The Wall Street Journal, page A8, November 1, 2007 (link for subscribers):
DUBAI, United Arab Emirates -- In this oil-fueled boomtown, which runs on imported labor, the dollar's sharp tumble is contributing to civil strife.
In recent days, thousands of expatriate construction workers walked off job sites to protest low pay and the rising cost of living. Law-enforcement officials -- who typically play down the scope of labor actions here -- have acknowledged widespread protests, isolated violence and dozens of arrests.
[O]fficials are finding it more difficult to deal with what has increasingly become one of the workers' chief complaints: A weak dollar, coupled with rampant inflation, means it is hard to send enough money home to make it worth sticking around.
The World Bank estimates that $20.75 billion in remittances was sent in 2006 from the four Gulf countries for which it has numbers: Bahrain, Kuwait, Oman and Saudi Arabia. Remittance data are difficult to track, and other estimates put outflows from the Gulf much higher. When the dollar falls against home currencies, those remittances don't go as far.
At the same time, soaring domestic demand for such things as housing and imports has stoked inflation across the Gulf. Because of its dollar link, the UAE's central bank typically can't use monetary levers, such as raising interest rates, to battle inflation. The UAE's inflation rate was 9.3% last year and is expected to be around 8% this year, according to the International Monetary Fund.
In recent interviews, officials at the ministries of economy and labor say there is no sign of an impending labor shortage. Plenty of workers are eager to come into the country to take the place of leaving workers, they say.