GCC Population Restructuring Calls: Mostly Illusory, or Dishonest, or Both…………


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“Abu Dhabi is not the only place in the region to be pushing more locals into the job market. Kuwait announced earlier this year that it would reduce by a million the number of foreign workers in the country over the next ten years. More drastically, it has begun to deport foreigners for traffic violations, though it has denied that that is part of a policy to reduce their number. Saudi Arabia has also long pursued “Saudi-isation”, whereby firms are made to replace foreigners with Saudi workers. Under the current law, known as nitaqat (“categories”), companies are classified by green, yellow and red labels that denote the extent to which they have complied with employment quotas. All firms, even those with fewer than ten employees, are supposed to hire at least one Saudi citizen. The three other members of the Gulf Co-operation Council—Bahrain, Oman and Qatar—have their own variations on the theme of making their citizens work. Across the region, a further cull of jobs for foreigners looks likely……………”

Also sprach The Economist.
this talk in the Gulf GCC countries over the past decades of changing the demographic structure is either illusory or insincere, most likely both. Talk of Saudi-ization, Emirati-zation, Kuwaiti-ization is basically wishful thinking or propaganda beyond the public sector. Here is why the potentates and those that control economic power are not sincere about this goal even as they repeat it:

  • A serious move to reduce the population of expatriate labor would wreak havoc with commercial real estate. Many thousands of apartment buildings and rental property have been built specifically with a certain level of demand in mind. They are mostly owned by influential potentates and merchant families and they are mainly rented to expatriates. Imagine commercial property prices from Dubai all the way to Kuwait, imagine what would happen to them with a few million less expatriates. Imagine the population of, say, the UAE cut back by 40% (assuming about half the foreigners remain).

  • The same applies to trade, the import business. Goods are imported and ports and airports are designed to meet a level of demand that includes millions of foreign workers. Reducing the level of foreign labor would cause demand for goods and services and airline traffic to crash. Merchant families, close partners of the ruling families would not, cannot, allow that to happen.

  • Other businesses, especially services like restaurants, have been established to serve a certain population. Reducing the population would cause a severe recession, nay depression, in these sectors. On the other hand, these sectors employ mostly cheap foreign workers, and would suffer increased costs.

  • Public policy of the GCC states encourages native population growth through subsidizing births. This has led to even more demand for foreign labor. Every new citizen born will require the services of some foreign labor, from nurses to housemaids to cooks, etc. The policy has caused the share of foreigners in the total population to grow.

  • This is seen as more a cultural issue than an economic one. Most GCC countries have more foreigners than citizens. In the UAE and Qatar foreigners form about 90% (more than 80% are non-Arab), and the ratio for Kuwait is more than 60%. Even Bahrain has seen an explosion of foreign residents mainly because the rulers are importing foreign mercenaries and security agents instead of giving jobs to their own Shi’a citizens. Even Saudi Arabia has somewhere between 7-8 million foreigners among its people.

  • Import of foreign labor to the Gulf serves to create a balance within the Middle East, where some states now have labor shortages and others have high unemployment. Ironically, some Gulf states with labor shortages also have very high native unemployment (Saudi Arabia, UAE). Any major policy shift would impact other regional economies and probably impact GCC foreign relations as well.

A tough problem with solutions that are either not feasible or not desirable or both. I expect we will be still reading promises (or threats) about it twenty years from now…………