In July, thousands of Indian workers in Saudi Arabia were stranded in the Kingdom without food or money after being laid off by the ailing Saudi conglomerate, Saudi Oger. Upon learning of their plight last week, the Indian government rushed emergency food supplies to the stranded workers, many of whom had not eaten in days. Approximately 8,000 workers from Pakistan and as many as 20,000 workers from the Philippines also currently face a similar situation in the Kingdom.
These events occur at a time when Saudi Arabia and its other oil-producing neighbors are experiencing significant economic slowdowns as a result of a collapse in global oil prices. Oil sales account for nearly 90 percent of the Kingdom’s revenue. As oil prices tumbled from $100/barrel to around $30, Saudi Arabia’s budget deficit increased to nearly 16 percent of GDP in 2015.
Saudi Arabia’s financial woes are compounded by its involvement in an ill-advised war in Yemen, which is costing the Saudis approximately $6 billion a month. The Saudi oil crisis has had a deleterious effect on other sectors as well.
In May this year, the Jeddah-based Saudi Binladen Group, the largest construction company in the Persian Gulf, laid off 50,000 employees, mostly workers from India, Pakistan, and Bangladesh. Per a report in the Wall Street Journal, the Binladen Group’s financial woes stemmed largely from the Saudi government’s failure to pay the company for completed or ongoing construction work.
The Saudis, for their part, have unveiled a National Transformation Program aimed at diversifying their economy and implementing urgent reforms. King Salman announced a number of fiscal measures aimed at cutting spending and reducing oil subsidies. In the short to medium term, however, Riyadh’s economic woes are likely to linger, the consequences of which will undoubtedly be felt by India and its neighbors.
The Gulf is home to 6 million Indians, with Saudi Arabia (1.8 million) and the United Arab Emirates (1.75 million) hosting more than half of all documented Indian citizens living in the region. If the current trend of sustained short to mid-term economic stress continues in Saudi Arabia, it is likely that other large companies employing Indian citizens might find it impossible to meet their financial commitments.
In Saudi Oger’s case, the Indian government intervened after reports emerged that the company had stopped providing food supplies to the retrenched workers. The Indian consulate in Jeddah distributed food to laid-off workers. Indian Minister of State for External Affairs VK Singh traveled to Jeddah to arrange for the workers’ repatriation to India, a cumbersome and complicated process because it involves obtaining no-objection certificates from the employer as well as exit permits from the Saudi government.
The Saudi Oger situation did not arise overnight; the Saudi Ministry of Labor and Social Development was aware that many workers had not been paid their wages for over seven months. The Saudis responded with no sense of urgency even after desperate workers took to the streets to protest their plight.
For now, the Indian government appears to have staved off a humanitarian crisis through its active intervention. But is this a sustainable strategy? If other large companies in Saudi Arabia fail – and it is possible that they might – will Indian consulates in the Gulf be forced to yet again provide food supplies to retrenched workers? Will it take a visit by an Indian minister to goad the Saudi government into action? What are the obligations of the host government?
The need of the hour is for Saudi Arabia and other Gulf states to reform their existing labor laws. Today, most private sector employment in the Gulf operates within the framework of the kafala system, where migrant workers are sponsored by a local employer who assumes full responsibility for the employee. The kafala system legally binds the worker to the employer, allowing for undue power and influence to be exerted over migrants.
Under the kafala system, a worker cannot change jobs without the approval of the employer. In countries like Saudi Arabia, the UAE, and Qatar (though not Bahrain), the worker’s ability to obtain an exit stamp from the host government to return to their country of origin depends on the acquiescence of their employer. Coupled with this, it is a standard (although illegal) practice across the Gulf for employers to confiscate the passports of their employees upon their arrival.
The worker is effectively at the mercy of the employer from the moment he arrives, with no ability to protest unfair labor practices, unionize, or collectively bargain for better wages or benefits. It is no wonder then that the International Labor Organization (ILO) has likened the practice to a “contemporary form of slavery.”
India must much more forcefully make the case to the Gulf states that they risk losing the ability to tap into India’s labor pool if the archaic and inhumane kafala system isn’t brought into compliance with ILO’s Declaration on Fundamental Principles and Rights at Work in letter and spirit.
India must also do a better job in raising awareness among prospective employees of the unfair labor practices that exist in Gulf, their rights as workers, and the available channels of recourse during their term of employment. Indeed, many unscrupulous labor practices go unreported in the Gulf because migrant workers are scared to speak out for fear of inviting reprisals from their employers. It goes without saying that the Indian government must blacklist companies that violate their contractual obligations and deny emigration clearance to Indian workers seeking employment in these blacklisted companies.
The Indian government, with assistance from Gulf states, should also work to establish escrow procedures, requiring proportional contributions from Gulf-based companies employing Indian workers. The Indian government should be able to utilize these funds in the event that an employer absconds, or violates the terms of their contract in a manner that jeopardizes the health, safety, and security of Indian employees, requiring the Indian government’s intervention in providing material assistance or repatriation services.
There is no doubt that these additional measures will likely increase Gulf-based employers’ costs for hiring and retaining labor from India and may drive employers to seek other sources of labor. The Indian government’s challenge is to strike a balance between providing an opportunity to its citizens to work in the Gulf (and thereby benefit from their remittances) while ensuring their safety and security in a volatile region with a poor track record in protecting migrant workers’ rights. However, the alternative – doing nothing – is not a sustainable option for India.