Irregular Workers Correction Campaign in Saudi Arabia

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In April 2013, the then Saudi King, Abdullah bin Abdulaziz Al-Saud issued a direction to the Ministry of Interior and Ministry of Labor to grant workers who are in violation of the law of labor and residency a three months grace period to correct their status, under the penalty of deportation._king_2013 Directions came after the two ministries started a inspection campaign in the premises and facilities of firms to make sure of the validity of its workers’ legal documents, whose count could mount up to hundreds of thousands, according to local newspapers._king_2013 These inspections came to be known “the correction campaign of the status of foreign labor.” This paper will look at direct results of the campaign in light of the goals set by the labor market regulating agencies, and will provide a background on the historical context of the labor market and the political economy of Saudi Arabia, and the wider Gulf Cooperation Council (GCC) countries.

This correction campaign represents a vital case study for the policies of the GCC countries in the area of labor market and demographics, as it is the first-of-a-kind initiative to adopt active labor market policies (ALMP) to encounter the structural problems in the labor market and demographics. The campaign has two prongs: providing subsidies for firms that employ Saudis and discourage employing non-Saudis by increasing their cost, and enforcing the law on foreign irregular workers. Since Saudi is the largest country among GCC countries in terms of GDP and population and because of the far-reaching implications of the campaign on millions of citizens and noncitizens,  it has become of vital importance to study it, starting from its causes, stances of the different stakeholders, to its results and implications.

The main hypothesis of the paper is that this law enforcement campaign has had a very negative effect on specific non-Saudi communities, especially the Yemeni community, for the  accompanying media campaign that worked on demonizing the foreign labor, setting it as a scapegoat for the economic and security troubles in the Kingdom. On the other hand, the effects of the campaign on the unemployment rate among Saudis has been very limited mainly because the majority of occupations of the foreign labor require low skills with limited wages, which Saudis are reluctant to take on. Economic implications are mainly an increase price levels and and delays in completion of projects and construction of facilities which depend on the labor of foreigners. This raises questions on the effectiveness of the campaign, and whether it represents a long-term solution for the structural distortion in the labor market in the Kingdom.

  1. Overview on the Campaign

The governmental direction came after four months of the legislation of Committees of Management and Human Resources in the Shoura Council a proposal to deal with workers in violation of labor and residency laws, through amending the Article No. 39 which illegalize change of sponsor, making the law more strict._visa_2013 it also abolished the Article No. 233 of the law which include punishments for violators of the former article. the proposal burdens the security agencies with the responsibility of chasing workers under the sponsorship of other than their original ones, self-employing foreign workers (commonly known as “amala saeiba”), absentees, and apprehended border-crossing individuals, by detaining, punishment, and deporting them._visa_2013 The proposal details the punishment against firms and individuals that employ irregular workers, including preventing and restricting them from recruiting foreign workers in the future.

Irregulars workers are generally divided into three types: expatriate workers who are still in the country despite having their working permits expired or revoked, expatriate workers with valid working permits but they have “escaped” from their employers and have been reported as “escapees,” and expatriate workers working for other than their original employers without updating their information according to the Residency Regulations and Work and Workmen Law. The Minister of Labor then, Adel Fakieh, stated that these actions will help the market “increase the nationalization percentage in the facilities,”_faqih:_2013 and will help Saudis opening their own business after getting rid of “illegal competition.” The Ministry reiterated afterwards that the campaign will help increase the number of working Saudis._60_2013

The surprising decision has caused a shock in business and official circles and in labor-exporting countries due to the millions of expatriate workers in Saudi. Branches of Ministry of Labor and and General Directorate of Passports of Ministry of Interior were overcrowded with numerous workers seeking to update their information according to the Residency Regulations. After the Ministry of Labor and General Directorate of Passports emphasized that the grace period will not be extended,_-jawazat:_2013 a royal direction to extend it by three months,_joy_2013 indicating how official agencies were taken by surprise with updating the information of over one million workers. By the end of the original period, more than half a million were forcibly deported, which increased to around a million after the extended grace period out of 6 million workers.Iaccino 2013 The status of 4.7 million workers was corrected._over_2013

In an attempt to prove its positive effects, Adel Faqih, Labor Minister, announced that 250 thousands Saudis have benefited from the employment services during the correction campaign. In May 2014, Mufrej al-Haqbani, Vice Labor Minister, announced that the correction campaign has increased the rate of employment from 35 thousands t0 65 thousands monthly, increasing the number of Saudis in the private sector from 700 thousands to 1.5 million by the end of the correction period.Al-Haqbani 2014

Historical Context

GCC countries have enjoyed huge revenues as a result of the increased oil prices and nationalization of oil companies in the second oil boom between 1973-1985, which made available a capital capable theoretically to form modern welfare states. However, as Omar Al-Shihabi argues, the local labor force presents the political elite with three problems: first, the inability of the local labor force, quantitatively and qualitatively to satisfy the needs of the available capital and the magnitude of planned projects; second, subjugating the local population to the needs of the capital which strived for free-0f-rights labor contradicts that the state promises of a higher level of economic welfare as a result of increased oil revenues; third, dependence on local labor force -as was evident in the labor movement in the fifties- might form a political conscience that could lead it to demand participation in decision-making and distribution of oil reviews, especially amidst the heightened worry among decision-makers in the GCC and the west of emergent leftists and nationalist movements. As a result, the political elite opted for importing cheap non-Arab labor -mostly South Asian- with no secured political or economics rights. In 1975, labor from Arab countries formed approximately 72% of the labor force, but it fell to less than 40% in the mid-90s. Local labor has found the public sector, with its high wages, shorter working hours, and the social security it provides, a suitable choice. Thus, citizenship was tied to the social and financial benefits the public sector job provides, whiles the rights of expatriate workers remained weak and under the control of capital in the private sector. Citizens have become increasingly reliant on the social and economic benefits provided by the state, and on the other hand, state has become independent of society as oil revenues spared the state the need of collecting taxes from citizens.

Thus, over the years of the second oil boom, the percentage of Saudi workers to the total labor force accelerated downwards from 74.8% in 1975, to 47.3% in 1980, to 33.3% in 1990. By the dawn of the ninth decade, with the decrease of oil price, increase of population, and inability of the public sector to absorb more numbers of citizens, the problem of unemployment surfaced. To encounter unemployment, the state has adopted the “Saudization” policy to encourage the private sector to employ more Saudis and impose restrictions on employing foreign labor. But the private sector was not willing to employ citizens, whom it considered expensive and unproductive, while citizens themselves find it greedy, opportunistic, and lacking proper working conditions.Kapiszewski 2006 As both sides this undesire, Al-Shihabi argues that GCC governments opted to substitute its Arab employees in their bureaucracies with citizens, with decreasing expenditures on developmental projects.