The COVID-19 crisis spoiled Maher’s* plan to end his long-term journey of employment in the Gulf and permanently return to Egypt within two years — a plan that had been postponed several times for different reasons.
The company that Maher — a 40-year-old civil engineer — works for decided to cut a third of his salary in exchange for a promise to renew his contract for two more years.
Maher tells Mada Masr that the company also asked all of its foreign employees to sign a supplementary agreement to contracts that were already concluded. According to this supplementary agreement, the employer has the right to suspend or terminate the employment contract without any compensation for the second party, including end-of-service benefits, in the event that the state imposes exceptional measures such as those that accompanied the COVID-19 crisis.
With the outbreak of the novel coronavirus, Gulf countries took a number of precautionary measures to control the pandemic, which put substantial economic pressure on companies, who in turn offloaded it onto expatriates. A significant number of Egyptian laborers in different Gulf Cooperation Council countries lost their jobs or were forced to take unpaid leave until the picture became clearer. Others were forced to accept unfair arrangements, such as pay cuts or contract amendments in exchange for keeping their jobs.
The Egyptian government tried to brainstorm different ways to absorb the returnees from the Gulf, and the Immigration Ministry launched an initiative dubbed “You’ve lit up your home country” (Nawart Baladak) to help employ some of the returning workers in national projects or encourage them to invest their money back into the Egyptian economy via a holding company.
The features of the initiative remain unclear. What is certain, however, is that the opportunities in Egypt will not provide the same financial remuneration that workers used to receive in the Gulf. And between the crisis hitting Gulf countries and the absence of any prospect for suitable job opportunities in Egypt, the future for the millions of Egyptian laborers looks more and more blurry.
Maher and other expatriate laborers are no longer the precious resource that Gulf countries depended on to manage their development projects in the 1970s. At that time, Gulf countries were awash in oil wealth, which led them to invest in “modernizing” their nations. But they found themselves in need of a labor force that had the necessary skills to implement their development dreams, something lacking in countries populated mostly by nomads, merchants, craftsmen and farmers.
Generations of civil engineers arrived to the Arabian Peninsula before Maher, and they took the lead in ushering in an era of urban development, new cities, roads and ports, all built by directing the flow of oil money to the construction sector. Oil tankers were docking in Gulf ports to unload huge amounts of cement, and then would return to their countries filled with Gulf oil. Oil money then moved bit by bit to the health and education sectors.
The Gulf was a major absorber of expatriate labor, which became the backbone of the economic and social infrastructure of the region for decades to come. Between the mid-1970s and the mid-1990s, foreign labor amounted to 90 percent of the labor force in the Gulf.
Maher traveled to the Gulf in 2005 after working as an engineer in the Cairo Governorate Authority, following his father’s advice on the importance of government employment for job security. But Maher found his salary inadequate for his aspirations of social mobility, so he started looking for work in the Gulf. He was encouraged by a few members of his family who had already made the leap because they found better chances in the Gulf, where they made 30 times the money they could have made in Egypt. This led to the increase in the proportion of Egyptian expatriate labor in the Gulf, from 25 percent in the 1980s to 70 percent at the start of the Arab Spring uprisings.
In the beginning, Maher worked in the private sector in Saudi Arabia. His job went smoothly, and he exerted tremendous effort for three years on different construction projects under the scorching sun of Riyadh. In those years, Maher’s savings accumulated, and he sought to get married. He was able to put a down payment on one of the apartment units in the Mubarak Youth Housing Project in one of the new cities. He could also bear the remaining costs of the marriage: the dowry, the wedding, the home furnishings, and the international calls with his fiancee (before the spread of instant messaging applications). The apartment and the marriage exhausted his savings, but he was happy as he had married and bought a house in Egypt.
Maher finished his contract in Saudi Arabia, and when an Emirati company offered him a better job opportunity, he moved on to a new stage in his Gulf journey. He and his wife moved to Dubai at the end of 2007.
After two years in Dubai amid the 2008 financial crisis, rental prices went up , and the cost of living significantly increased. Maher had two choices — either remain in the United Arab Emirates or return to Egypt and start his own business. But he was not ready for either option, so he was forced to choose a third one: return to Saudi Arabia.
The financial crisis of 2008 was a push factor for many laborers in the Gulf. But job opportunities in Gulf countries were already affected by a number of changes before the crisis.
The first of those changes was the entry of laborers from the Indian subcontinent into Gulf markets, driving up competition. The GCC countries welcomed the migration of Indian laborers because they could suppress the wages of those that they viewed as unskilled, untrained, and with a lower level of educational attainment compared to Egyptian laborers.
A number of Gulf countries also started instituting policies to replace foreign labor with local labor. The phenomenon of “Saudization” became one of the main concerns for Egyptian laborers in Saudi Arabia, the biggest recipient of Egyptian labor in the Gulf. Egyptian laborers realized that their future in the Gulf would not be safeguarded forever.
Local employment policies were adopted for several reasons, including the fear that expatriate laborers would bring the political unrest in their own countries into the Gulf. But economic factors remain the main driver behind those policies. Since the 1990s, the GCC countries have invested heavily in the education and training sector in order to increase the size and efficiency of the local labor force with an eye toward replacing expatriate workers. It has started to reap the benefits of this strategy in the last few years.
