Sunday, October 4, 2015

How Kuwait Going To Manage It's Cultivate Dependence On Foreign Labor?

Kuwait and other Gulf countries rely on foreign labor to run local economic sectors. According to a report issued by the Manpower Public Authority in Kuwait, the total number of migrant workers in Kuwait by mid-September stood a little above 1.5 million employees and workers, divided between the private and the public sectors, with the private sector's share reaching up to 96%.

The foreign workforce is distributed among the various economic sectors as following: transportation and warehousing (5.4%); manufacturing (9.7%); agriculture and fishing (5.1%); power, gas and water (0.3%); finance, insurance, real estate and business services (42.2%); building and construction (13.3%); other activities (1.2%); social and personal services (15.9%); and mining and quarries (0.9%).

The percent distribution indicates that the service and commodity distribution sectors combined make up 70% of the foreign workforce. Other sectors such as agriculture and fishing — which do not account for a significant share in the country’s GDP — employ 80,000 workers. Such distribution of foreign labor highlights the gap in the economy and the prevalence of the service sector and the tertiary ones.

The data also underlined the low level of education as well as the lack of working skills among the majority of migrant workers, as 42.5% of them are underqualified, 32.8% have low qualifications, 18.3% with moderate qualifications, while only 6.4% possess high qualifications. These facts should prompt employers in Kuwait to review the current situation of the labor market and look for means and mechanisms to reform it.

Moreover, do economic requirements really justify this high number of foreign workers knowing that it is possible to use technology to run the business in many sectors? Not only that, but the present sectoral distribution gives rise to many questions concerning the economic efficiency of this foreign workforce as it is mainly based in the sectors of personal services, commodity distribution, as well as hospitality services or agriculture and fishing.

These sectors employ a larger workforce compared with the one employed by vital and primary sectors. For example, the mining and quarries sector, which is responsible for 49% of the total GDP, employ less than 1% of foreign workers, while the agricultural and fishing sector has 5.1% of these workers even though its total share of the GDP is no more than 0.3%.

The rentier nature of the economy explains such distribution of foreign labor as demand on services is increasing along with the companies that employ underqualified and unskilled migrant workers. Nearly 600,000 migrant workers are employed by families and households, indicating that the total number is estimated at 2.1 million. Meanwhile, government officials reiterate solutions such as rationalizing foreign recruitment and stress the importance of setting higher educational and professional standards for migrant workers.

However, efforts should be aimed at reforming the labor market so as to boost the national workforce, which currently represents 17% of the total labor force in Kuwait. It is also a fact that most working Kuwaitis are either civil servants or employed by the public sector. The government is trying to motivate Kuwaitis to work for the private sector and has established a system to subsidize the salaries of these employees through a new law that imposes an annual tax of 2.5% of the annual net profits on Kuwaiti companies listed on the Kuwait Stock Exchange. This government plan is funded by the treasury. Furthermore, over 50,000 Kuwaiti workers in the private sector benefit from this workforce support program, with the government allocating nearly 5 million Kuwaiti dinars ($116 million) per month for these workers.



However, these programs and attempts to reform the labor market and its systems lack determination and seriousness, since many interests and influential figures are hindering this reform process, in addition to a large number of fake companies that recruit foreign workers illegally and receive tributes from them, in a circumvention of local laws and international treaties. For these reasons, it is necessary to enforce the law, put an end to manipulation and limit the actual needs of economically efficient institutions. Raising business efficiency and using modern technologies are also instrumental in order to limit the need for manpower or raise the educational and professional standards of the workforce needed. As for developing the national labor force, it requires enhancing the educational system and according more importance to vocational education.

Can we expect real changes in the upcoming years after it became evident that none of the goals set in previous development plans was achieved, the latest being the 2010-2014 development plan? Human development goals will remain beyond reach as long as no crucial decisions were taken to reform the educational system and adjust the economic system as to promote modern development approaches and curtail rentier economy. Can the fall in oil prices and oil revenues lead the government and the National Assembly to adopt legislations amending financial policies as well as employment policies in the public sector and the employment procedures of foreign labor in the private sector? Changing that reality demands a brand-new economic philosophy, i.e., the implementation of policies that would seem unpopular at first but prove fruitful later on.

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