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July 2013, Volume 20, Number 3

GCC: Nitaqat and Kafala

The Saudi government in summer 2013 launched a new crackdown on unauthorized foreigners, targeting workers in the 250,000 mostly small and medium-sized businesses that employ no Saudis. By some estimates, there are two to three million unauthorized foreigners in Saudi Arabia, including almost half in construction.

The Saudi government on April 3, 2013 announced that it would hire 1,000 inspectors who would be accompanied by police as they check small and medium-sized businesses for unauthorized foreigners. Punishments for employers include a $26,700 fine for each illegal worker, two years in prison or both.

Unauthorized foreigners in Saudi Arabia were given until July 3, 2013 to legalize their status or leave the country. As the deadline approach, contractors warned that projects would be delayed for lack of labor, and the Saudi government extended the deadline to November 4, 2013.

As of July 1, 2013, some 1.6 million foreigners in Saudi Arabia had registered after, for example, changing their work permits to reflect their actual employer. Another 180,000 left Saudi Arabia without penalty. The Saudi government said that 600,000 Saudis had found jobs as a result of the crackdown.

As unauthorized foreigners lined up outside their countries' consulates to obtain the papers required to leave Saudi Arabia, an Indonesian woman collapsed and died June 9, 2013 outside the Indonesian consulate in Jeddah, prompting the Indonesian government to ask the Saudi government to postpone the crackdown. There are an estimated 1.2 million Indonesians in Saudi Arabia, including a third who are unauthorized.

All persons need a passport to exit Saudi Arabia. The Indonesians' frustration was motivated in part by the consulate's practice of issuing in Lieu of Passport (SPLP) documents that are rejected by Saudi Arabian authorities.

Under the Saudi Nitaqat or Saudization policy, at least 10 percent of the employees of all businesses must be Saudis. Firms with no Saudi employees are labeled red and risk being shut-down; the displaced employees can transfer to "green" employers.

The other Gulf Cooperation Council countries, Bahrain, Kuwait, Oman, Qatar, and United Arab Emirates, were expected in spring 2013 to enact laws similar to that of Saudi Arabia that require all employers to hire at least 10 percent local workers.

Sponsors. The GCC countries receive about 1.5 million mostly Asian migrants each year. The stock of foreigners in the GCC countries is about 17 million, and migrants in GCC countries remit $80 billion a year to their countries of origin.

GCC countries rely on private sponsors or kafalas to control migrants. A sponsor is usually a private citizen who assumes responsibility for the health and welfare of a foreigner while he or she is a GCC country, and ensures that the foreigner leaves when his or her visa ends. A foreigner may not exit without the kafala's approval.

Many foreigners enter Saudi Arabia under the sponsorship of a Saudi national but end up working for others or set up their own businesses. Some businesses warned the Saudi government that cracking down on skilled workers who have valid residency permits (iqamas) but who are not working for their sponsors would lead to labor shortages.

The Saudi government hopes to raise the share of Saudis in the private sector work force with its Nitaqat program that requires employers to hire one Saudi for each 10 migrant workers. The Saudi government wants private employers to hire more of the 400,000 Saudi youth who turn working-force age each year.

Labor Minister Adel Fakieh, who said that there were 7.5 million legal foreign workers in Saudi Arabia, acknowledged in April 2013 that "six million foreign workers are employed in low jobs unfit for Saudis, and 68 percent of them are paid less than 1,000 riyals ($270) per month." Fakieh said 200,000 foreigners were deported in spring 2013 and another 840,000 left "voluntarily" because of the Nitaqat or Saudization program introduced at the end of 2011.

Individuals dominate farming in Saudi Arabia, and many hire migrant workers. A Saudi farmer with 200 acres of land, 700 camels or 2,500 sheep or goats can apply for four farm worker visas; Sudanese dominate among shepherds. Foreign farm workers are treated as domestic workers, and many are isolated from other foreign workers.

In Kuwait, where foreigners are 70 percent of the 3.9 million residents, the government announced plans to reduce the number of migrant workers by 100,000 a year over the next decade. Police checked areas with large numbers of foreigners for unauthorized workers in summer 2013. The al-Watan newspaper in April 2013 wrote: "Cutting the number of migrants could help ? reduce traffic congestion, high consumption of water and electricity, crimes and violations of law."

UAE. The four million migrant workers employed by 260,000 private employers in the UAE are 98 percent of private-sector workers. Low-skilled migrants in the UAE earn about 750 dirhams or $200 a month.

In May 2013, thousands of workers employed by Dubai's largest construction company, Arabtec, went on strike to protest low and unpaid wages. Workers reported earning less than $200 a month, and said they were not always paid for overtime work. The UAE Labor Ministry backed Arabtec, saying that it was paying the workers according to their contracts and that the value of the meals, transportation, housing and health insurance provided to Arabtec workers effectively doubled their salaries.

Perspective. Migrants in GCC countries often complain of unpaid or late wages, wages that are lower than promised, and long working hours and substandard housing conditions. Before arriving, low-skilled workers often overestimate how much they can save because they do not know enough about the higher cost of living in the Gulf.

No GCC country has abolished the kafala system, but Bahrain in 2009 approved a mobility law that allows migrants to change employers without first obtaining the approval of their sponsors. Kuwait in 2011 made similar changes to its kafala system. Opinion surveys suggest that GCC citizens want to maintain the kafala system, in part because they benefit from it economically.

The UAE in 2009 dealt with unpaid and late salaries by requiring employers to pay their workers' salaries electronically to banks, the so-called wage protection system (WPS). Saudi Arabia announced in 2013 that it would introduce a similar WPS. The UAE's electronic contract verification system aims to ensure that migrants work under the contracts that they signed in their country of origin by sending the UAE-approved contract to the migrant's recruiter in the country of origin and obtaining his signature before departure.

Domestic workers are not covered by labor laws in GCC countries. In spring 2013, GCC labor ministers agreed to develop a standard contract for domestic workers that would require overtime pay for hours worked after eight hours of work and at least a day off a week. Under the proposed standard contract, workers would have a right to keep their passports.

Citizens of GCC states worry about the "demographic imbalance" in their countries, that is, the fact that foreigners are a majority of residents and most or almost all private-sector workers are foreigners. Most GCC countries want to develop knowledge-based economies that employ fewer foreign workers, but none has a clear strategy to achieve this goal.

The Qatar Foundation Mandatory Standards of Migrant Workers' Welfare, released in 2013, deal with migrant wages, working conditions, medical insurance, holidays, transport, accommodation standards and contract terminations. The standards say that workers should retain their passports and personal documents and receive equal pay for equal work "irrespective of their nationality, gender, ethnic origin, race, religion or legal status." However, migrant workers are barred from joining or forming unions in Qatar, and many say that they risk removal if they complain of violations of their rights.

Qatar's sheikh in June 2013 resigned after 18 years in power and was replaced by his son. With an per capita income of $100,000 for the estimated 250,000 Qataris in 2012, Qatar may be the richest country in the world due to liquefied natural gas from its offshore north field. The government is spending $200 billion to improve infrastructure before the 2022 FIFA World Cup.