Expats and the Labor Force

The Gulf Cooperation Council (GCC) countries consist of six countries located in the Arabian Peninsula between the north-east border of the African continent and the Persian Gulf. The countries are Kingdom of Bahrain, State of Kuwait, Sultanate of Oman, State of Qatar, Kingdom of Saudi Arabia (KSA) and State of the United Arab Emirates (UAE). The GCC is both a political and an economic organization with the objective of devising similar regulations in various sectors of the economy such as monetary, trade, customs, tourism, and military. One of the main areas of comparable policy among the GCC countries is labor market regulation of foreign workers. Expatriates and the labor force in the GCC countries are the key topics of this book. The following chapter briefly lays out the history of the GCC countries emphasizing more recent times with periods of strong economic growth and a massive demand for foreign labor. The objective of the chapter is to understand the reasons behind moving to the Gulf.

The Middle East and North Africa (MENA) region has been a center stage for military struggles for centuries that included several invasions and different empires such as the Greek, Roman, Persian, and Ottoman, among others. Two distinct historical events created large population movements; the Arab and Berber invasion of the Peninsula in the eighth century and the significant expansion of the Ottoman Empire in the fifteenth and sixteenth centuries (World Bank 2009, 13). Throughout the years, the MENA region has been the host for multiple directions in people’s movement. People moved to the MENA region, within MENA countries, and out of the region. In the early nineteenth century, colonial powers to the region brought European settlers along with them, relocating in North African countries (Algeria, Egypt, Libya and Morroco).¹ Late in the nineteenth century (between 1840 and 1900), the first wave of migrants left the MENA region (specifically from Lebanon and Syria) to the Americas. Due to a 15-year long civil war and continuous instability, the emigration from Lebanon remained strong but, with time, to a more diversified set of destination countries that still included the Americas but also now Europe, Africa, and Australia (World Bank, 2009).

A quick look at the population and labor force structure in the Gulf Cooperation Council (GCC) countries reveals that perhaps the most significant characteristic of the labor markets in these countries is that an overwhelming majority of workers originate in foreign countries. Ironically, even most of the population consists of foreigners.¹ They are assumed to be expatriates (expats, for short) as opposed to immigrants because the law disallows permanent settlement of foreign workers in the country, except residence for a predetermined per the labor contracts. As shown in Figure 3.1c, the ratio of expatriates can reach up to 90 percent in Qatar while it is in the neighborhood of 70 percent in the UAE and Kuwait. Oman and Saudi Arabia have more indigenous populations, with no more than 30 percent foreigners in their midst.

People have been moving residences for thousands of years. The ultimate motive is always to find better opportunities and secure a higher standard of living. Researchers have been curious about the different dimensions that come with migration such as migration decision, risk sharing, family reunification, and the economic, social, and political consequences on both the receiving and sending countries. Perhaps the most direct consequence of migration is the money that migrants send back home. In many cases, the decision to migrate is even directly linked to the decision to send money back home. Migrants transfer money back to their families for many reasons that span a wide set of human emotions. There are those who send money home for simply altruistic feelings towards their families back home and to ensure the welfare of their loved ones. Others remit money for purely egoistic reasons, to keep the doors open for a potential return to the homeland or to directly fund personal investments. Obviously, many migrants remit money for a combination of both reasons (Lucas and Oded, 1985).

The Gulf Cooperation Council (GCC) countries experienced a revenue windfall thanks to significant income receipts from oil exports starting in 1970s (Abdel-Rahman, 2006). The unexpected economic expansion, disproportionate to the size of the indigenous population, necessitated the import of foreign workforce. The influx of foreign labor to the GCC countries has since then been so strong that even the global economic crisis of 2007 did not knock down the historical trend (Naufal and Termos, 2009).

The Middle East in particular, and the Middle East and North African (MENA) region in general, is one of the most interesting regions in the world, and scholars and policy makers have a tremendous desire to do research on this region from a variety of perspectives (Zahra, 2011). Yet, it is probably one of the least researched corners of the world in terms of quantitative analyses (Genc et al., 2011). When one focuses on the contribution of studies from the region itself, the picture is even bleaker. The MENA region produced less than 0.2 percent of economic publications between 2005 and 2010, placing it at the bottom among large regions in the world. Latin American countries rank second to bottom with a 3 percent share, beating the MENA countries by a factor of 10 (UNESCO, 2010). In the globalized world, lack of understanding of any region could potentially threaten even some of the most stabilized countries in the rest of the world (see Kaminsky and Reinhart, 2000; and articles in Griffith-Jones et al., 2001; Goodhart and Illing, 2002). In particular, Genc et al., (2010) look into the financial and economic integration, or lack thereof, between the Gulf Cooperation Council (GCC) countries and the United States.