Gulf States Reconsidering Reliance on Foreign Labor
Under the strain of the coronavirus crisis and plummeting oil revenues, sentiment grows to replace expatriates with Gulf citizens
The oil-rich Gulf Arab states are struggling to deal with steep downturns in their economies and ballooning state deficits as a result of the coronavirus lockdowns. Many are resorting to tough austerity measures, cutting spending to make up for lost revenue. Saudi Arabia has gone as far as to triple its added-value tax, from 5% to 15%.
VAT was first introduced in the wealthy kingdom in January 2018.
All six Gulf Cooperation Council (GCC) members − Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (all the Gulf Arab countries except Iraq) − are looking to reduce expenditures in the face of crashing oil prices that have devastated their main source of revenue.
The economic hardship has exposed the fragile financial situation in the Gulf. The International Monetary Fund expects a sharp decline in the economies of the Gulf states due to the double blow from the strict measures taken because of the coronavirus and the record drop in petroleum prices.
The governments in the Gulf are looking at every possible way to save money. They all say that it is time to stop relying on foreign laborers and replace them with local workers.
“There is a responsibility on the government to appoint Kuwaiti citizens to jobs first,” Hashim M. Majid, a Kuwaiti activist, told The Media Line, adding that there had long been a trend of advocating “Kuwaitization” of employment.
Approximately 70% of the 4.7 million people in Kuwait are expatriates, a proportion that has remained relatively stable since the mid-1970s.
The time had come for Kuwait’s ministries to put “us” as their “top priority” when it came to jobs, Majid said. “The unemployment rate increases and increases in Kuwait, and the corona pandemic revealed a defect in the state ministries.”
Putting Kuwaitis’ needs first did not make him anti-immigrant, he insisted. “I am not against immigrants. I am one to defend them but opportunities must be given to Kuwaiti youth,” Majid said.
The Gulf countries brought in huge numbers of foreign workers from the 1960s to the 1980s, using their oil and gas revenue to pay lucrative salaries.
A large chunk of the workers are Arabs, mainly Egyptians, Palestinians, Jordanians, Syrians and Lebanese working in education, medicine and commerce. Others come from India, Bangladesh, the Philippines and other Southeast Asian countries and work in construction, the health sector, commerce, and as domestic help.
But the dive in oil prices in international markets is expected to invigorate programs to “nationalize” jobs, replacing hundreds of thousands of expatriate employees, especially those working in the state’s administrative apparatus and public sector companies.
“All advisers and government employees are Egyptians,” claimed Majid, who said that there were more than 1.4 million Egyptians in Kuwait, making them the second-largest foreign group after Indians. There are about 1.3 million Kuwaiti citizens.
“The problem is with one nationality and I am talking about the Egyptians, which is part of the foreign labor that has taken over sensitive positions in Kuwaiti ministries,” he said.
Majid said that the problem with the Egyptians was that they had allowed themselves to “interfere” in the country’s policies and also to open the door to bringing in more Egyptians to work in the tiny emirate.
There is a fear in Kuwait that many Egyptians intend to settle in Kuwait permanently.
The demographic superiority of Egyptians in Kuwait, he said, “poses a threat to our national security.”
According to local estimates, foreign workers in the Gulf as a whole make up about 40% of the population, including an estimated 20 million Asian laborers.
Many say serving the massive number of foreigners has “exhausted” the health and education sectors, putting pressure on infrastructure.
Saudi political analyst Abdel Azizi Al Enezi told The Media Line that when oil prices are high, no one notices the weight foreign workers put on the local economy.
“You can’t imagine the amount of money that expatriate labor drains from my country’s reserves,” he said.
Al Enezi said only those who were needed could stay; others must return to their countries.
Mohammed Al-Bishi, a Saudi journalist specializing in economics, told The Media Line that the kingdom was reviewing all of its options including regarding foreign labor.
“Many difficult economic decisions are being implemented to reduce spending. Foreign workers deplete the Saudi treasury,” he said.
An estimated 31% of the 35 million people in the kingdom are expatriates and according to official figures, in 2012 they filled 66% of jobs
The value of remittances sent to Gulf workers’ countries of origin totals more than $100 billion annually. Such monetary transfers from the Gulf region constituted 26.8% of the global remittances in 2017. The UAE and Saudi Arabia were ranked second and third globally, with $44.4 billion and $36.1 billion sent overseas, respectively.
But many argue that dispensing with hundreds of thousands of foreign workers may not be in the best interest of the host countries.
Adel Khorafi, a Kuwaiti politician, warns that laying off foreign workers would not be easy, as it could have dangerous effects on the Gulf economies.
“There are many posts that we desperately need filled and don’t have enough local skilled people to fill all of the positions. We need to be wise before making such a decision,” he said.
And on the lower end of the prestige scale, many of the jobs held by foreigners are seen as unacceptable by Gulf citizens, who would refuse to fill them.
The Kuwaiti Municipal Affairs Ministry has decided to stop hiring foreigners and to replace the ones already in service with Kuwaiti nationals, drawing vocal support.
Kuwaiti MP Safa al-Hashem has fiercely attacked the presence of foreigners in her country. She has in the past called for two separate systems – one for citizens and one for expatriates. Hashem is notorious for her populist comments against foreigners living in Kuwait, including banning foreigners from obtaining driving licenses and taxing them for walking on the streets.
The Kuwaiti government has promised to get more citizens working, achieving high levels of “Kuwaitization” in many jobs and sectors.