Zoom on the expat exodus in the Middle East

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Published 2020-06-29 08:30

The coronavirus gave rise to a real crisis in the Middle East, and we are not just talking about the health crisis here. Expats have been leaving massively during the past few months due to job losses and salary cuts. What does this mean for the economies and labour markets of these popular expat destinations? Let's have a look.

Saudi Arabia

Last week, Saudi Arabia announced that expat residents who are currently abroad would not be allowed to return until the end of the COVID-19 pandemic. This comes as a preventive measure since it is one of the most affected countries in the Middle East, with more than 183,000 confirmed cases and 1,511 deaths. The three-months lockdown only came to an end last weekend. However, the return date of expat residents, as long as they have a valid entry visa, will be announced once things get back to normal. But that's not all! According to the Riyadh-based Jadwa Investment Company, more than 1.2 million foreign workers, mainly Indians, Egyptians, Filipinos and Pakistanis are expected to leave Saudi Arabia by the end of 2020. In fact, nearly 300,000 expatriates have already left the country, not to mention the 178,000 new Awdah applications. Awdah is a measure that has been set up to facilitate the repatriation during the pandemic. It is worth noting that the repatriation of some 445,000 foreign workers in 2019 resulted in an unemployment rate of 12%. This trend is like to lead to a demographic decline of around 4% by the end of 2020 since expats account for more than 10.5 million of the population of 34.8 million.

On the other hand, austerity measures adopted by the Saudi government are discouraging foreign workers who are still in the country. These include a considerable rise in value-added tax (VAT), up to three times the current rate, the abolition of the cost of living allowance for public sector employees, etc. Also, private companies have been allowed to reduce salaries by 40% maximum and to terminate expat contracts in order to mitigate the effect of the pandemic. Employees of sectors such as hospitality, food, security, administrative and support services are the most likely to be fired.

Kuwait

With an expat community of 3.4 million out of a population of 4.6 million, Kuwait isn't any better. However, the country has been looking at reducing its expat population to 30% for a better balance in the private sector, especially. In fact, almost 50% of the expatriates employed by the municipalities have already been fired. Over the past weeks, more than 11,921 Indian and Egyptian workers have already been repatriated. In June 2020, Kuwait announced that foreign workers would no longer be hired in the oil sector until further notice. A quota system has also been proposed for the recruitment of expatriates from now on, and this will be based on their nationality. A 100% to 200% in the costs of residence permits, visas, health insurance and education is also expected -- which is very likely to discourage foreign workers from moving there. The Kuwaiti Ministry of Foreign Affairs is also planning to increase processing fees by 150%. According to the government, these measures aim at allowing the country to face its 20% budget cut for the 2020-2021 tax year.

Qatar

In Qatar, costs relating to the employment of foreign nationals in ministries, government institutions and other entities were reduced by 30% as of June 1. This measure resulted in a sharp cut in expat salaries and termination of contracts with a two-months' notice. With a population of 2.3 million expatriates who make up 95% of the local labour market, out of a population of 2.7 million, Qatar expecting a demographic decline of 10%. However, according to experts, the expat exodus is likely to have long-term implications on the country's economic growth, whether in terms of labour shortage or loss of purchasing power.

Bahrain

Bahrain was already working on the Bahrainisation strategy with the aim of nationalising its labour market, especially in the private sector. The pandemic resulted in the loss of nearly 6,000 jobs occupied by expats. Today, some 8,800 companies have already experienced the financial consequences of the COVID-19 crisis. Thus, Bahrain has not only abolished the flexi-work permit but also allocated a special budget to the Bahrainisation of the public sector.

What about other Middle East countries?

With an expat community of 5,095 million in 2019, the United Arab Emirates remain quite stable in spite of the massive repatriation that is in progress. If the trend continues, a demographic decline of 10% is expected -- which would result in the loss of nearly 900,000 jobs, according to local authorities. However, the United Arab Emirates hasn't taken any drastic measures to reduce the number of foreign workers. It's worth noting that the UAE is the first Middle East country to have registered COVID-19 cases. To date, nearly 48 000 cases and 313 deaths have been reported.

On the other hand, Oman is trying to taking advantage of the current situation to boost its workforce. In order to make its labour market even more attractive and competitive, a new law will come into force in 2021. Foreign workers, whether they are already in Oman or abroad, will no longer need a No Objection Certificate (NOC) to switch employer when their contract has come to an end.