Guest workers have played an integral role in the Gulf since the 1970s where the demographic changes accompanying these labor flows occurred at an extraordinarily rapid pace. The region’s aggregate population has increased more than tenfold in a little over half a century, but in no other region of the world do citizens comprise such a small proportion of the population. While this ‘demographic imbalance’ makes the Gulf unique, what differentiates it is not its economic and demographic expansion through migration but the degree to which the region’s governments have excluded foreign workers from being integrated into the national polity. This exclusion of foreign workers is a result of a conscious policy.
Labor migration to Gulf Cooperation Council (GCC) countries are mostly governed under a sponsorship system known as Kafala. Migrant workers require a national sponsor (called Kafeel) and are only allowed to work for the visa sponsoring firm. The workers must obtain a no-objection certificate from the sponsor to resign and have to leave the country upon termination of the usual 2 to 3 years’ contract before being allowed to commence a new contract under a new sponsor. Tied to the sponsor, the migrants become immobile within the internal labor market for the duration of the contract. Consequently the sponsors benefit from non-competitive environments where they extract substantial economic rents from migrant workers at the expense of inducing significant inefficiencies in production.
The Kafeels pay workers an income above the wage in their country of origin and obtain economic rents equal to the difference between such earnings and the net marginal return from employing the migrant worker. Migrant workers are paid the initial nominal wage throughout the entire contractual period. They are even made to accept lower wages than contracted initially. Immobilized by labor restrictions, workers cannot command a higher wage even when there is demand for their services by rival firms willing to hire them in order to avoid the cost of hiring from abroad. Kafeels have also found other ways of extracting rents in recent decades by indulging in visa trading. They allow their names to be used to sponsor foreign workers in exchange for monetary gains.
Arguably, rents per-se should not directly create adverse effects because they are essentially redistributive transfers. Earnings paid to migrants are sufficient to motivate them to migrate. The migrants do not leave. But this view is over-simplistic. The combination of short contracts, flat wages, and lack of internal mobility kills the incentives for migrant workers to exercise higher effort levels in production and engage in activities that enhance their human capital. Any productivity gain would go to the sponsor in the form of rents. The system provides incentives to entrepreneurs to concentrate on low-skills, labor-intensive activities where the extraction of economic rents is easier. Such sponsor-worker behavior explains for instance why despite the massive investments in Dubai, the economy-wide efficiency levels (average labor productivity) have not improved in the last two decades while in Hong Kong, they doubled and in Singapore quadrupled.
Lessons on Governance from Bangladesh’s Garment Industry
One year ago today, in the outskirts of Bangladesh’s capital city, an eight-story garment factory collapsed of its own weight, killing 1,130 young workers and injuring thousands more. The ghastly photos of bodies trapped in the Rana Plaza wreckage provoked outrage in the wealthy world, targeted largely at global retailers who purchased garments there. North American and European consumers called for measures to ensure safe conditions and humane treatment for Bangladeshi garment workers, mostly young women from poor families in remote rural areas. Many called for a boycott of the big-box retailers and of the Bangladeshi products they sell.
I had just moved from Bangladesh to Europe at the time, and my advice to friends who asked was: “Go ahead and buy those skinny jeans or that tank top if you want. It’s the right thing to do for Bangladesh and its young workers.”
A puzzle: Sanitation is one of the most productive investments a government can make. There is now rigorous empirical evidence that improved sanitation systems reduce the incidence of diarrhea among children. Diarrhea, in turn, harms children’s nutritional status (by affecting their ability to retain nutrients). And inadequate nutrition (stunting, etc.) affects children’s cognitive skills, lifetime health and earnings. In short, the benefits of sanitation investment are huge. Cost-benefit analyses show rates of return of 17-55 percent, or benefit/cost ratios between 2 and 8.
But if the benefits are so high (relative to costs), why aren’t we seeing massive investments in sanitation? Why are there 470 million people in East Asia, 600 million in Africa and a billion people in South Asia lacking access to sanitation? Why are there more cellphones than toilets in Africa?
