Pakistans exports after Dubai

The news from Dubai has raised many questions about its consequences on domestic economy in general and trade market and businesses in particular, in a time when domestic exporters are already struggling from last years financial woes.
A quick look at last years data shows how exactly recent developments in Dubai will impact Pakistan. Despite the depreciation of rupee during financial year 2009, exports from Pakistan to top five major countries, apart from Afghanistan, saw a substantial decline over FY08.
Although, export revenue from UAE, which is the second largest export destination after the U.S, also fell by 29 percent in FY09, it was largely due to 70 percent drop in the sale of petroleum products, which alone accounted for 37 percent of total exports revenues from UAE in FY08. Partially offsetting this fall, however, export of household and food items witnessed increased volume during the same period.
This makes one conclude that although total export revenue from Dubai might feel a bit of pressure if the fiasco deepens further, the impact won be too significant as the export volume of consumer goods and food items, such as rice, cotton cloth, towels and chemicals etc, which remained high in the face of global financial woes last year, is likely to remain intact.
Cement exports might ease because recent crisis would hurt construction and real estate activity in UAE. But the decrease in cement demand from UAE would likely be offset by increase demand from other developing countries, mainly from Sri Lanka and African countries, as cement exports to UAE make up just 7 percent of total cement export revenues, while share of cement exports to total export revenue is as low as about 3.28 percent.
But the alarming consequences of UAE debt turmoil will leave many expatriates jobless. And Pakistan being the second largest expatriate population in the UAE, of about 1.25 million according to UAE United Arab Emirates National Media Council, would bear a major burnt. Since the majority of Pakistanis employed in Dubai are involved in construction industry, any massive job layoff will result in higher remittances in the immediate term followed by a decline in the medium to long run.
What could turn positive though is that Pakistans lukewarm real estate industry could witness increased activity, as investors plough out funds from UAEs real estate industry and invest back in domestic market.
All the while, however, a big fear remains that Dubai could be signaling the origins of another bout of crises - just like Argentina did in 2002, Thailand did in the famed Asian financial crises and Lehman Brothers did last year.