GCC to witness exit of expatriate workers due to coronavirus

Experts expect an outflow of expatriate workers from Gulf states as a result of the economic shock delivered by the coronavirus pandemic.

Gulf states rely heavily on foreign workers across all sectors of the economy, from professionals to skilled workers and manual labor. Foreigners constitute 90 percent of the population of the UAE, two-thirds in Kuwait, half in Oman and Bahrain, and one third in Saudi Arabia.

“I don’t think there will be an exodus, but I expect a significant outflow that may be concentrated in the upper echelons of the workforce,” Omar Al-Ubaydli, a researcher at Derasat, Bahrain, told Al Arabiya English.

Expats from Western countries are expected to be the first to leave, Ubaydli added, while lower-paid workers from Southeast Asian countries will stay as long as there is work to be done as they have fewer alternatives.

“They’re coming from places that are even more devastated by coronavirus, economically and non-economically than the Gulf is,” he said.

Local policies to mitigate the effects the shutdowns could reduce the size of the outflow, according to George Naufal, Assistant Research Scientist, Public Policy Research Institute, Texas A&M University.

For example, the UAE has relaxed some requirements for workers moving from one employer to another which could help workers to ride out the downturn. But Karen E. Young, a resident scholar and Middle East expert at the American Enterprise Institute expects a significant outflow by the end of Ramadan at the end of May.

“We should expect redundancies, reduced salaries, forced annual leave, and measures by firms to reduce costs,” she told Al Arabiya English. “Government contracting is likely to dry up, meaning we will see many construction jobs in jeopardy. Retail and service workers are in a similar position, as well as higher paying jobs across many sectors.”

She adds, “Once there are airport openings again and we approach the end of spring and Ramadan, there will be a large exit of expatriate workers of all income brackets, both skilled and unskilled.”

Any large outflow could also mean accelerated nationalization efforts. All Gulf countries are trying to reduce their dependence on oil and have begun to invest in training their national labor forces to take on larger roles in the economy, and not just the public sector, said Naufal, who authored “Expats and the Labor Force: The Story of the Gulf Cooperation Council Countries.”

Coronavirus will add urgency to the nationalization policies, he said.

“A mass exit of foreign workers – if it happens – cannot be completely addressed with local labor force just simply due to numbers, but also technical expertise in different areas, but in the long run, a pandemic such as this will certainly shape future labor policies in the region.”

Government measures

The UAE enacted a new regulation on March 26 that allows employers to make workers redundant but must still provide housing (if provided contractually) and allow the employee to transfer his or her visa to a new employer if a new position is found. It also allows the employer to temporarily reduce salaries or force employees to take paid or unpaid leave. Saudi Arabia has announced partial salary support for citizens working in the private sector who are made redundant, but no support for foreign residents.

These stimulus packages and mitigation measures are unlikely to stem job losses in the largest employers in the region, such as state-owned or state-related entities in travel and tourism, retail, property and contracting, Young says.

These businesses will need major recapitalization just to survive, and they are unlikely to survive with the same number of employees.

“There is some government support to small and medium enterprises (SMEs) in access to bank loans to try and weather the crisis, but many will fail as the widespread effects of demand destruction throughout the economy make it difficult for businesses to survive,” she adds.

After suspending operations for nearly two weeks, several airlines in the GCC region restarted passenger flights to repatriate foreigners last week. Emirates airline resumed passenger operations with repatriation flights from Dubai to London, Frankfurt, Paris, Brussels and Zurich.