Expats and Dubai's Economic Recovery

Roula Khalaf hit the nail on the head when she listed the obstacles to economic recovery in Dubai. One of the major obstacles that should be addressed by the UAE on a national level is the departure of expatriates who lose their jobs. Not only can such departure delay the prospects of economic recovery in the country, it can also make the downturn more severe as the economy shrinks further to account for the decrease in population.

In any economy, the decrease in the labor force means an substantial decline in the GDP, especially if the decrease is not offset by an increase in productivity. The forecast is that the population of Dubai will decrease by 13 - 17% as a result of the current economic downturn, a decrease that will certainly hinder the economic recovery as GDP shrinks further to adjust for the reduction in population. One very obvious sector that will be hurt further by the flight of expatriates is the real estate market. Imagine what will happen to the real estate prices, already in free fall, if the demand decreases as a result of population shrinkage.

Dubai will also experience a "brain drain" as skilled expats depart and find jobs elsewhere. Sure, Dubai can always recruit new people with the needed expertise once the economy has recovered, but the process of finding, moving, and socializing these people with the way things are done in Dubai will take time. It is much easier to hire skilled employees who are already in Dubai than to try to recruit people from the outside.

To deal with this problem, the UAE government needs to seriously review their residency permit laws. Losing the residency permit as a result of job loss is the main reason for the flight of expatriates. A permanent residency system similar to those in the United States and Europe might help stem that problem.