Expatriate Outflow Adds to Economic Woes in Gulf Arab States

The coronavirus pandemic lockdown and job losses have resulted in millions of expatriates seeking to return to their home countries. A few hundred thousand who are employed in the Gulf Arab countries are also waiting to return after being stranded in their home countries. Businesses in most sectors are experiencing losses, and retrenchment has been reported across blue- and white-collar jobs. With an estimated 13% decline in employment across the region, the exit of expatriates could shrink the overall population by around 10% in the United Arab Emirates and Qatar and 4% in Saudi Arabia and Oman. About 3.5 million of 30 million expatriates in the six Gulf Arab countries could be forced to return home.

Expatriates are a huge part of the regional population, comprising over 85% in the UAE and Qatar. Most of those returning home are Indians, Pakistanis, Egyptians, and Filipinos, who form the largest expatriate communities in the region. With most unskilled and semiskilled workers living in crowded accommodations, managing the spread of the virus has overwhelmed regional governments.

Compounding the problems are unpaid salaries for expatriates in the private sector. In Qatar, migrants have protested over unpaid wages, and the General Federation for Bahrain’s Trade Unions received complaints from nationals and expatriates about the impending loss of government-supported jobs.

The governments and social support groups are providing emergency relief to ease the crisis. The Authority of Social Contributions program, for example, has delivered 20 million meals to 35 workers’ camps in Abu Dhabi. The Abu Dhabi government intervened to help 180,000 blue-collar workers fly back to their home countries between April and June. Many unemployed workers were tested for the coronavirus, with those testing positive receiving treatment at the government’s expense. The authorities also ensured that the repatriated workers received their salaries and end-of-service benefits before they returned home.

The bodies of more than 120 Bangladeshis who had died due to natural causes were repatriated from the UAE to Bangladesh in May and June after the lockdown was eased. In addition, 5,000 Bangladeshis were repatriated in 30 chartered and special flights.

Dealing with Indians, who are the biggest expatriate community in the region, has been particularly challenging. Prior to the coronavirus outbreak, 1,100 flights operated every week between the UAE and India. Since April, the lockdown has brought flight operations to a complete halt, impeding the movement of millions of people.

In a “one-way” air traffic arrangement, 125,000 of 450,000 Indian applicants were evacuated from the UAE by the end of June. This was part of the world’s largest repatriation of civilians stranded abroad, with about 365,000 Indians residing in more than 50 countries transported home in May and June.

While this arrangement addressed part of the problem, it did not tackle the plight of the tens of thousands of Indians who are Gulf residents and have been stranded in India since April. Along with logistical and health concerns, the open skies policy was a stumbling block. The UAE asked Air India not to carry passengers from India on its repatriation flights unless specifically approved by the Emirati government. The move came after the United States accused India of engaging in discriminatory and restrictive practices by leaving out U.S. carriers from the government-backed repatriation flights for stranded Indians abroad. The two governments have now agreed that UAE residents stranded in India will be allowed to fly back on the Air India repatriation flights but only between July 12 and 26. Emirati airlines have announced the resumption of regular flights to India starting on August 1.

The process of flying back about 200,000 expatriates, who are residents of the UAE but are stranded abroad, is currently underway. Since immigration services were suspended during the lockdown, Saudi Arabia extended the validity of expired residency permits and exit and reentry visas of expatriates outside the kingdom for three months without penalties. In Kuwait, only expatriate health workers can return, even if their residence visas are expired.

While the list of expatriates living in the Gulf states waiting to return home mounted during the lockdown and as their home governments faltered, the UAE’s Ministry of Human Resources and Emiratization said it was considering recalibrating its labor cooperation with countries refusing to receive their nationals. Though it did not follow through, the ministry considered imposing strict restrictions on hiring workers from these countries, activating a quota system in the future, and suspending past memorandums of understanding.

Kuwait sought to convert the crisis into an opportunity. In an election year, the anti-expatriate rhetoric gave the workforce nationalization policy fresh impetus. While nearly 100,000 expatriates have left Kuwait since April, Prime Minister Sabah al-Khalid al-Sabah said the country’s expatriates should be reduced from 70% to 30% of the population. Since expatriates are about 3.4 million of the 4.8 million people living in Kuwait, he said “we have a future challenge to redress this imbalance.”

Subsequently, a draft bill on reducing the number of foreign workers in Kuwait was considered constitutional by a parliamentary committee. The bill includes plans to replace 100,000 expatriate government employees with citizens. It also proposes quotas for different nationalities. For example, a 15% ceiling for Indians as a proportion of the total population, would reduce their numbers by more than half from the existing 1.4 million. The bill is awaiting vetting by another parliamentary committee before being voted on and potentially enacted into law.

Likewise, Oman’s bid to curtail public spending meant that contracts would not be renewed for at least “70% of foreign experts and consultants working in all civil and government units.” Private companies were also instructed to replace expatriate employees with nationals. About 35% of the sultanate’s 4.6 million residents are expatriates.

In Saudi Arabia, 1.2 million expatriates are expected to leave the kingdom by the end of the year. Since the beginning of 2020, 323,000 workers have left the kingdom. In a 6-week period from April to June, 178,000 expatriates applied for departure permits. About 10.5 million people of a total population of nearly 35 million are expatriates in a country that has proactively pursued a Saudization policy for the last few years.

While the outflow of expatriates raised concerns from some people about brain drain, the unavailability of an affordable workforce, and the overall impact on an already distressed economy, others perceived it positively. Some nationalists had blamed expatriates for spreading the coronavirus and demanded their expulsion. One Saudi columnist called for “cleansing” the kingdom of excess expatriate workers.

In other justifications arguing that foreign workers leaving Gulf countries would not lead to economic loss, it was pointed out that there would be less strain on public services and the flow of remittances would be curtailed, which would “help enhance domestic liquidity,” especially since the outflow, which was $120 billion in 2019, is expected to drop to about $100 billion in 2020.

The impact of decreasing numbers of expatriates on the Gulf states’ economies will certainly be a concern in the longer term, especially in the real estate, retail, hospitality, and entertainment sectors. Some countries may also suffer huge losses from an inability to collect indirect taxes levied to increase non-oil revenue. This is especially true for Saudi Arabia, which imposes special fees on foreign workers and their families and, in addition, recently tripled its value-added tax to 15%. One silver lining for the Gulf countries, however, is the opportunity to nationalize their workforces. But given past experiences, this is easier said than done since most nationals are either inadequately skilled or unwilling to take unskilled and low-paying jobs.

Overall, the pandemic-induced economic and social challenges are likely to be worse than any other downturn in the past. But these are likely to receive undivided attention only after the Gulf governments overcome the short-term logistical burdens associated with the outflow of expatriates and are able to measure the ebb and flow of their changing labor markets.

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