh and Sri Lanka, 4 per cent in Pakistan, and 3 per cent in India. The rising unemployment among South Asian workers overseas threatens this all-important lifeline, particularly in Bangladesh, Sri Lanks and Nepal.

According to the latest estimates of the World Bank, almost 40 percent of 107 developing countries are highly exposed to the poverty effects of the current economic crisis, less than 10 percent face little risk and the remainder are moderately exposed. Bangladesh, India, Nepal and Pakistan are ranked among the 43 countries most exposed to poverty risks, raising the horrible specter of further political instability and dangerous social strife in a very important region of the world.

Related Links:

Malaysia Pulls Visas for 55,000 Bangladeshi Workers

Unemployment surges around the world

South Asian Exodus from Dubai

World Economy Worst in Sixty Years

Global Economic Crisis and Growing Poverty Risks


Riaz Haq said...

Here's some bad news about Dubai and its impact on World markets, according to Wall Street Journal:

Stocks slumped Friday as investors reacted to a debt crisis in Dubai, with more repercussions likely on tap the next few days as traders return from major holidays in both the U.S. and Middle East.

Crude oil touched a six-week low, gold tumbled, and the dollar climbed as worried investors sought safe havens.

The stock market's slide began in Europe, continued in Asia, and then through the U.S. trading session after Dubai said it would delay repayments on $60 billion of debt from its investment company, Dubai World. The decision raised broader questions about the safety of emerging-market debt and the strength of the global recovery The Dow Jones Industrial Average was off 233 points at its morning low and ended the shortened post-Thanksgiving session with a 154.48-point decline, off 1.5%, at 10309.92, hurt by declines in all 30 components. The Dow, which entered Friday's session at a 13-month high, ended the week down 0.1%, snapping a three-week winning streak.

Traders and money managers drew some comfort from the U.S. market's recovery from its intraday lows Friday. Many point out that Dubai's main creditors are European banks, not Wall Street firms. But that could still lead to gyrations next week and beyond if investors with exposure to Dubai's troubles continue to unload commodities, U.S. shares, and other assets that have shown hefty gains this year to raise cash.

"We still need to see if there's going to be a domino effect here," with Dubai's credit woes spreading to its neighbors and trading partners, said Kevin Shacknofsky, of Alpine Woods Capital Investors. "The markets are telling us for now that this is a containable problem, but we're not absolutely certain of that yet."

In particular, traders are waiting to see details of possible aid from oil-rich Abu Dhabi to prop up Dubai. Both are city-states within the federation known as the United Arab Emirates, which was the world's eighth-largest oil producer in 2008, according to U.S. government data.

Analysts said such a rescue may have to be hammered out in the coming days, since many key players in the Middle East are away Friday for the Eid Al-Adha holiday marking the end of the annual Muslim pilgrimage to Mecca. Trading was light in the U.S. on Friday, with many participants taking an extended Thanksgiving break.

In Asia, Japan's Nikkei stock average slid 3.2%. Hong Kong's Hang Seng index tumbled 4.8%. South Korea's benchmark dropped 4.7%.

The dollar rose, with the U.S. Dollar Index, which measures the greenback against a basket of six other currencies, up 0.2%. The euro fell to $1.4960, down from $1.5017 late Wednesday.

Treasurys also gained. The two-year note was recently up 4/32 to yield 0.687%, while the 10-year note rose 17/16 to yield 3.207%.

Friday's moves in the financial markets reverse a recent trend in which investors have generally favored riskier investments, reflecting optimistism that the world was coming out of recession. But now attention is turning not just to Dubai but also to Greece, which is scrambling to refinance its mounting public debt.


Riaz Haq said...

Here's a report about the exodus of Indian workers from Dubai due to financial crisis:

NEW DELHI: There is no cause for worry over potential job losses among Indians employed in the Gulf following the multi-billion-dollar debt
default risk faced by Dubai World, Minister for Overseas Indian Affairs Vayalar Ravi said on Saturday.

"There is no need to panic," the minister told media over the phone from Chennai, adding: "I have feedback from our consulate general in Dubai and our embassies there. We are not expecting any kind of exodus of Indian workers to India."

