January 17, 2000

Part II: Problem of the Plenty

George Iype in Kochi

The Gulf Dream has ended. A New Reality stares at millions of Keralites.

For years, the petrodollar-flush Middle East countries -- they are collectively referred to as 'the Gulf' -- offered not only hope but better livelihood and lifestyle for millions of households in Kerala. The Arabian Dream was a safety valve for the thousands of educated / uneducated unemployed, frustrated youth.

E-Mail this report to a friend But an unprecedented exodus of Keralites from theArab nations is causing heartburn to people: for their consumption and spending have come to be dependent on the Gulf remittances. Ditto for the economy that has been driven by the Non Resident Indian deposits in banks.

The reversal of fortunes is best illustrated by a fact: in 1997, nearly 600,000 Indians (most of them Keralites) landed jobs in the Gulf. By 1998-end, the figure shrunk to 200,000, a whopping plunge of 66 per cent from the previous year's level! During 1999, less than 150,000 people managed to land jobs in the Gulf. That is one aspect of the story.

Some 107,000 Non Resident Indians quit their jobs or were thrown out of them in 1996. In 1997, 127,000 more met with the same fate. In 1998, 126,867 followed suit. And all of them returned home (read India/Kerala).

The Gulf-settled Indians face a threat to their survival. The largest chunk of Indians working in the Gulf are Keralites (2.6 million). Saudi Arabia, the largest Gulf station for the Malayalees (natives of Kerala), accounts for 38.1 per cent ofmigrant workers from the state.

No other state in India is experiencing the impact of the exodus and influx like Kerala. The Gulf turbulence has hit at least ten out of the 14 districts of Kerala. The tumult is severe in districts like Malappuram, Pathanamthatta, Thrissur and Kozhikode where the rate of migration per 100 households is above 22.

Economists and experts who have extensively studied the Gulf boom, differ on the causes behind the havoc. Some say it spells doom for the state. Others argue it won't.

Dr B A Prakash, professor of economics, the University of Calicut, says, "Kerala is experiencing economic recession because of the rapid dip in the remittances from the Gulf Malayalees."

Dr Prakash, who has prepared a number of study paperson the outflow and inflow of migrant labour in the last two decades, says if the recessionary trends continue for some years, it might turn into an economic depression.

But economists such as Dr I S Gulati, the state Planning Board vice-chairman, argue that the situation is not"as alarming as it is made out". "The Kerala economy has the resilience to withstand the influx of Gulf returnees. Moreover, Keralites are very enterprising and therefore they will relocate to newer pastures and find out new vistas after migration," Dr Gulati points out.

But all agree that the Gulf boom in the state is over thanks to the increasing visa restrictions by the most sought-after Malayalee destinations like Saudi Arabia and the United Arab Emirates.

But in the last decade, the unemployment rate in the oil kingdom has been skyrocketing. Some 20,000 Saudis walk out of universities every year. So Saudi Arabia has launched an 'indigenisation' move to employ its own nationals. The results: in 1993, some7.3 million Saudi nationals were holding jobs. By May1999, some 9.5 million young Saudis were in the jobmarket, considerably diminishing the employment prospects of Indians.

Pradeep Menon, a civil engineer, worked for 12 yearsfor a multinational construction company in Saudi Arabia. But last year, he and 28 other Indians working in the company lost their jobs as they were forced to take drastic cuts in their salaries.

Menon, who earned enough, resigned and returned to Kerala and is now planning to start a small construction firm in Thrissur. "The point is that no Indian goes to the Gulf to settle down there. All those who work there will come back at one point in time unlike the NRIs in the United States or Europe,"Menon points out.

Therefore, he says, there is nothing "alarming" in the fact that there is an exodus of Indians from the Gulf. "It has to happen necessarily. But the only worrying factor is that the number of the returnees these days is higher than those who keep their there," he observes.

The economic recession in the Gulf due to the oil price fluctuations is also said to have led to wage and job cuts.

In 1998, and during the first six months of 1999, the price of oil in the global market had gone down by $ 25.7 a barrel, mainly because of the recession in some South East Asian countries. The fall in the oil prices has compelled many Gulf countries to reduce dependence on migrant workers and instead focus on building a workforce from among their own nationals.

But the Death of the Gulf Dream has caused innumerable problems for many in Kerala, especially in the Malabar region in north Kerala which accounts for more than 60 per cent of the Gulf Malayalees.

Travel agents, a prospering tribe till recently, have either shut down or handle little business. Business volumes in dominant Gulf pockets like Chavakkad have declined by more than 50 per cent between 1996 and 1999. The distress sale of gold -- once considered a safe investment option by Gulf Malayalees -- is on the increase.

Taxis, which did brisk business, are not plying, indicating that the lifestyle has changed considerably.

"Three years back, my monthly turnover was more than Rs 20 million. Now my turnover is below Rs 250,000. It is unlikely that my company will survive long if the trend continues," says P G Shaji, owner of a Kozhikode travel-cum-recruiting agency that employs 15 people.

According to the Kerala Travel Agents' Association, more than 40 per cent of travel and recruitment agencies in the state have folded up in the last two years. "It is not a question of making profits anymore. It is a question of survival for many of us. The Gulf boom is over and therefore our business has gone bust,"said P K Kunji-Mohammad, an association member.

There is a curious twist to this gloomy tale though. Banks in Kerala are flush with excess cash -- NRI deposits from the Gulf.

The turbulence in the Gulf has not affected the flow of the NRI money in the banks. Apparently, those who continue to work in the Gulf are raking in the millions. And the state government is now facing a problem of plenty as expat remittances touched an all-time high of Rs 142.81billion in 1999.

Part II -- Problem of the Plenty: Flush with cash, short of investment avenues


Oct 1998: Flow of NRI deposits peters to a trickle

Oct 1999: Kerala moots sensible investment of inert NRI deposits


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