Labour rations

tauringhuang.

Sep 3rd 2008
From the Economist Intelligence Unit ViewsWire

Gulf Arab states are fretting at the rising number of foreign workers


Governments in the booming Gulf Arab states are becoming increasingly anxious at the erosion of their national cultures, as their growing economies suck in ever-larger numbers of expatriate workers. They are now devising a range of measures to limit the growth of segments of the expatriate population—in particular those at the less skilled end of the spectrum—while not impinging on the continued expansion of their economies. The concerns call into question the entire basis of the Gulf development model, entailing ambitious targets for economic growth and diversification, which cannot feasibly be achieved without a substantial increase in the expatriate population.

UAE student pool
The problem is most clearly evident in the United Arab Emirates, where expatriates account for more than 90% of the private-sector labour force, and where the population is thought to have grown by almost one-third over the past three-four years. According to the most recent census, whose results were published in 2005, the UAE's population was 4.3m; it is now generally estimated to be about 6m. The UAE government announced in early September that it is setting up a national demographic agency that will be tasked with finding ways to slow down the growth of expatriate labour imports. Among the initial measures that have been proposed is a scheme to allow students who are enrolled in UAE universities and who are the children of foreign residents to take up part-time jobs. This measure appears to be targeted at children of long-term residents from other Arab countries, who have more cultural affinities with Emiratis than do Asian and European residents, who predominate in the expatriate community. The students would be expected to gravitate towards semi-skilled jobs in the services sector that tend to be performed by Asians.

The government is also considering the establishment of ethnic and cultural diversity quotas within companies, so as to prevent certain national groups predominating. Other ideas include changing building codes so as to reduce reliance on foreign construction workers and introducing much more automation into the services sector, for example at petrol filling stations.

However, these measures will have only a marginal impact on the overall size and make-up of the expatriate population. There is no sign of any let-up in the construction activity associated with investment in infrastructure, real estate, tourism, financial services and industry, which suggests that the current total of some 1.5m expatriate building workers is only likely to increase. Once this wave of construction is completed, there will be growing demand for imported services and factory workers to operate and maintain the new hotels, offices, apartment buildings, leisure and cultural centres, transport facilities and industrial plants. The businesses importing the labour are likely to continue to insist on their freedom to recruit from whatever market suits their needs best.

Picking and choosing
Elsewhere in the Gulf, Bahrain and Kuwait provide examples of the pitfalls of trying to impose ethnic selection in structuring the labour force. Following an incident in Bahrain earlier this year in which a Bangladeshi mechanic was charged with the murder of his Bahraini employer, the government considered applying a policy of refusing to renew work permits of Bangladeshis and banning the entry of any more workers from the Asian country. However, this policy has since been quietly dropped following protests from employers' organisations. Bangladeshi workers also found themselves in the firing line in Kuwait in July, when they were blamed for instigating protests, some of which turned violent. Several hundred Bangladeshis were expelled, and there were reports that the government was thinking of adopting a policy similar to that under consideration in Bahrain. The Kuwaiti government has addressed the immediate problem through instituting a minimum wage for security and cleaning staff and through cracking down on trafficking in worker visas. However, a number of MPs have started to agitate for a national strategy to be charted for the labour question, based on targets for reducing reliance on expatriates.

A proposal to impose a limit of five or six years on the residence of foreign workers is expected to be tabled for discussion at the annual summit conference of the Gulf Co-operation Council (GCC), to be held in Oman at the end of this year.

Streamlining
The Kuwaiti response to the recent labour unrest showed that GCC governments have a pragmatic self-interest in ensuring that legitimate grievances of expatriate workers are addressed. In this vein, Saudi Arabia is considering proposals to relax some of the rigid regulations on sponsorship of workers, in an effort to create a more flexible expatriate labour market. Saudi employers have maintained near-absolute control over the lives and welfare of their foreign employees because foreign workers have generally been required to surrender their passports to their sponsors in the Kingdom (usually their employer). Foreign workers are also unable to change jobs or leave the country without their employer's permission, leaving them vulnerable to exploitation; there are frequent reports of expatriates working for months for no pay. The labour minister, Ghazi al-Gosaibi, is said to be considering a new law setting up a regulatory agency that would draw up contracts between local companies and expatriate employees, thereby diminishing the powers of the sponsor and enabling workers to find new jobs once their contracts have expired.

Mr Gosaibi earlier this year worked a shift flipping burgers in a fast-food restaurant in Jeddah, in an event staged to demonstrate that Saudis should not consider such jobs to be beneath their dignity. However, there is still a yawning gap between the pay and conditions that Saudis and other Gulf nationals regard as acceptable and the minimum that expatriates are happy to work for. That gap has probably increased as a consequence of the booming economic conditions, which in turn have driven demand for more expatriate workers.