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Monday, January 5, 2009

Dubai dream turns sour as job cuts rise

DUBAI: Dubai's rapid expansion in recent years provided jobs for millions. But the global financial meltdown has abruptly ended the dream for many people as more and more firms sack staff to cut costs.

Spectacular economic growth, spurred by a robust construction sector, lured people from far and wide to the booming city on the shores of the Gulf, tempted by high pay, low tax and - for many Europeans - the year-round sunshine.

Foreigners form most of the population in Dubai and with residency permits linked to employment many of the people who are losing their jobs face the added upheaval of leaving the country.

"I don't feel that I was wronged. This is business... But I would have preferred a cut in my salary rather than being sacked," said an Arab man who was let go by government-controlled property group Nakheel.

Another former Nakheel employee: "Only four days before we were given the termination letter, our director told us in a meeting that the situation was difficult and that the budget for our project had been cut by three quarters.

Nakheel has its fingerprints on most of Dubai's iconic projects, including three palm-shaped artificial islands and a cluster of islands in the shape of a world map.

It unveiled in early October another gigantic project to erect a 1km high tower, which, if ever built, would dwarf the unfinished Burj Dubai, currently standing around 700m high.

Property sold like hot cakes for the past few years but demand has slumped amid the global credit crunch as panicking investors and creditors fled the market.

All of sudden, the viability of the grandiose property projects has become questionable.

Nakheel's job cuts programme is one of the largest so far in the United Arab Emirates, but is far from the only one.

Damac Properties, Dubai's largest private property developer, cut 200 jobs, or 2.5 per cent of its workforce, in October.

Al-Shafar General Contracting said a few days ago it was laying off up to 1,000 workers as its order book has dropped by US$817 million (US$1 = RM3.47) since September.

Emaar, the other local property giant, said recently that it was revising its recruitment strategy and reportedly laid off 100 workers last month.

Omniyat has shed 69 jobs out a 350-strong workforce and Tameer has notified 180 employees that December 31 will be their last working day.

The job losses have spread beyond property jobs to the financial sector.

Shuaa Capital investment bank, for instance, has cut 21 jobs, or nine per cent of its manpower.

Companies in Dubai and the rest of the United Arab Emirates were until recently on a hiring spree. Some 640,000 work permits for foreigners were issued in the first quarter of this year, 306,000 in Dubai alone, according to a study published last week.


HwangDBS positive on construction sector

HWANGDBS Vickers Research Sdn Bhd said it sees the outlook for the local construction sector in 2009 as positive, boosted by the government's expenditure on infrastructure projects.

The high-profile jobs include extension of the Klang Valley light rail transit system and the inter-state water transfer.

"We expect 2009 to be the year for the government to play catch-up (after 2008's more muted allocation of construction projects) as pump priming efforts appear vital to ensure its internal Gross Domestic Product (GDP) growth target of 3.5 per cent is met and the economy does not slip into recession," it wrote in its market focus report recently.

"The (government's) development expenditure of RM53.7 billion for 2009 is a hefty 16 per cent increase from 2008 estimates of RM46.3 billion. An additional RM7 billion was announced as part of a stimulus package in November," it said.
The foreign research firm also sees improved outlook for the construction sector's margins, as building material prices have corrected sharply.

The price of steel bars at RM1,900 per tonne has dropped from a peak of above RM4,000 per tonne.

"When material prices were at the peak, the government planned to delay some projects given the higher cost. The lower cost now will allow more projects to be implemented," it said.

HwangDBS Vickers said it expects bigger construction players with good execution track records such as IJM Corp Bhd and WCT Bhd to emerge as winners given the increased focus on timely delivery.

"Apart from potential government jobs, we believe IJM will be eyeing projects in India, the Middle East and private sector jobs in Malaysia. For WCT, we expect the group to leverage on their Middle East presence for order book replenishment," it said.

Meanwhile, its 12-month target for the Kuala Lumpur Composite Index is 950 points, based on 12 times 2010 earnings.

"In the near term, concerns about growth may continue to weigh on the market. In this environment, we like stocks with relatively resilient dividend flows.

"Utility-type/concession earnings at YTL Power Bhd, PLUS Expressway Bhd and Lingkaran Trans Kota Holdings Bhd should sustain high-dividend payouts," it added.

For 2008 and 2009, DBS expects the country's GDP to grow by 5.5 per cent and 3.3 per cent respectively. This estimate factors in another 50 basis points cut in the Bank Negara Malaysia's policy rate to 2.75 per cent by end first quarter of 2009.

By Business Times