Gulf States: Labor Policies, Financial Crisis and Security Concerns

9 MINS READFeb 24, 2009 | 16:46 GMT
After seeking a rescue to help cope with $80 billion in debts, Dubai has become a symbol of the financial crisis in the Persian Gulf, but it is not the only troubled economy in the region. Gulf Cooperation Council (GCC) states that depend heavily on foreign labor to keep their construction and oil industries running will face new challenges — including potential security threats — as layoffs in these sectors mount.
With property prices crashing and cranes standing motionless over abandoned construction projects on the famed Sheikh Zayed Road, Dubai has found itself in the eye of the global financial storm. Without oil revenues to provide a cushion against the downturn, the emirate finally sought a $10 billion bailout from its wealthier Emirati rival, Abu Dhabi, on Feb. 22. As Dubai tries to cope with its financial troubles, foreign workers are being laid off in droves, and mass deportations loom on the horizon. The growing unemployment rates for foreign workers could provide recruiting opportunities for jihadist groups in the region and further deepen social tensions for the United Arab Emirates as well as other GCC states, which are releasing scores of blue-collar immigrant workers. That said, the GCC states have a number of tools at their disposal with which to manage the likely repercussions. All of the GCC states suffer from the same problem: an over-reliance on foreign workers to prop up their economies. Millions of immigrants — mostly Indians, Pakistanis, Bangladeshis and Filipinos — provide the labor needed to maintain giant oil rigs and build elaborate skyscrapers in the Persian Gulf. The foreign-to-native population ratios vary throughout the Persian Gulf, though the United Arab Emirates, Bahrain and Qatar are thought to have the most extreme imbalances. These demographic issues have contributed to a heated debate among Gulf political circles in the past several years over the supposed "harm" expatriate workers have inflicted on traditional Arab society. This debate takes on xenophobic and frequently racist tones: Growing numbers of Gulf Arabs have complained about the so-called degradation of national identities and of Arab culture stemming from the influx of mostly South Asian workers. Highlighting those tensions, Bahraini Labor Minister Majeed Al Alawi claimed in January 2008 that the expatriate worker population posed a bigger danger to the region than fallout from an atomic bomb or an attack by Israel. Click to enlarge But these GCC states are in a quandary. Despite the sentiments of politicians and native citizens, foreign workers remain the primary means of fueling these states' economies. Within the Gulf region, the law of petropolitics reigns: Oil wealth provides heavy subsidies for locals, who therefore have little incentive to take the blue-collar, menial jobs that keep foreign workers employed. In order to keep their oil rigs running and construction sectors alive, these states require significant immigrant populations.

Policy Experiments

The GCC states have several ways to manage these demographic issues, and they are experimenting with more as the problems intensify. For example, all of the GCC states have attempted variations of "Saudiization" and "Qatarization" policies, which require companies to employ a certain percentage of native workers in white-collar jobs. The goal is to create systems in which native citizens gradually can acquire the skills needed to run their own industries, from the top down. However, a dearth of emphasis on technical instruction within the educational system and lack of motivation among younger cadres has hampered most of these initiatives. To deal with the blue-collar expatriate populations, GCC states enforce rigid immigration policies. In the United Arab Emirates, where layoffs are now concentrated, foreign workers' visas are automatically rescinded when they lose their jobs — and only 30 days are allotted for finding a new employer as a sponsor. If none is found, the worker is deported. Dubai also has a strict legal code that allows the government to jail foreigners for relatively minor offenses, such as traffic violations or writing a hot check. Consequently, many expatriates flee the emirate, abandoning homes and cars, once they are out of a job. Unionization is more or less outlawed in Gulf states, but that has not prevented Asian workers from rioting over low wages and mistreatment from their Arab employers. Occasionally, foreign governments attempt to step in and demand better wages and working conditions for their expatriates, but it is usually much easier for the GCC states to deport foreign workers en masse whenever a labor issue arises. Since there will always be more people looking for jobs who are willing to tolerate existing labor conditions in the Gulf, the governments have incentives to shuffle foreign worker populations as frequently as possible — preventing migrant laborers and their families from assimilating and settling in GCC countries. Recently, states like Bahrain — where foreign workers comprise roughly half the population — have experimented with more creative techniques to manage the expatriate issue. When the Indian ambassador to Bahrain became more vocal in complaints over the treatment of Indian workers, the government simply started firing and canceling work permits for Indian workers and sought replacements from other countries — mainly Afghanistan, Nepal, the Philippines and Pakistan. Bahrain and Kuwait also are mulling proposals that would limit how long foreign workers can remain in-country. They are attempting to prevent a perpetually discontented underclass — residents who cannot become naturalized citizens but are unwilling to leave — from forming. But a cap on residence periods, without corresponding policies to reduce dependence on foreign labor, effectively would set up a "revolving door" system in which new arrivals replace departing migrants, ensuring that the foreign labor force is constantly in flux.