Gulf countries adopted a number of mechanisms to implement the substitution strategy. Some ministries became dedicated to this mission specifically. And institutional measures were taken to impose quotas on the private sector, which absorbs the most expatriate labor. The quota system specifies the proportion of foreign laborers as compared to local laborers, imposing fines for any company found to be in violation.
In the past decade, Saudi Arabia launched a massive campaign to deport irregular migrants — to whom they had previously turned a blind eye — and in one year, the government deported 2.7 million people. Egyptians made up the second-largest group of irregular migrants (12 percent) deported between April and November of 2017.
When Maher, his wife and their firstborn moved from Dubai to Riyadh, he tried to work under what is known as a “free visa,” which cost him around SAR 30,000. He had to take out loans to pay this sum and use several months’ savings to pay off his debt.
“The free visa” is known to expatriates in the Gulf, and especially Saudi Arabia, as an agreement between the foreign laborer and an employer to process a work visa under the sponsorship of the company but without actual employment. In exchange for this, the worker has to pay a large sum of money to the fake sponsor or the “visa dealer,” which varies according to the type of visa to be issued. In addition to this, the worker has to send a monthly payment to the fake sponsor.
Even though the free visa is illegal, Maher sought this route to escape the control of a legal sponsor — a person or entity that is legally responsible for expatriate workers. Without a legal sponsor, workers cannot obtain residency and thus can be deported. The sponsorship system in place deprives workers of most of their rights, and it has been heavily criticized by human rights organizations.
But the free visa caused many issues between Maher and his fake employer, so he decided to change his situation. He was able to find a job with a real contract for two years, which was periodically renewed. Maher moved between different jobs, and he was forced to make some concessions with regard to financial compensation, but overall he was still able to save money.
Maher had another child, and his family’s annual vacation posed an additional challenge. The apartment in the Mubarak Youth Housing project was too small, so Maher tried to look for a bigger house that could accommodate his family. This was in the height of the price boom that occurred after 2016, when a new apartment in the same city cost LE1 million.
Maher’s situation is no different from that of most expatriate laborers in the Gulf. Most of their savings go to the real estate sector in Egypt, which accounts for around a third of Egypt’s GDP. According to estimates by Aqarmap, 45 percent of Egyptian real estate purchases are made with money from expatriate workers in the Gulf.
But the new apartment meant that Maher would spend all the money he had saved to establish an engineering consulting office after returning to Egypt. With that, his dream to return was postponed once again and he decided to continue working in the Gulf.
At that time, Saudi Arabia decided to increase the residence renewal fees and the annual fees for families and sponsors of expatriate workers, a decision that was part of the Saudization plan.
Imposing extra fees on foreign labor means raising the overall cost of employing expatriate workers, making it closer to the cost of employing local workers, says London School of Economics professor of economics and political science Steffen Hertog. Thus, foreign laborers lose their competitive advantage, which pushes employers to hire local workers.
The cost of renewing the residency of Maher’s family surpassed LE120,000 per year. “I decided that my family should go back to Egypt, and I would stay for two more years, and then permanently return to Egypt,” says Maher. “I’m not alone. Most of my Egyptian colleagues decided to stay here alone and send their families back to Egypt, in order to accelerate the savings process and reduce expenses before returning permanently to Egypt.”
The number of work visas granted to foreigners in the Gulf has significantly decreased. The UAE issued three million work visas in 2015. By 2017, it had dropped to 1.6 million. . According to Hamdy Imam, the head of the Egyptian Chamber of Commerce’s Overseas Employment Division, this decline is likely to continue after the COVID-19 crisis.
The harmful economic effects of COVID-19 are an extension of deeper crises in the Gulf’s oil-dependent, rentier economies. These crises have deepened even further since oil prices plummeted in April. And in general, oil faces an uncertain future in light of the climate crisis and the strong voices calling for clean and environmentally friendly energy sources, especially in the European Union.
This is why Saudi Arabia, which owns the global giant Aramco, has tried to start restructuring its economy to rely on multiple energy resources and transition to the post-oil world, in what is referred to as the “2030 vision.” But the sudden arrival of the pandemic put pressure on Saudi Arabia’s public finances and forced the country to reevaluate its spending priorities once more, which meant halting major developmental work, such as the NEOM project, promoted as an expression of Saudi Arabia’s new face in the post-oil world.
Afshin Molavi, a researcher at the John Hopkins Foreign Policy Institute, doesn’t believe that the COVID-19 pandemic will instigate radical changes in the Gulf labor market, but that it will accelerate the long-running process to push private sector employers away from less-costly expatriate workers. Governments will continue to impose more fees on expatriate labor to close the cost gap between hiring local workers and hiring foreign nationals.
As for Maher, 2020 was the second and final year of the deadline he had set for himself to end his residency in the Gulf — but then the pandemic hit. His dream to come back to Egypt, live with his family, and start his own business was once again postponed. Maher is stranded and not sure how to proceed. He has significant doubt about whether he will be able to obtain another work visa after this excruciating crisis is over. “Permanently going back to Egypt is no longer an option, as I had planned. I cannot even visit my family because my annual leave was consumed in the home quarantine period following the decisions of my employer. And there are no exit and re-entry visas right now,” says Maher. “Right now, going back to Egypt means jumping into the unknown.”