According to Ravi, there was some impact in the Gulf region at the beginning of the meltdown last year but the situation had changed since then. "I even announced this in parliament. About 100,000 Indian workers had returned from Dubai at that time. But many of them have gone back now," the minister pointed out. "India won't be affected by Dubai's debts."

The state-run Dubai World stunned the global financial world Thursday when it announced it would need to restructure its debt, estimated at $59 billion, to pre-empt default and asked creditors for a six-month deferment.

The conglomerate has a host of companies under its fold with interests in a wide range of businesses such as realty, infrastructure, logistics and economic zones. It operates not just in the region but across a clutch of countries, including India.

The total debt of Dubai as an emirate is estimated at $80 billion. There were some concerns in India among the families of expatriate Indians working in the Gulf since the region accounts for nearly half of the country's inward remittances worth $25 million annually.

An estimated five million Indians work in the region. But key policy-makers like Ravi, Finance Minister Pranab Mukherjee, Commerce Minister Anand Sharma and Reserve Bank of Governor D. Subbarao have sought to calm the nervous, saying the impact on the Indian economy will be negligible.

Riaz Haq said...

The BBC is reporting that Dubai crisis is impacting a remote village in Bihar:

In August 2008, Bharat Bhushan Tiwari - from Akhopur village in eastern Indian Bihar - took a loan of 71,000 rupees ($1,500) from a village moneylender to pay a local agent who had arranged a job for his son in Dubai.

Mr Tiwari - who runs a small shop - was hoping for better days for his family of five by sending his second son, Jay Kumar Tiwari, to the Gulf country.

Jay Kumar had got a job as a carpenter in a Dubai-based construction company and had big dreams - he wanted to earn a lot of money to pull his family out of grinding poverty.

But last month, their dreams came crashing down when Jay Kumar was asked by the company officials to quit by 6 March 2010.

'Cruel joke'

Dubai has been hit by an unprecedented financial crisis and the tremors are being felt in far away Bihar.

"This has been a cruel joke on our fate," Bharat Bhushan Tiwari told the BBC, trying to fight back his tears.

His other two sons are also unemployed and the Tiwari family now prays that the situation improves in Dubai.

Riaz Haq said...

There are an estimated 4.5 million Indian workers in just the GCC countries, about half of them in the UAE, according to the Financial Times.

The current difficulties in Dubai are exposing India's vulnerability to the possible economic collapse in the Gulf region. The fears are deepening that remittances, worth about $27bn a year, accounting for over 50% of total remittance inflows, from the Gulf to India. The United Arab Emirates is also one of India’s most important export destinations, accounting for about $17.5bn in trade or 10 per cent of India’s merchandise exports.

In spite of repeated tales of horror by Indian workers, the Islamic Gulf nations remain a powerful magnet for Indians seeking a way out of abject poverty and deprivation at home.

The village of Akhopur is in the district of Siwan in Bihar, India- from where about 75,000 people work in the Gulf. Most work as masons, helpers, carpenters, fitters and drivers, according to a recent story by the BBC.

They often labor in abysmal conditions with little or no facilities, but many say they can at least earn a living since opportunities back home are non-existent.

In Akhopur and neighboring villages of Bindusar, Orma and Khalispur, every household has at least two people working in the Gulf.

In the wake of recent Dubai troubles, the flow of returnees is ever growing, raising fear of rising h unger and poverty in resurgent India.

Often motivated by religious bigotry rather than than genuine concern, some Indians point to the unacceptable and deplorable treatment of the poor Indian workers in the "Arbi land".

But the real question is why are the Indian workers forced to accept degrading treatment in foreign lands?

Why is resurgent India so badly failing its people?

Why are 42% of Indians forced to live on less than $1.25 a day?

Why does Indian official Syeda Hameed believe "countries like Bangladesh, Pakistan and Sri Lanka are better" than India in terms of meeting basic nutritional needs of their children?

Why have an estimated 200,000 farmers in India committed suicide in the last ten years?

Why are 46% of India's children malnourished?

Why does the world call India a nutriti onal weakling?

Riaz Haq said...

Here's an interesting Op Ed by George Fulton in Pakistan's edition of International Herald Tribune:

We haven’t got a lot to be thankful for these days in Pakistan.

But at least we are not Dubai.

