SAUDI ARABIA MIGRANT LABOR UPDATE: INFLATION, THE

C O N F I D E N T I A L SECTION 01 OF 03 JEDDAH 000368 SIPDIS RIYADH PLEASE PASS TO DHAHRAN; DEPARTMENT FOR NEA/ARP; DEPARTMENT FOR JLIEBERMAN IN DRL/NESCA; E.O. 12958: DECL: 08/31/2018 TAGS: ECON OFDP PHUM PGOV SOCI SMIG ELAB PREL SA SUBJECT: SAUDI ARABIA MIGRANT LABOR UPDATE: INFLATION, THE MIDDLE-MAN, AND THE POTENTIAL FOR PROTEST Classified By: Acting Consul General G Stoner for Reasons 1.4 (b) and ( d) ¶1. (C) SUMMARY. Recent labor strikes in Kuwait coupled with rising inflation across the Gulf raise the question of potential for worker protests and strikes in Saudi Arabia. Meetings with consular and labor officers of sending countries in Jeddah indicate that inflationary pressure is not likely to lead to the return of migrant workers or to strikes, in spite of increased workloads and decreased remittances. Comparatively high inflation and prices in home countries along with minimal work opportunities back home continue to create major incentives for labor to remain in Saudi Arabia. The "Middle Man" in the form of recruiting agencies in Saudi Arabia and sending countries allows for complicated contractual disputes and potential abuse(reftel) END SUMMARY. -------------- -------------- Staying Put: Inflation is Bad, But Worse at Home -------------- -------------- ¶2. (C) According to the Sri Lanka Consulate of Jeddah Labor Attach Meeran Mohamed Jiffrey, inflation in Sri Lanka is higher than in Saudi Arabia and is therefore not a factor likely to encourage return among workers. Jiffrey added that a new wage agreement entitles workers to a minimum wage of 650 Saudi Riyals ($173) monthly instead of the rate of 450 Saudi Riyals ($120) that they had been receiving before. Therefore, any angst over inflation is likely offset by these increases. ¶3. (C) PolOff met with Ethiopian Consulate Consul Muktar Mohamed. He stated that inflation is much worse in Ethiopia and that prices there are so high that, "people can't afford to live there." In his opinion, rising prices are not likely to have much bearing at all on the 80-100,000 Ethiopians working in Saudi Arabia. The one impact might be a reduction in remittances by some of the workers to their families back in Ethiopia. ¶4. (C) Bangladeshi Consulate Counselor Islam Kaisarul met with PolOff. Kaisarul admitted that the rising prices in Saudi Arabia are in fact a significant factor for migrant workers, but that ultimately they will stay in Saudi Arabia even if it means working more than 16 hours a day. According to Kaisarul, the monetary advantage of working in Saudi Arabia is still significantly greater than the poverty of home. The worker response to rising prices is simply taking on additional jobs or longer hours. ¶5. (C) PolOff met with Ali Shaukat, the Community Welfare Attach at the Consulate of Pakistan. According to Shaukat the inflation in Pakistan is worse than in Jeddah so there is no incentive to return home. In fact, more Pakistanis are coming in recent years (80 thousand last year) in large part due to the real estate construction boom in Saudi Arabia, related largely to the development of several economic cities. Shaukat also felt that the attempts to Saudize the labor force is not likely to effect low-skilled workers. -------------- -------------- Inflation has Limited Impact on Those With Few Expenses -------------- -------------- ¶6. (C) According to the Pakistani Attach, inflation and price increases are noticeable, but the effects depend on which socio-economic class of Pakistanis in Saudi Arabia are in question. He claims that the rich workers still have enough money for expenses and remittances. Meanwhile the poorer social class of less-skilled workers is affected but with prices for food as low as a few dollars a day, it is not a great impact. ¶7. (C) Sri Lankan Labor Attach Jiffrey discussed that the impact of inflation on migrant workers largely depends on the type of labor. Domestic laborers, who account for 80% of the Sri Lankan labor force in Saudi Arabia, are less impacted than other groups by increases in prices since they have almost no living expenses. Domestic labor in Saudi Arabia are generally provided food by the family and required to live in the house. Most of these laborers remit the bulk of their wages back to their families. JEDDAH 00000368 002 OF 003 -------------- -------------- The Middle Man Spells Trouble for Workers Rights -------------- -------------- ¶8. (SBU) A new law in place as of August 1st requires that all labor contracts from foreign recruiters work directly through the Saudi National Recruitment Committee SANARCOM rather than with the employer. The decision is creating anger among Filipino recruiting agents with some believing that Saudi Arabian recruiters are simply trying to earn more money from recruitment (Source: Arab News August 29). ¶9. (C) According to the Bangladeshi consul, there are over 1000 recruitment companies in Bangladesh. Some of these companies have set up unofficial and illegal offices in Saudi Arabia in order to foster connections with SANARCOM. The system in place creates four elements to recruitment: the employer, SANARCOM, the sending country recruiting agency, and the employee. According to him, the middle man is getting a big cut of the salary. (Given the recent passing of the unified contract law, both SANARCOM and the sending country recruiting agencies can be seen as playing a role of middle man. ¶10. (C) The Bangladeshi Consul noted that while he does not see many abuse cases, most of the cases dealt with involve contract disputes. He cites the fact that the employee rarely has direct contact with the employer as one reason for this. The recruitment agency in Saudi serves as a middle man and this can make it hard to determine who is actually correct in a dispute. According to him, it is often the agency itself rather than the employer that has taken any disputed wages. ¶11. (C) The Pakistani attach felt that disputes are increasing due to a lack of education. He stated that problems usually arise with less-educated individuals who might not have understood the terms of their employment. He seemed to attribute most of the culpability with the employee rather than the agency or employer. He mentioned that there are efforts in Pakistan to make sure that people understand the terms of their contract in Saudi Arabia and to promote fair recruitment. -------------- Kuwait Strikes, Round Two in Saudi Arabia? -------------- ¶12. (C) The Sri Lankan Labor Attach Jiffry admitted that the conditions at some of the camps where construction workers and others live tend to be very overcrowded. He said that individual complaints are launched by workers over abuse issues including non-payment of wages and other contract-issues. However, the attach does not seem to see any organization among those with grievances and said that he does not expect a situation in Saudi Arabia similar to that which was seen in Kuwait. Jiffrey explained that the wages offered in Saudi are still considerably higher than anything that could be received in Sri Lanka leading many to favor staying within the Kingdom and to reject measures that might jeopardize this status. ¶13. (C) COMMENT. While possible, it does not seem likely that a similar set of protests or strikes, along the lines of those seen in Kuwait, will occur in Saudi Arabia. Intense Saudi security at all levels makes it unlikely that significant organization among workers can occur. If it should, the incident is expected to be dealt with quickly and perhaps even harshly by the Saudi government. The disincentive of deportations and loss of remittance is a huge deterrent for labor to participate in any protest. Despite heavy inflation in the Kingdom, the opportunities there usually far outweigh the poverty found in the home country. Some of the conditions that might lead to a strike are however present in the Kingdom: long hours, harsh working conditions, cramped living situations, and instances of abuse by employers. The most likely condition to lead to disturbances is significantly delayed payment of wages, non-payment, and pay below that which was contractually agreed upon. From an economic perspective, the reality is that Saudi Arabia has no shortage of potential laborers should it find itself deporting a small number of protesters or strikers. For this reason the political and economic JEDDAH 00000368 003 OF 003 impacts of any strike are likely to be minimal to the Saudi economy. The Saudi Arabian government can avoid potential unrest among workers by ardently enforcing its own labor laws. Additional monitoring and regulation by the Ministry of Labor, the judicial system, and police is necessary to insure that Saudi Arabian and sending country recruitment agents are not maximizing their profits at the expense of laborers. END COMMENT. STONER