- United Kingdom
- East Asia and Pacific
- Europe and Central Asia
- Latin America & Caribbean
- Middle East and North Africa
- South Asia
- Public Sector and Governance
More than 1.5 billion people today reside in countries affected by violence and conflict, most - if not all - of which also suffer from inadequate and poor access to basic services. By 2030, it is estimated that about 40 percent of the world’s poor will be living in such environments, where each consecutive year of organized violence will continue to slow down poverty reduction by nearly one percentage point.
A large portion of this group presently resides in conflict-affected parts of South Asia, a region that is home to 24 percent of the world’s population and about half the world’s poor.
Despite such challenging circumstances, research shows that in many settings, development aid is indeed working - albeit with frustrating inconsistency.
The 2011 World Development Report recognizes the strong link between security and development outcomes in fragile and conflict-affected contexts. However, what the evidence is yet to show us is how exactly do you get the job done right?
“Thanks to our research program, we have been able to save the lives of at least 10 women by detecting their breast cancer at early stages,” enthusiastically says Dr. Md. Kamrul Hasan, a professor at Department of Electrical and Electronic Engineering (DEEE), Bangladesh University of Engineering and Technology (BUET), Dhaka.
Dr. Hasan is the manager of the cancer detection research project, which is one of the sub-projects awarded with research grants from the Academic Innovation Fund (AIF) program under the Higher Education Quality Enhancement Project (HEQEP). Faculty members and research students of the department joined together for the research project.
Lack of access to research grants and proper research environment has long been a major headache for researchers in developing countries like Bangladesh, especially in fields of science and technology. Bangladeshi scholars, who go abroad for their studies, often prefer to stay back in the host countries out of concern for availability of research facilities and financial resources indispensable for pursuing their academic work.
The biggest daily struggle for 28 year old mother of two Sima Begum, is feeding her young children and keeping them healthy. Nutrition is a key challenge not only for Sima, living in a slum in Narayanganj, but for women across Bangladesh and South Asia. In fact, wasting and stunting are among the most stubborn health challenges facing the children of this region.
For the last 15 months, Sima has started receiving nutritional advice as well as a small cash transfer to help raise healthy children. Through a pilot cash-transfer program supported by the Rapid Social Response Multi-Donor Trust Fund (MDTF), her 10 year old son Faisal, is eligible for a Tk 800 ($10) school stipend and her daughter Shakal, 5, for a Tk 800 income transfer. Sima uses the stipends to feed Shakal a healthier diet and to pay for Faisal’s tuition, school books and uniform.
In order to receive these stipends Sima has to ensure that Faisal goes to school and that Shakal is brought every month to the community center near her house at New Zimkhana, where her growth can be monitored. The growth monitoring is simple:
Bangladesh, the most vulnerable country in the world to the impact of natural disasters is also a leader in emergency preparedness and disaster response, particularly for cyclones, tidal surges and floods. This was achieved through 25 years of effort, which was catalyzed through two devastating cyclones, one in 1970 and 1991 that caused the deaths of approximately 500,000 and 300,000 people respectively. Part of what makes Bangladesh so strong at cyclone preparedness and response is the fact that major cyclones seem to hit Bangladesh every 3-4 years. Recurrence of this frequency is quite unique.
On the other hand, major seismic events that lead to major losses occur infrequently. Cities like Dhaka and Kathmandu, which are susceptible to major earthquakes, haven’t experienced a major shake in more than a generation. Unfortunately, a lack of frequency often leads to complacency amongst governments and citizens. Even more problematic is the very rapid accumulation of assets and population in urban environments in South Asia, including Dhaka.
Walking through the streets of Dhaka paints a picture of a city with significant structural vulnerabilities – where poor construction standards, lack of enforcement, and poor maintenance turn many buildings into potential hazards. When a building in Savar collapsed in April 2013 – killing over 1,100 people and injuring thousands more – it was a wakeup call for Bangladesh. The collapse was not triggered by an earthquake, it was the result of catastrophic structural failures, but it was a glimpse into what could happen in the event of a major earthquake.