International Policy Digest

Photo illustration by John Lyman
World News /30 Jun 2020
06.30.20

Foreign Labour in the Gulf Amid the COVID Pandemic

The Arab states of the Gulf Cooperation Council (GCC) rely heavily on migrant workers, who account for at least two-thirds of the workforces in these six countries. Their presence in the private sector is overwhelming. Indeed, the registered percentage of nationals in GCC countries’ private sector never overcomes 20 percent. The result is a labour market with an extremely high and rigid rate of jobs’ segmentation between nationals and expatriates, which is especially evident in private enterprises, like construction, retail, and domestic services, which mainly employ low and middle-skilled foreign workers.

The coronavirus pandemic and the subsequent plummet of oil prices not only forced GCC members to deploy measures to limit people’s mobility through curfews and lockdowns, but also to address a crisis which was bound to severely damage their healthcare and economic systems. In this regard, Gulf governments implemented a two-fold strategy. First, the implementation of stimulus packages aimed at sustaining national private businesses and enterprises. Second, policies directed at supporting the national workforce by the re-nationalisation of jobs and the repatriation of hundreds of foreign workers.

As a matter of fact, GCC countries have devoted consistent amounts out of their national budgets both to provide relief in their private sector and to shield national employment. In this regard, it is estimated that their economic aid programmes totaled more than $173 billion. The United Arab Emirates (UAE) and Saudi Arabia led with $70 billion and $32 billion, followed by Oman, Kuwait, and Bahrain, which have raised $20 billion, $16.5 billion, and $11.4 billion.

The goal of the stimulus packages are to sustain private businesses by providing them with tax breaks, and by reducing, suspending, or rescheduling payment for utilities’ bills in electricity and water services. For instance, Saudi Arabia opted for a 30 percent cut in bills for April and May for companies working in industrial, services, and the agricultural sectors, and the Saudi Industrial Development Fund has recently adopted a $1 billion stimulus package to shore up more than 500 small and medium-sized industrial companies. Similarly, since April, Bahrain has exempted private companies from paying utilities for a three-month period since April and issued a financial aid package to sustain the national hospitality sector.

At the same time, Gulf states have devoted part of their funds to shield nationals’ employment in the private sector. In this regard, the Sultanate of Oman is committed to preventing businesses from firing Omani nationals unless those companies would be able to demonstrate severe production damages due to the coronavirus outbreak. The Bahraini government deployed a $570 million programme aimed at paying three-months-worth of salaries to more than 100,000 of its nationals employed in the private sector.

In addition, Kuwait announced its commitment to consistently reduce the number of foreign workers currently employed in its market to promote the recruitment of national citizens. Prime Minister Sabah Al-Khaled al-Hamad al-Sabah declared his intention to slash foreigners’ population from the current 70 percent to 30 percent. However, to better understand the implications of the PM’s statement it is essential to shed light on the two main points that could make it hard to enforce this demographic readjustment policy. Firstly, Kuwait has a population of 4.8 million people, but approximately 3.4 million of them are expatriates. This means that foreign workers represent a huge component of the Kuwaiti workforce, especially in the private sector where, according to recent estimates, less than 20 percent of Kuwaiti citizens were employed in 2019.

Secondly, by living in the country, foreign workers’ communities provide a significant contribution to the economic system not only through their working activities, but also through their economic consumption, by boosting the demand for staples, and essential services. Therefore, what emerges is a picture that presents Kuwaiti economic structure as heavily dependent on foreign workers and this seems a trend difficult to reverse at least in the short term.

According to Khaled Al-Fadhel, Kuwait’s Minister of Oil and Acting Minister of Electricity and Water, the Kuwait Petroleum Corporation (KPC) and its subsidiary companies will pursue a ‘Kuwaitisation’ policy by ending their recruitment of foreign workers until 2021.

