THE FINANCIAL CRISIS IN THE GULF AND ITS IMPACT ON SOUTH ASIAN MIGRANT WORKERS

ABSTRACT

The financial crisis originated in the United States of America and impacted the Gulf Cooperation Council (GCC hereafter) countries after a time lag. The falling oil prices, contracting trade and declining private investment flows have adversely affected the GDP growth of the Gulf countries, which in turn affected the flow of migrant labour to and from them and remittances from them. In this context this study seeks to: Assess the impact of the recession on key industries in the GCC economies; Assess the repatriation of expatriate labourers; Assess the flow of emigrant labourers and fall in remittances; Assess the impact of loss of employment on the emigrant households' in the country of origin; and Identify the measures undertaken by various stakeholders to mitigate the adverse effects. The study takes a two pronged approach to the subject. The impact of the global crisis on the GCC economies is first analyzed in terms of the sectors of the economy affected, the changes in GDP growth and employment of expatriate labourers. A Survey of migrants in the destination countries was carried out to assess the loss of employment and earnings and their coping strategies. It was followed by surveys of emigrants and return migrants in the countries of origin in South Asia. Study teams visited the six GCC countries and Malaysia to interview labourers as well as employers in various sectors. The global crisis has affected the GCC economies through falling oil prices, depressed property and equity prices, low investor confidence and reversal of capital flows. The GDP growth in GCC economies spawns large population growth, especially large influx of migrant labourers from South Asia. So a recession is expected to affect the flow of migrants and remittances.

The rising oil prices since 2002 brought about large scale FDI flow into the GCC economies, rising investment rates and higher GDP growth rates by boosting the investment in telecom, banking, power and real estate. Private investment flow played an important role in the emergence of West Asia as the world's largest market in project finance surpassing Western Europe and North America. The rapid growth of the GCC economies in the 2000s initiated increasing concentration of employment in manufacturing, construction and trade, and so attracted a large influx of expatriate unskilled and semi skilled labourers. One estimate put the composition of Indian expatriates in UAE as 50 per cent unskilled workers, 25 per cent semi-skilled and 25 per cent skilled professionals. The large influx of unskilled and semi-skilled workers led to higher rent inflation on top of unprecedented food inflation, attributed to global rise in food prices in the late 2000s. Over a quarter of the population in the GCC countries was spending above 20 per cent of their disposable income on food then. In response, the governments raised the wages of the public sector employees. This might have protected them, but vast segments of workers in manufacturing, construction and trade suffered real income losses download