The crash of the real estate market in Dubai has seen dollar demand plunge

[LahoreEstate]

The crash of the real estate market in Dubai has seen dollar demand plunge

KARACHI: Outflow of dollars from the country remained just 10 per cent of what it was before the collapse of the global financial system that eroded the boom in Dubai and other Gulf countries, said experts who recently returned from the region.



The exchange companies, which knew about the remittances being made to Dubai and some of them were involved in the business, said the dollar demand dropped significantly in the last six to eight months.



The experts said the trading activities between the two countries continued but on a lower level than a year ago.



‘The flow of dollars from Pakistan to Dubai has reduced to less than 10 per cent of what it was a year ago as the booming economy of Dubai has collapsed,’ said Anwar Jamal, an investor, who recently returned from Dubai after spending more than two years. He also runs currency exchange business in Karachi.



Before the collapse, which was felt during the first quarter of 2008, the outflow of dollars was very high. From the start of 2003-04, Pakistani investors were expanding their commercial ties with the Dubai economy.



The real estate boom in Dubai proved lucrative for Pakistani investors, while some top Pakistani companies having strong base in that country also entered the business and attracted investment from Pakistan.



The investment from Pakistan caused a serious dent to the country’s foreign exchange reserves, while Hundi and Hawala business accelerated unrecorded outflow of dollars from the country.



‘The property that cost 500,000 dirham in 2008 has lost 40 to 50 per cent value eroding the investment attraction, while many people trying to get rid of the investment fearing more devaluation of their money,’ said Jamal.



Exporters of commodities, including rice, fruits and textile made-ups said, ‘Dubai pays good money for their products as the country still has trading attraction for the entire region.’



‘Our exports to Dubai are not huge but the volume is intact,’ said Sultan Jamil, an exporter of readymade garments. He said Dubai was the market for branded products, while a segment of expatriate population requires less expensive products, which are exported from Pakistan, China and India.



However, the business in Dubai fell sharply as 45 per cent employees have lost their jobs while more are expected to return home.



Exchange companies said the remittances were higher from Gulf countries because the people were selling their assets after losing jobs or winding up their businesses.



Jamal, who runs a currency business in affiliation with Glaxy Exchange Company in Karachi, found no reason for higher remittance except that Pakistanis were coming back home with their remaining savings.



Another money expert said remittances were higher because Khanani and Kalia operatives were closed down. The exchange company had the largest operations in the country and was one of main instruments for bringing unrecorded remittances.



The loss of Dubai attraction slashed dollar demand helping the local currency to develop stable exchange relation with the greenback. For last six months Pak rupee remained around Rs80 per dollar with slightly bullish trend.

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