November 27th, 2009
Thiruvananthapuram, Nov 27 - Kerala Finance Minister Thomas Isaac, a former economics professor at the Centre for Development Studies (CDS) here, Friday said the $59-billion debt woes of state-run Dubai World will hit the state’s economy.
“This is certainly going to hit the Middle East, which means this is bad news for Kerala. Anyway, it is early days yet but we will have to closely watch the situation,” Isaac told IANS.
“Initial indication is that what happened in Dubai is a real estate collapse and one has to wait and see how they tackle it,” he added.
The financial woes at Dubai World, one of the largest global conglomerates, has left thousands of Indian families worried, as the region accounts for half of the country’s $25-billion remittances.
Gulf countries employ five million Indians, out of the 25 million total strength of the Indian diaspora in 130 countries, and Dubai being a key driver of the region’s economy, a shakeout there is seen unsettling the job market — and the incomes of relatives.
For Kerala, the Middle East too has been the backbone of its economy for close to three decades now.
A CDS study says the number of emigrants from the state went up from 1.84 million in 2003 to 2.19 million last year, while remittances shot up from Rs.18,400 crore to Rs.43,300 crore.
The United Arab Emirates accounts for the largest share of Kerala migrants.
According to the study by the CDS — an autonomous research institute — remittances from expatriates was the single-most dynamic factor in driving the otherwise dismal economic scenario of Kerala between 1975 and 2000.
The Dubai crisis comes at a time when Kerala Chief Minister V.S. Achuthanandan has challenged the financial health of Dubai-based developer Smart City, which has tied up with the state government to execute a Rs.1,500-crore IT park project in Kochi.
The foundation stone for the IT city was laid in November 2007, but there has been no progress since then due to unresolved issues between the government and the Dubai-based developer.
Referring to the proposed project, Isaac said the chief minister was right when he said Smart City Dubai was “financially broke”.
“See, they (Smart City) are also into real estate and the collapse there appears to have hit them too. So Achuthanandan was right.”