Job Cuts in the UAE: Who, When, Why, and What Now?

Nadine Hawa for CNBC, December 2008

“It was around the end of September when we started to notice that some of our multinational clients started to slow down their decisions, and then, it was the real estate companies that made the whole subject public knowledge by unavoidably laying off hundreds of people.” That is how Mike Hynes, Managing Partner at Kershaw Leonard, one of the leading recruitment agencies in the UAE, described the beginning of what happened to be the end for many Dubai based employees.

It started in October when Omniyat properties, a small size developer based in Dubai, made the first public statement about cutting its workforce. Shortly after, the Emirate’s two leading developers, Emaar Properties, the name behind the world’s tallest tower Burj Dubai, and Nakheel, developer of what has been dubbed by some as the 8th wonder of the world The Palm Island, followed.

In November, Emaar announced it was reviewing its employment policy. A few weeks later, Nakheel announced it had cut 15% of its staff and was scaling back on some of its projects.

The real estate sector has certainly been the hardest hit in terms of numbers, but as of late, the banking sector has also been feeling it more and more.

As the financial crisis moves through the world from West to East, it started with international financial giants cutting back some of their workforce in line with global reductions. One example is Morgan Stanley, who in early December cut 10 percent of its Dubai workforce.

However, the news really hit home when Shuaa Capital, one of the regions largest local investment banks, announced that it had started redundancy consultation with 21 staff, or 9% of Dubai employees, in order to realign its cost base.

In a public statement, Iyad Duwaji, Shuaa Capital’s Chief Executive, said that their approach to managing their expenses was driven by the reality imposed on them from external market conditions, adding that Shuaa held AED 3 billion ($816 million USD) in shareholder equity as of the end of September 2008 with a very low leverage ratio.

In the larger scheme of things, not only Dubai and its labor force are being affected, but neighboring economies will also suffer the consequences of these job cuts.

Countries for which part of their income relies on feeding labor into the UAE will feel the repercussions on their respective economies.

Prime examples of big labor and staff feeding markets for Dubai are Lebanon and India. Gulf economies, (in particular the UAE, Qatar, and Saudi Arabia), employ a third of Lebanon’s workforce, and according to Lebanon’s Finance Minister, Mohamed Chatah, Lebanon has started to feel the pinch of the global financial crisis through exposure to Gulf economies. Workers remittances from the Gulf helped sustain GDP growth of 6 percent in Lebanon this year.

The question that remains is what options do these people presently have?

According to Hynes “the options are pretty slim depending on how specialized you are. If you are heavily specialized in real estate, it will be pretty tough to get another job. But if you have skills that are transferable, then your options are better. Another option is to retrain on the understanding that you can stay here, or be here.”

Living in Dubai as an expat, this is one of the worst things that can happen to you. In the UAE, no job means no sponsorship, and no sponsorship means your days in the country are counted. This often translates into going back to where you came from, and in many cases involves uprooting the family.

A lucky few will be able to find another job and remain in the country, however, at a price. That cost? A lower salary.

Mike Hynes told me that “people are going to be willing to take jobs offering lower salaries. We are seeing a softening of the demands from the candidates side. A year ago, a lot of candidates were asking for salaries that their skills did not justify…they were looking at what they needed for their lifestyle, as opposed to what they were worth to an employer. A lot of the clients we are working with are using this as an opportunity to perhaps get on board some of the skills that they previously couldn’t afford. This is a chance for the really skilled people to get into the companies that really need them.”