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Hilary Gush
Dubai, Oct 22: A bankrupt textile trader has fled. Electronics shops are pulling down their shutters and banks are concerned about their clients' exposure. The main cause for the upheaval in Dubai's bustling re-export business community is Russia and its financial crisis.
Moscow traders, who have been largely responsible for the huge take-off in business in the United Arab Emirates' commercial hub in the 1990s, are evaporating as the economic crisis at home means their roubles buy far less abroad.
Dubai's ubiquitous textile and electronics traders, who rely on high turnover and low margins, are feeling the squeeze.
Banks say they are unharmed so far, but are worried their clients in the two sectors, which account for more than 10 billion dirhams ($2.7 billion) in annual turnover, could be vulnerable.
"The textiles, toys, electronics and foodstuffs sectors are feeling the pinch of the rouble and southeast Asia. A few over-extended people have been burnt. But big banks know their customers well andshould cope," said a Dubai bank manager.
"We are concerned it will affect certain segments of the textile trade," Ashok Sawlani, secretary of the Textile Manufacturers Association, told Reuters, adding that the industry's latest casualty was a direct result of the Russian crisis.
He said a small trader, who had given credit to Russian buyers, fled the country in mid-September leaving about five million dirhams in debt when his clients couldn't pay.
And more closures could be in store for the 600 textile wholesalers dotted along the banks of the emirate's creek.
"In good times the Russian trade made up roughly 30-35 per cent of the business, but this has declined to 20-25 per cent in recent months. In September and October I'd say it accounted for only five per cent," Sawlani said, adding that textiles worth seven billion dirhams passed through the emirate every year.
Hotels, airports feel the pinch
Some of the city's hotels are also feeling the pinch.
"There has been a tremendous drop inRussian business. It is 25 per cent of what it was two months ago," said a hotel manager.
Apartment hotels, like his, cater mainly to what they call Russian business tourists, who visit the emirate with wads of $100 bills to take advantage of low import duties and buy cheap electronics and other consumer goods for sale back home.
But since mid-August, when Russia's financial crisis kicked in and the rouble plummeted, business has evaporated.
"We practically have no flights at all to Moscow now. They have stopped completely," said Ibrahim Chehab, the airport cargo manager in neighbouring emirate Sharjah. "Before (two months ago) we had three to four flights a day to Moscow."
Statistics from the airport, which until recently rated the Russian capital among its most important freight destinations, show total exports fell 53 per cent year-on-year in September to 5,359 tonnes. In August exports slid 45 per cent.
Airlines operating from Dubai say the cargo load to Moscow has been reduced to a mere tricklesince August.
Latest data show Russia provided the most tourists to Dubai in 1996 with 155,000, up from some 1,500 in 1992. Many tourists also enter Dubai -- a city of 700,000 -- through other emirates.
Electronics sales drop
Hisham al-Shirawi, who chairs a group of 24 electronics distributors representing 150 brands, said the fall in the number of Russian customers had been a long time coming.
"Their effect on the consumer electronics market has been enormous," he said, adding that purchases by Russians had, at times, made up more than 80 per cent of total consumer electronic sales.
But rouble weakness, higher Russian import taxes and direct marketing by some manufacturers had gradually eroded volumes.
"The decline started at the end of 1995 and continued through 1996 and 1997. It is taking clear shape right now, but we hope that this is the trough," Shirawi said.
He put the drop between 1995 and 1996 at 10 to 15 per cent and at 20 per cent between 1996 and 1997. "It's been more orless the same -- 10 to 15 per cent -- down between 1997 and 1998."
Shirawi said the repercussions were serious, as dealers worked on narrow margins, relying on high turnover and credit lines from distributors to survive. "So such a change in demand gives them a very big blow. Some have gone out of business, and you will see a few more between now and December."
He estimated annual consumer electronics turnover at 3.5-4.0 billion dirhams, down from 5.5 billion three years ago.
Money changers don't escape slowdown
Fewer Russian visitors have meant fewer foreign exchange transactions in a market which had seen the number of money changers soar in the past few years.
"It has affected a segment of our business -- the buying of foreign currencies and of travellers cheques," said Niyaz Ali, UAE manager of the Thomas Cook al-Rostamani Exchange Co.
"That has come down substantially, by 60-70 percent. But the overall impact on our business is about 10 per cent."
These are tough times for Dubai'sre-exporters, but the hardened traders used to the vagaries of international commerce say they are already hunting down new markets.
"The business will go on," says an optimistic Sawlani.
"Nothing continues forever... The bottom line is we won't die, one way or other we will open up some new markets, we will find some hungry people somewhere and feed them."
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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