George Naufal on the Economics of GCC Migration

George Naufal, Assistant Professor of Economics at the American University of Sharjah and a ‎research fellow at the Institute for the Study of Labor (IZA), delivered a CIRS Monthly ‎Dialogue lecture titled, “The Economics of Migration in the Gulf Cooperation Council ‎Countries” on September 9, 2013. The lecture mapped the history of non-Gulf Cooperation Council (GCC) Arab workers ‎migrating to GCC states, and explained how and why there were ‎such dramatic changes to these migration patterns since the 1970s.

Naufal elaborated upon the history of labor migration to the GCC states in order to explain why ‎these countries became a uniquely attractive destination for large numbers of foreign laborers. The ‎chief factor turning the region into a hub of temporary economic migration was the discovery of ‎large oil and natural gas reserves in the early twentieth century. Decades after the discovery of ‎hydrocarbon reserves, during the time of the oil embargo of the 1970s, Naufal explained that ‎‎“the GCC countries—Saudi Arabia first—received the largest transfer of wealth in human ‎history.” Because the local populations were small in number and inexperienced, there was a dire ‎need to import foreign labor in order to fully exploit the nascent industry. Naufal recounted that ‎‎“in 1981, when the GCC was formed, the population was around 15 million” people living on a ‎relatively vast amount of land. As the growth of the hydrocarbon industry accelerated, this in ‎turn led to increased economic growth and related development projects, which required even ‎more labor power. “The ultimate goal was to develop and develop fast, and the best way to do so ‎is to bring labor,” he added. ‎

Owing to geographical proximity as well as shared language, culture, and religion, “it was the ‎non-GCC Arabs who came first in the ‘70s and the ‘80s” as migrant workers to the GCC states. ‎However, this influx was gradually capped in the mid-1980s when GCC governments realized that ‎the Arab migrant workers posed a disruptive threat by introducing their own domestic religious ‎and political ideologies, which were not always welcome in the region. Naufal cited the first Gulf war as ‎‎“a structural break in the nationality, or the source of workers,” to the GCC. During this time, ‎citizens of Middle East countries that supported Iraq were deported en mass from GCC states. ‎

The large numbers of non-GCC Arab migrant laborers were replaced with Asian and South Asian ‎workers. Naufal argued that “the estimates put the non-GCC Arabs in the ‘70s to be around 70 ‎percent of the labor force and the Asians less than 20 percent.” These figures were almost exactly ‎reversed in 2005. GCC policymakers found that the Asian workers were economically beneficial ‎as they would work more for less pay, and there was also less chance that they would be ‎politically, religiously, or ideologically influential. ‎

The determinants of migration to the Gulf are the results of push and pull factors that are ‎international and domestic according to the needs of both the sending and receiving countries. ‎On their part, South Asian and South East Asian laborers traveled to the GCC to escape ‎unemployment and poor standards of living in their home countries. “In comparison, in 2010, the ‎standard of living in Qatar, measured by income per capita, was 23 times that of Sri Lanka, 35 ‎times that of Yemen, 50 times that of Sudan, and 70 times that of Bangladesh.” Naufal noted ‎that these macro-economic measurements translate on a micro personal level: “if you were an ‎Egyptian farmer in the ‘70s, and you came to Saudi Arabia, you made 30 times your salary. In ‎the 80s, if you were a school teacher in Egypt, you made 20 times your salary. In the 90s, if you ‎were a Jordanian engineer, you tripled your income by moving to Kuwait.” ‎

Naufal also explored the remittances phenomenon from the Gulf, which “are much less volatile ‎and much more stable than foreign direct investment and foreign aid.” During the global ‎economic crisis, remittances from the GCC remained strong, “basically, one fourth or one fifth of ‎remittances in the world comes from the GCC,” he added. Pointing out the direct correlation ‎between GCC labor policies and the growth and development of labor sending countries that ‎receive direct remitted capital, Naufal commented that Middle East countries have thus missed ‎out on potential investments and wealth that has been redirected to Asian countries. ‎

Similarly, he noted the direct correlation between geopolitical events and GCC labor policies. ‎Because of the volatility of many Middle East countries, the GCC states are especially attractive ‎as a migration destination to the populations of neighboring Arab countries. Naufal argued that ‎‎“since World War II, before the Arab Spring, up until 2010, the Middle East has had 28 serious ‎conflicts.” Conflicts result in high unemployment rates and a lack of job opportunities, which for ‎a large youthful population spell serious future challenges. To this end, he proposed that GCC ‎labor policies could have partially alleviated some of the employment stresses that resulted in the ‎Arab uprisings. ‎

In conclusion, Naufal noted the future challenges to the GCC labor market. “The GCC countries ‎were able to create, in the last ten years, 7 million jobs—that’s almost one million jobs a year,” he ‎said. However, job creation matters less than ensuring that the local population enters fully into ‎the labor market. Currently, unemployment rates are extremely high for local GCC populations ‎who either refuse unattractive jobs, or cannot compete with more experienced foreign workers. ‎‎“Countries in the Gulf have to think about what will happen to the price of oil and if at some ‎point they will be able to balance their budget,” Naufal commented. In order to offset these ‎worries, some GCC governments have begun diversifying their economies and investing heavily ‎in education to give the local populations a competitive advantage in any future labor market. ‎

George Naufal has a Ph.D. in Economics from Texas A&M University. His primary research ‎includes migration and its consequences, mainly the impact of remittances on the remitting ‎countries. Naufal’s research has focused mostly on the Middle East and North Africa region with ‎an emphasis on the Gulf countries. He is the co-author of Expats and the Labor Force: The Story ‎of the Gulf Cooperation Council Countries (Palgrave Macmillan, 2012). His work has been cited ‎by regional and international media outlets including The National, Gulf News, and the New York ‎Times. Professor Naufal has served as a consultant on issues related to the Middle East.

 

Article by Suzi Mirgani, Manager and Editor for CIRS Publications.