Fed up with loadshedding, bombs, and TV cynicism pervading Pakistan, I recently escaped to Dubai for a holiday. Big mistake. Huge. Ten days later I returned, gasping for Karachi’s polluted, but far sweeter, air. Dubai may have the world’s tallest building and the world’s largest shopping mall, but it also has the world’s tiniest soul. It’s a plastic city built in steel and glass.

It has imported all the worst aspects of western culture (excessive consumption, environmental defilement) without importing any of its benefits (democracy, art). This is a city designed for instant gratification a hedonistic paradise for gluttons to indulge in fast food, fast living and fast women. It’s Las Vegas in a dish dash. You want to eat a gold leaf date? Munch away.

You want to drink a Dhs 3,000 bottle of champagne? Bottoms up. You want a UN selection of hookers at your fingertips? Tres bien. Let’s start with the malls. These cathedrals of capitalism, these mosques of materialism are mausoleums of the living dead. Slack jawed zombies roam around consuming food, clothes and electronics in a desperate attempt to fill the emptiness of their existence.

Whilst at the Mall of the Emirates the azan goes off. Nobody appears to move to the prayer room; everyone’s too busy performing sajda before Stella McCartney, genuflecting before Gucci, and prostrating themselves at Prada. With Dubai, one recalls F Scott Fitzgerald’s The Great Gatsby.

The people are modern day Gatsbys, buying shirts that they will never wear and books they will never read. Like Fitzgerald’s roaring 20s America, Dubai is a moral failure a society obsessed with wealth and status. Everyone is trying to keep up with the Jones’ or the Javaids. You see the goras with their perma-tans, streaked highlights and their flabby cleavages.


Riaz Haq said...

Here's a Guardian story on US penalizing Infosys for violating visa restrictions:

Infosys Ltd said on Wednesday it has reached a $34m settlement with US authorities in a case involving the widespread practice by Indian firms of flying workers to client sites in the United States on temporary visas.

The fine, which the US Department of Justice said is the largest in a case of its kind, comes as US lawmakers consider legislation that would make it more difficult and costly for Indian IT firms to send workers to the United States on temporary, restricted visas.

"Infosys denies and disputes any claims of systemic visa fraud, misuse of visas for competitive advantage or immigration abuse. Those claims are untrue and are assertions that remain unproven," Infosys said in a statement.

"There were no criminal charges or court rulings against the company. Furthermore, there are no limitations on the company's eligibility for federal contracts or access to US visa programs as a result of the settlement," it said.

Infosys, India's second-largest IT services exporter, employs roughly 15,000 people in the United States. As of March 31, about 10,800 of those were on H-1B visas, which allow an employee to stay and work in the United States up to six years, and 1,600 were on temporary L-1 visas, a company filing said.

The US investigation focused on the use of B-1 business visas and I-9 forms, Infosys has said. I-9 forms verify the identity of employees and their authorisation to work in the United States. A person on a B-1 visa in the United States can participate in meetings but is not allowed to work.

"It is likely to add more fuel to the ongoing debate around visa reforms," Chirajeet Sengupta, practice director in Mumbai at Everest Group, which advises clients on technology vendors, said on Tuesday after reports that a settlement was imminent.

"These reforms, if executed, have the potential to impact Indian service providers' landed resource model that is largely driven by access to H-1B visas in large numbers," he said.

In its statement, Infosys said only 0.02% of the days that Infosys staff worked on US projects last year were performed by people on B-1 visas.

"The Company's use of B-1 visas was for legitimate business purposes and not in any way intended to circumvent the requirements of the H-1B program," the Bangalore-based company said.

Infosys has secured roughly one B-1 visa for every 10 H-1B visas, according to a person with direct knowledge of the matter who declined to be identified.

US authorities have been looking into Infosys' use of visas since 2011. Earlier this month, Infosys set aside a reserve of $35m, including legal fees, as it worked towards a resolution of the US investigation.

The case is "an important event in the annals of Indian IT industry," Sundararaman Viswanathan, a consultant in Bangalore with Zinnov, which advises US corporations on sending outsourcing work to India, said ahead of the settlement.

"This is a common issue amongst all the Indian service providers – just that Infosys had to deal with it," he said.

"Though the Indian service providers do not intend to flout the visa regulations, there was definitely a lack of regard for certain norms and procedures. This will be fixed. There will be an increase in onsite hiring," he said.