Ireland and the UAE: a tale of two crises

The histories of the two countries demonstrate the importance of migrant labour, but in rather different ways.

As an Irish citizen living in Dubai, I have often been struck by the similarities between the Republic of Ireland and the UAE: comparable populations (between 4 million and 5 million), living alongside a dominant neighbour (Britain and Saudi Arabia), and both living off their wits as commercial entrepreneurs in a competitive global business environment. The histories of Ireland and the UAE also demonstrate the importance of migrant labour, but in rather different ways. For many years after independence 90 years ago, Ireland's biggest export was its people. Hundreds of thousands of Irish left the country to seek their fortunes abroad, as my parents did in the 1940s when they went to England, and helped sustain their families by sending some of their hard-earned money back - what we call "remittances".

The Emirates, on the other hand, has been a magnet for migrant labour since its inception in 1971. The armies of workers that helped build Dubai and Abu Dhabi into world-class cities are the direct equivalent of the Irish navvies who rebuilt Britain after the Second World War. The UAE workers, too, have helped sustain their families at home by sending cash back to Kerala, Karachi and Guangzhou. The pattern changed in Ireland in the early 1990s, when rising standards of living at home reversed the labour outflow and instead made Ireland a net importer of people. There is much historical debate over the reasons for this change. British sceptics point to the generosity of the EU, which subsidised the Irish economy through grants; with the Irish responding that European handouts were only part of the story. Innate entrepreneurial endeavour and an enlightened tax regime (another similarity with the UAE) played just as important a part, they would argue in Dublin.

Whatever the reason, the past 20 years were boom-time for Ireland. The "Celtic tiger" showed the highest rates of growth in Europe and made many of its citizens wealthy. This coincided with the oil-fuelled expansion of the UAE, which had a similar effect on the lives of nationals and expatriates. The good times rolled, in Galway as they did in Garhood. Until last year. The first signs of weakness in the Irish economy came last autumn, when the full extent of the nation's reliance on property and construction became apparent. Expansion had been fuelled by a 10-year property bubble that made Dublin one of the most expensive cities in the world. The Irish banking system, in turn, was reliant on these property assets and when the bubble burst the government had to step in with the by-now familiar techniques of credit-crunch management - bailouts, nationalisation and voluntary bankruptcy.

Last week, the Irish government announced the most savage budget in its recent history. What remains of the banking sector has been reined in, exploding national debt has been tackled by ruthless public-sector cutbacks, and the lenient tax regime, the central plank of Ireland's long run of economic success, reversed, with jumps in personal and corporate rates. The entrepreneurial Irish middle classes are groaning under the weight of the enormous debts they and their children have inherited, and perhaps it will not be long before they send their sons and daughters abroad again to earn a living for them. The Celtic tiger has become the sick man of Europe, even if the illness may turn out to be less than fatal.

Compare the Irish reaction to the global economic crisis with the initiatives of the UAE. Sure, property prices in Dubai and Abu Dhabi have fallen significantly, and certainly the banking system has felt the strain. There have also been injections of liquidity into the system, most notably the US$10 billion (Dh36.73bn) government-backed bond issue for Dubai. And there are forecasts that the population will shrink as migrants head home.

The great difference, of course, is the bank of capital that the UAE has built up during the past decade of historically high oil prices. This has provided a cushion of financial security. The Irish exchequer has a black hole of billions of euros at its centre, while the UAE has a substantial cash pile. Some economic forecasters are looking at a five-year recession for Ireland; even the gloomiest of analysts believes the UAE will bounce back much faster than that.

There is a final similarity, which will stand both countries in good stead in the challenging times to come. Both the UAE and Ireland remain enthusiastic participants in the great globalisation movement, which can only help the world economy recover from its troubles. Ireland is committed to playing its role in Europe and the broader international economy, just as the UAE is an active participant in the Gulf Co-operation Council and a leader of the Middle-Eastern business community. They must surely both emerge as stronger countries.