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The End of the Middle East’s Trickle-Down Economy

The flow of remittances from Lebanon and the Gulf to Africa and Asia has come to a sudden, and devastating, stop.

Vohra-Anchal-foreign-policy-columnist18
Vohra-Anchal-foreign-policy-columnist18
Anchal Vohra
By , a Brussels-based columnist for Foreign Policy who writes about Europe, the Middle East and South Asia.
An African domestic worker hangs laundry on the balcony of her employer's apartment in the area of Dbayeh north of Beirut on April 24, 2019.
An African domestic worker hangs laundry on the balcony of her employer's apartment in the area of Dbayeh north of Beirut on April 24, 2019.
An African domestic worker hangs laundry on the balcony of her employer's apartment in the area of Dbayeh north of Beirut on April 24, 2019. JOSEPH EID/AFP via Getty Images

To walk their dogs, to clean their houses, or even to hand them towels as they exit their restrooms, Lebanese have traditionally depended on Ethiopians. To drive their cars, to build their stadiums, and to dig for their natural resources, the six oil-rich Gulf nations have traditionally hired South Asians. Both of these sizable immigrant groups were often overworked and underpaid. But they suffered through it all just to be able to earn enough to send money back home to help their families.

The onset of the coronavirus pandemic, however, has collapsed this economic model. The long lockdowns and resulting economic slump in host countries have put tens of millions of immigrants in the Middle East out of work, or on unpaid leave, and forced many to return to countries already grappling with poverty and high unemployment. Experts fear this reverse migration will have debilitating consequences for the workers and their home countries, as well as their host nations.

The salaries that Asian and African migrant workers earned in the Middle East trickled home in the form of loans to siblings to open small businesses, homes for aging parents, and school fees for children. Now, their joblessness is bound to have a ripple effect, too, as a decline in remittances reduces consumption and plunges local businesses into hardship. In an April report, the World Bank estimated that remittances to low- and middle-income nations will drop by 20 percent this year, a steeper dive than the 5 percent witnessed after the global recession in 2009.

To walk their dogs, to clean their houses, or even to hand them towels as they exit their restrooms, Lebanese have traditionally depended on Ethiopians. To drive their cars, to build their stadiums, and to dig for their natural resources, the six oil-rich Gulf nations have traditionally hired South Asians. Both of these sizable immigrant groups were often overworked and underpaid. But they suffered through it all just to be able to earn enough to send money back home to help their families.

The onset of the coronavirus pandemic, however, has collapsed this economic model. The long lockdowns and resulting economic slump in host countries have put tens of millions of immigrants in the Middle East out of work, or on unpaid leave, and forced many to return to countries already grappling with poverty and high unemployment. Experts fear this reverse migration will have debilitating consequences for the workers and their home countries, as well as their host nations.

The salaries that Asian and African migrant workers earned in the Middle East trickled home in the form of loans to siblings to open small businesses, homes for aging parents, and school fees for children. Now, their joblessness is bound to have a ripple effect, too, as a decline in remittances reduces consumption and plunges local businesses into hardship. In an April report, the World Bank estimated that remittances to low- and middle-income nations will drop by 20 percent this year, a steeper dive than the 5 percent witnessed after the global recession in 2009.

The case of Lebanon’s domestic workers from Africa is especially stark. One day last month, Bakalo, a 25-year-old domestic worker in Beirut who requested anonymity to preserve her employability, was squatting on the pavement outside the Ethiopian Embassy with her head in her hands, sobbing. Two suitcases, hurriedly stuffed with her belongings, were lying next to her. Wearing a black T-shirt imprinted with “I Love You” written in multiple European languages, and her hair tied with a pink plastic hair band, Bakalo tearfully told me that her employers dumped her outside the embassy gates without any further explanation. Moreover, they withheld her wages and even her passport. (Migrant workers are typically brought to Arab countries through the kafala system, which binds them to their employers.) Several of her compatriots have been meted similar treatment over the last few months. An unknown number of distressed women have died by suicide as a result.

“I worked 16 hours a day,” Bakalo said as other Ethiopian women outside the embassy offered consolation. And yet, such was her desperation that she would not give up the names of her employers, hoping that one day, after the coronavirus crisis is over, she may get back her job and the arrears she is owed. The $300 a month she earned was a major chunk of the money her whole family in Ethiopia survived on.