Security Implications

Although the GCC states are unlikely to lose their dependence on foreign workers, the migrant labor pools in these countries are gradually shrinking under the pressures of the global economic crisis. Thus far, Dubai and Kuwait have been hit the hardest by downturns in the construction and property markets, and they are announcing mass layoffs and deportations. In early January, reports emerged that Dubai's Labor Ministry had been canceling 1,500 work permits per day, on average, since late October 2008. The Indian embassy reportedly expects a worker exodus: 20,000 seats already have been booked on flights from Dubai to India in March. Most foreign workers have had to flee to their home countries to avoid getting in trouble with authorities when they no longer are able to pay their bills. As remittances from expatriate workers dry up and unemployed migrants return to their home countries, militant groups and insurgent movements in countries like Pakistan, Bangladesh and India might be able to draw new recruits to their ranks. Asian workers descend from scaffolding during a break from their labors on a construction site in the Gulf emirate of Dubai on Feb. 13 But there also are large numbers of workers who simply cannot return home, and who would rather risk the consequences of becoming illegal aliens in the Gulf. Many of these South Asian natives gave up most of their belongings just to get to the Persian Gulf, and they still owe fees to the agents who helped them find work in the Arab world. If they return home, their debts will follow them. They could wind up bankrupt or worse. This has led to concerns among authorities that Dubai soon might see a rise in suicides or even a potential uptick in militant threats. The dim economic outlook raises prospects for militant groups already milling about the region — particularly the newly merged al Qaeda in the Arabian Peninsula (AQAP). Activities by this organization peaked in 2004, when jihadists staged a number of significant attacks, kidnappings and beheadings to threaten the Saudi regime. Saudi authorities, with the help of the United States, cracked down on the jihadists and co-opted key religious leaders in order to dampen support for al Qaeda within the kingdom. More recently, the defanged Saudi al Qaeda node announced a merger with a fledgling node in Yemen. However, the apparent surrender of one of the group's leaders, Mohammed al Awfi, to Saudi authorities illustrates the extent to which Saudi-U.S.-Yemeni cooperation can help to curtail al Qaeda threats and prevent a revival of serious jihadist attacks in the Gulf. Though many in jihadist circles consider the United Arab Emirates a Westernized disgrace to the Arab world, it has remained immune to the al Qaeda threat thus far. This reality is primarily a reflection of the UAE's strong security apparatus and the social and economic factors that deprive al Qaeda of a strong support network there. It also has been rumored — though STRATFOR has no information to verify the claim — that the UAE and al Qaeda groups have an implicit understanding that keeps jihadist activity focused elsewhere. Given the growing number of unemployed and disaffected South Asian workers in Dubai, AQAP potentially could find new recruiting opportunities — particularly among workers who come from Islamist backgrounds. Whether opportunity can be translated into capability, however, is a different matter. The UAE's security apparatus remains highly capable, and a militant threat will be prominent on the radar of the UAE and other GCC states as the number of layoffs increases. Moreover, AQAP still appears to be a weak movement that is vulnerable to penetration by Saudi and Yemeni intelligence services. Most of this group's activities have been concentrated in Yemen, where poorer economic conditions and a weak writ of law have provided al Qaeda with a base for operations. An expansion of operations to Saudi Arabia, the UAE or anywhere else in the Persian Gulf would require a significant expansion of the group's capabilities. That said, if socioeconomic conditions provide an opportunity, attempts could be made to exploit it and stage attacks — which would, at minimum, have the effect of spooking foreign investors in a region already gripped by financial challenges. The GCC states likely can contain any militant threats that might arise from the economic crisis, through intelligence-sharing and the work of their security forces. But whatever policies they employ to manage their foreign labor forces, the economic crisis is likely only to exacerbate the growing social tensions between Gulf governments and their migrant worker populations.

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