For what concerns the repatriation issue, even the countries among the GCC that depend the most on foreign workforces, like Qatar and UAE, have heavily engaged with this practice to shield local employment from the economic and healthcare crisis triggered by the coronavirus outbreak.

In May, amid growing concerns regarding infections within the communities of illegal labourers in Kuwait pushed the government to issue an amnesty for undocumented workers, by promising that they would be repatriated if they voluntarily turned themselves in to the government. However, as the expatriation procedures took a long time to be arranged, more than 23,500 illegal workers resulted in having been detained in the camps of Abdallia, Khoslar, Mangaf, and Sebde located in the suburbs of Kuwait City. However, scarce hygienic conditions, such as the total absence of running water, sanitizer, and social distancing and overcrowding of the detention camps exposed countless migrant workers to COVID.

Gulf states have tried to redirect their citizens from the saturated public sector towards the private sector which is dominated by foreign workers. To confront this issue, Kuwait plans to dismiss over 600,000 marginal workers and to put an end to more than 25,000 contracts for expatriates working in the government sector.

Similar cases of dire detention conditions can be found in Qatar, where Amnesty International blames several national companies for having laid off and repatriated dozens of Nepali workers without having paid their owed salaries or end-of-service benefits.

In the UAE, where citizens represent roughly one million inhabitants out of a total population of almost 9.7 million, repatriations are a considerable concern. As a matter of fact, more than 450,000 Indian nationals and 60,000 Pakistani citizens have registered with the government for repatriation.

Also, it is estimated that more than 1.2 million foreign workers will flee Saudi Arabia due to the economic downturn which has seriously damaged hospitality, construction, and retail sectors, all known to be important employment basins for low and middle-skilled foreign workers.

Last but not least, in the UAE, the General Civil Aviation Authority recently decided to suspend all flights arriving from Pakistan due to the fear of a surge in COVID cases. Similarly, the Saudi Directorate General of Passports issued a statement announcing that the return of expatriates who left Saudi Arabia will be only after the pandemic ends, whenever that is.

The burden of interdependence

The economic development of the region could not have been achieved without the support of a workforce coming from the Middle East and South Asia. Working relations between employer, known as sponsor or kafeel, and foreign employees among the Gulf have been regulated through the kafala system, a form of recruitment contract which has been often labeled as a ‘contemporary form of slavery’ because it perpetuates an asymmetrical power relation. However, it is undeniable that thanks to remittances these communities of foreign labourers working in the Gulf region represent a precious and irreplaceable drive to development and economic growth for their countries of origin.

As a matter of fact, the total remittances inflow received by South Asian countries in 2018 amounted to $131 billion, and 60 percent of this originated from the Gulf region for a total value attesting at more than $78 billion. More precisely, GCC-originated remittances constitute more than half of the total capital inflow in both India and Pakistan. In fact, they stand at 61.7 percent and 66.7 percent. Indeed, remittances often are the main source of living for many households in developing countries by allowing them not only to have access t0 better healthcare and education, but also to secure their economic position and to ‘climb the social ladder,’ as happened to many families in the Indian Kerala region which once was one of the poorest areas in the country.

In this regard, even though the kafala system exposes migrant workers to dire, exploitative, and often semi-illegal working conditions – as exemplified by the phenomenon of the visa merchants (tujjar altashirat) – Gulf-originated remittances still represent for several developing countries a pivotal element to escape the poverty trap. Therefore, the economic development of those countries is strongly conditioned by growth and prosperity in the Gulf region and the current economic slowdown is a real threat to South Asian economies.

However, several critical questions remain unanswered. For instance, how Gulf governments would satisfy their citizens’ job expectations? Will national workers be able to compete in the private sector? And what will be the impact of re-nationalisation of employment in the Gulf as well as in those South Asian developing countries which strongly rely on Gulf-originated remittances? The coronavirus pandemic has exposed significant criticalities inherent in the Gulf labour market structure and those implications are bound to provoke great concern far beyond regional borders.