Lebanon’s economy was in shambles even before the coronavirus hit and expedited its collapse. The workers had been paid in U.S. dollars, to which the Lebanese currency had previously been pegged, but as the local currency plummeted by 80 percent, Lebanese with domestic help found it impossible to maintain their lifestyles and started to fire their staff en masse. But Lebanon is not an outlier. The ax is also falling on the foreign workers of nearby petrostates.

A fast-changing business landscape owing to the coronavirus-related restrictions, in conjunction with dropping oil prices, is expected to cause 13 percent unemployment in the Gulf, with the burden expected to fall mostly on foreign nationals, as Gulf nationals are hired mainly by the public sector. In a recent paper, the University of Oxford economist Scott Livermore says that of the 900,000 jobs anticipated to be lost in the United Arab Emirates, an overwhelming 835,000 belong to the expatriates. In Saudi Arabia, the number jumps to 1.5 million out-of-work foreign residents.

It is not just the blue-collar workers at the receiving end, said Rima Kalush, the director of Migrant-Rights.org, a nongovernmental organization. “Migrant workers of all incomes have been heavily impacted by the pandemic and largely excluded from government responses,” she said.

The airline Emirates made the UAE a global hub of air travel, but as flying was suspended and remains limited to essential commuting for at least the foreseeable future, the airline decided to lay off thousands of employees to save cash. One flight attendant from India, was among them and spoke to Foreign Policy on the condition of anonymity because he worried that speaking openly may make him less employable. Based in Dubai, the father of one is struggling to pay his rent while his retired parents and a physically disabled sister wait for his monthly check in central India. “Emirates is a global, profit-making company. We made it profitable. And they just fired us, it was cruel,” he said, distraught that 14 years of service was ended without compunction. “And I speak for thousands, even my friends employed in hotels are worried they may lose their jobs, many already have.” The flight attendant said he may have no option but to join hundreds of thousands of people who have registered with the Indian embassies to be flown back by the government in its biggest-ever repatriation mission.

India deployed the national carrier and naval ships to extract stranded citizens. However, among all of the human capital exporters, India has particular reason to be worried about return migration. There are 8.5 million Indians working in the Gulf, and 500,000 are expected to return to just one state or province, Kerala. On India’s southernmost coastline along the Arabian Sea, Kerala was one of the first outposts of Islam in the subcontinent, long before the invasion of the Mughals. Then as now, it was trade that bridged the distance between Kerala and the Middle East. Since the 1980s, however, not spices but migrant labor has been Kerala’s biggest export to the oil-rich region. Nearly 10 percent of Keralites, over 2 million people, earn their livelihood in Persian Gulf countries. Between 2014 and 2018, their remittances accounted for 35 percent of the state’s GDP and 39 percent of its bank deposits. In many ways, Kerala is a prime example of both the benefits home countries derive when a large number of their citizens find employment abroad and the challenges the nation confronts when reverse migration takes place.

Mahendra Nath Pandey, the Indian minister for skill development and entrepreneurship, told the national press that data was being collected from Indians upon arrival to help them find employment matching their skill set. Analysts, however, brushed it aside as mere talk and wishful thinking at best. They say India has more pressing concerns as it reports the third-highest number of coronavirus infections, and millions of internal migrants literally walk back from the cities to their villages, empty-handed and unemployed.

Irudaya Rajan, a professor at the Centre for Development Studies in Kerala, has been monitoring migration to the Gulf for decades. “The government is underestimating the numbers, and I think at least 1.5 million Indians will return,” Rajan said. “One migrant supports four or five people back home, we are looking at a big unemployment catastrophe unfolding, but real policymakers are not taking it seriously.” Lydia Bwiite, the manager of a Ugandan NGO called Platform for Labour Action, shared a similar concern. “In 2017, we received $1.3 billion in remittances, that is 5 trillion Ugandan shillings, that is more than we make by exporting anything else,” she said, adding that according to government estimates “at least 2 million more Ugandans may be pushed into poverty” as remittances drop.

Livermore, the Oxford chief economist, said that policymakers in the Gulf may have thought that firing expats would solve the problem of a local surge in unemployment. But that may be shortsighted. He said the exodus of foreign nationals will magnify a downward trend in property and rental prices in the Gulf region and reduce demand for the already struggling retail and hospitality sectors. Meanwhile, the International Labour Organization has advised home countries to gear up and get ready to deploy the skills of the returnees toward national development and growth. The transition may be most difficult for the migrants themselves. For millions who made it in the Gulf and climbed up the social ladder there, the coronavirus has ushered in the end of an era. “If there was a job that paid me as much in India,” said the flight attendant, “why would I have come to Dubai?”

Twitter: @anchalvohra

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