STEVE INSKEEP, host:

It's Morning Edition from NPR News. Good morning, I'm Steve Inskeep. The global economic trouble has reached the Persian Gulf. It's affecting a construction boom that had seemed almost magical in places like Dubai. That boom depended on cheap labor, which came from countries like India, Pakistan, and Bangladesh. Now the downturn raises questions about how the Gulf states might deal with large numbers of unemployed foreign workers. NPR's Peter Kenyon reports from Dubai.

PETER KENYON: Although the growing understanding that the international financial crisis will not spare the Gulf has dampened spirits here, it's still hard to find a Dubai hotel room that's not surrounded by a cacophony of construction noise.

(Soundbite of construction noise)

KENYON: One worker on a project on the busy Sheikh Zayed road in Dubai pauses to take a break. He gives his name as Mahmoud and says his project, part of the new metro system that's due to be completed in 2010, seems secure. But he worries about some of his fellow laborers.

MAHMOUD (Construction Worker, Dubai): Too much problem. One man is...

KENYON: In his very rudimentary English, Mahmoud says the pay is poor, the conditions are harsh, and some companies keep the worker's passport and two months' pay to keep him from running away. If the work dries up, he says, many people will be at the mercy of their companies to get home. Analyst Mustafa Alani at the Gulf Research Center says he doesn't think people in the oil-producing states of the GCC, the Gulf Cooperation Council, are prepared for a sharp downturn in development activity - neither the developers, the investors, nor the migrant workers who could be hit first and hardest.

Dr. MUSTAFA ALANI (Senior Adviser and Program Director, Security and Terrorism Studies, Gulf Research Center): We're talking about six million Indian workers employed in the GCC. Possibly 50 percent of this workforce, they're going to lose their jobs in the region. And they have either to stay as illegal immigrants or they have to go back to their country to seek employment.

(Soundbite of people shouting)

KENYON: On the outskirts of the city lie the labor camps - cramped, dirty, two-storey concrete barracks that sleep six to 12 to a room, according to human rights activists. Young men tout cell phone bargains, offering calls home to India or Pakistan or Bangladesh. Men line up patiently to wash themselves. A dumpster sits in a great pool of standing water. Stark as they seem, labor advocates say these are far from the worst conditions in the Gulf. A closer look at the tiny rooms finds them equipped with air conditioning units that the laborers say do work in the brutal summer heat.

After two years of strikes by angry workers and condemnations by international NGOs, the larger companies have invested in improvements for their workers. Assistant professor Chad Haines at Cairo's American University has studied the plight of Gulf migrant workers. He says the first impact of the coming downturn and tight lending market could be to put these recent modest improvements at risk.

Dr. CHAD HAINES (Assistant Professor of Anthropology, American University, Cairo): You know, it becomes an opportunity for a lot of the corporations then to not follow up on, sort of, laws that have been passed in the last couple of years drawing attention to the issues of exploitation there. This might be an excuse then to sort of backtrack on a lot of that.

KENYON: Many economists argue that the Gulf states have the cash and the incentive to soften the regional impact of the financial crisis. And they doubt that governments here would allow the streets to be flooded with unemployed South Asians if there is a sharp downturn. But that raises other troubling questions. For instance, is Pakistan, already struggling with political unrest and terrorist attacks, ready to absorb millions of unemployed young men back into its population? The leaders of this land of dazzling wealth and desperate poverty hope they never have to learn the answers to those questions. Peter Kenyon, NPR News, Dubai.

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