The amount of money UAE workers transferred home last year fell about double the global rate as salary freezes and job cuts hit the country's foreign breadwinners.
Foreign workers sending less cash to the folks back home
The amount of money UAE workers transferred home last year fell about double the global rate as salary freezes and job cuts hit the country's foreign breadwinners. About Dh45 billion (US$12.25bn) to Dh50bn was transferred by workers to their home countries through exchange houses and banks last year, a decline of 10 to 15 per cent from the previous year, said Mohammed al Ansari, the chairman and managing director of Al Ansari Exchange, one of the biggest providers of exchange services in the UAE.
"We expect 2010 to remain at the same level. We have seen a down trend in Dubai and other emirates but a rise in Abu Dhabi in the last year," he said yesterday on the sidelines of the Money Transfer Dubai Conference 2010. Globally, remittances to developing countries decreased by 6 per cent to $317bn last year, figures from the World Bank show. Widely viewed as a shadow sector to banking, the money transfer industry enables migrant workers to send some of their pay to their families, who can pick up the funds at local post offices, transfer agents or other outlets.
The decline in transfers from the UAE was linked to the tens of thousands of job losses in the country that were in turn connected with the global financial crisis. It is estimated that between 10 and 15 per cent of the workforce in Dubai lost jobs in the first three months of last year before the employment market stabilised. Many of those laid off were labourers in the construction industry, and many workers in that sector use money transfer services.
"It makes sense to see a decline in remittances in 2009 as it was a year of correction after 2008, which was the peak of the economic cycle," said Marios Maratheftis, the head of research at Standard Chartered Bank based in Dubai. "The construction and real estate sector are unlikely to see a recovery this year, and that employed a lot of people from the Indian subcontinent who transfer money home."
About 40 per cent of the money transferred through Al Ansari Exchange is sent to the Asian subcontinent, about 35 per cent goes to other Middle East countries, and the rest goes to Europe, North America and Australasia, Mr al Ansari said. About Dh18bn was transferred through the exchange last year, he said. The business has 90 branches across the Emirates. "Our estimate is that globally the decrease will stop this year, so in a sense we are seeing the first signs of a recovery," said Massimo Cirasino, the head of the payment systems development group at the World Bank.
In the past, remittances have proved counter-cyclical to economic crises, said Mr Cirasino, citing the example of the Asian financial crisis, during which Asian nationals working abroad sent home more money to help their families absorb the impact of the downturn. "This crisis is different as it originated in sending countries where migrants work, and as some of them have lost their jobs, we haven't seen any counter-cyclical increase," he said.
The flexibility of the UAE's labour market and future growth in Abu Dhabi would ensure the country was well placed to see a rise in remittances, Mr Maratheftis said. firstname.lastname@example.org