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Will Possible Labor Policies by Gulf Countries Affect Remittances to South Asia?

Ceren Ozer's picture

My entry last week gave a quick profile of the South Asian overseas workers and discussed the crucial role of remittances received from the Gulf Cooperation Council (GCC) countries (Saudi Arabia, the U.A.E, Kuwait, Qatar, Bahrain and Oman) for South Asian economies. Today I’d like to discuss whether changes in the labor market policies of the GCC countries could jeopardize job prospects for South Asian migrant workers.

Creating jobs for GCC citizens is already on the top of the agenda in some of these countries and is bound to gain more momentum with the youth bulge. Efforts to create jobs for nationals through the “nationalization of the labor market” have been further intensified as a response to the recent events in the Middle East. Across the GCC, additional policy measures are being announced highlighting the need to replace expats with nationals in private and public sector. These messages have been the strongest in Saudi Arabia, but also in the U.A.E. and Kuwait.

Will recent events in the Middle East Affect Remittance Flows to South Asia?

Ceren Ozer's picture

For countries with substantial numbers of workers in the Middle East, recent events have not only raised concerns for the repatriation and welfare of their citizens, but have also raised fears of a possible slowdown in remittances. Will remittance flows noticeably decrease due to recent events in Egypt, Libya, and Tunisia?

For South Asian countries, remittances are among the largest and most stable sources of foreign exchange and their developmental impact have been remarkable. For example, in Nepal national poverty level has come down from 42% to 31% during 1996 to 2004, and to 21% today, largely on the account of remittances which finance household consumption as well as education and health expenditures. Nepal, Bangladesh, and Sri Lanka, were among the top 15 remittance recipients in 2009—with inflows being equivalent to 24% of the GDP in Nepal, 12% in Bangladesh, 8% in Sri Lanka, 5% in Pakistan and 4% in India.

Gulf States employ more than 11 million expatriate workers, an estimated 8 million or more from South and East Asian countries. Saudi Arabia, the U.A.E, and Qatar are top destination for South Asian migrants and are main sources of remittance inflows. The table as well as the country profiles below demonstrates the sheer magnitude of migrant workers in the Arab Gulf countries and their contributions to the labor force; sometimes greater in overall numbers and proportion than the respective labor force in the countries.