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Labour market badly hit by oil price fall

Experts suggest vigorous move to protect migrant workers

Porimol Palma
Bangladesh's job market in the Middle East is likely to face a major blow with the continuous fall in oil prices and economic slowdown in the region. This gloomy economic state is already affecting the migrant workers there.
With revenues from oil exports going down and the impact of wars in Syria and Yemen on the Arab countries, the governments of the region have begun slashing subsidies on oil, electricity and water.
Results of such policy shifts are evident. The UK-based Business & Human Rights Resource Centre in a report on November 5 said the governments in the Gulf region have been unable to pay contractors in the construction industry.
"Recent instances of stranded workers across the Gulf abandoned without pay, accommodation and food, sometimes for months on end, are a clear demonstration that current worker protections are wholly inadequate," it said.
Bangladeshi migrants, along with Indians and Pakistanis, were unpaid by a few Saudi companies, which left them stranded since August.
"These are alarming signs for the foreign workers. They are the ones affected first and the most in any crisis," said Professor Rashed Uz Zaman at the department of international relations of Dhaka University.
WHY IS OIL PRICE FALLING?
The oil price that was more than $130 per barrel in early 2008 began falling and went below $50 in 2009. Taking an uptrend since then, the price hovered around $ 100 line, but mostly below it until mid-2014.
The oil price took a sharp downtrend and mostly remained below $50 a barrel since then. The United States' domestic production has nearly doubled over the last several years because of extraction of non-traditional shale oil.
When the global production of oil is rising, the economies of Europe and developing countries "are weak and vehicles are becoming more energy-efficient," says a New York Times report on December 1.
Professor Rashed Uz Zaman said withdrawal of sanctions on Iran by the West would lead to significant rise in global oil production and supply.
"Alongside demand and supply issue, there is geopolitics as well. I don't think oil price will return to its previous record [over $100 a barrel] anytime in near future," said the professor who teaches global political economy.
WHAT'S THE IMPACT?
Against this backdrop, the Gulf countries - Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates - that earn over 80 percent of revenues from oil exports are cutting public spending and imposing taxes.
Last year, Saudi citizens saw the price of gasoline rise by 80 percent as a result of the withdrawal of subsidies. Public employee pay has also been cut by up to 20 percent, and bonuses and annual leave have been reduced after the Kingdom's budget deficit amounted to $98 billion last year.
According to a report of The Economist, value-added tax of up to five percent will be introduced across the Gulf region by 2018. Oman has raised corporate tax from 12 percent to 15 percent. Other states are considering taxing expatriates' incomes.
The International Monetary Fund said oil-exporting countries in the Middle East lost $390 billion in revenue last year, and the sum could be up to $500 billion by the end of this year.
The issues are of concern for Bangladesh as over 70 percent of the country's nearly 80 lakh workers work in the Gulf region and send home 60 percent of the country's $15
billion remittance a year.
Moreover, they face high migration cost — on an averageTk 3.8 lakh. It takes them nearly two years to recover the money, according to a 2015 study by the Refugee and Migratory Movements Research Unit of Dhaka University.
Dr Zaid Bakht, former research director at the Bangladesh Institute of Development Studies (BIDS), said implementation of current projects like the stadiums for the FIFA World Cup in Qatar would not stop, meaning there would be a need for workers.
But the economy of the Persian Gulf nations that recruited foreign workers, mostly from South Asia, since the oil boom in the 1980s for its massive infrastructure development projects is very likely to slow down. This would definitely lead to a decline in labour recruitment, the economist noted.
WHAT'S THE POLICY OPTION
FOR BANGLADESH?
Researchers say Bangladesh has been traditionally dependent on the Middle East and some Southeast Asian countries like Malaysia and Singapore for overseas jobs with the majority of those in low-skill categories.
It is high time the authorities focused on creating more jobs inside the country for its large youth population by creating an environment for private sector investments, while finding alternative foreign job markets, including in the East Asian countries.
Zaid Bakht suggested Bangladesh now focus on preparing skilled manpower for the services sectors like healthcare, care-giving, management and information technology to be able to grab the global demand.
Even in the Middle East, the demand for caregivers and nurses are high. Besides, the East Asian countries, including Japan where ageing population is very large, can be attractive job markets for Bangladesh, he noted.
"What we need is to improve skills of our people in line with the demands, and effectively look for new labour markets," Zaid said.