Slump in Gulf sends wake-up call
Rahman Jahangir | Published:
January 01, 2016 22:51:40
October 24, 2017 00:39:02
In this age of globalisation, any development taking place anywhere is sure to bring positive or negative impact on a country. Bangladesh is no exception. That is why, recent formation of the Trans-Pacific Partnership (TPP) at the initiative of the United States has sent jitters to policy planners, chambers, trade bodies and researchers. Similar had been the reaction among our garment manufacturers when the buyers imposed tough compliance rules. Finally, the BGMEA members are implementing the US roadmap with steps initiated by the government, retailers and the ILO to make the country's garment factories free from industrial accidents and uphold high labour standards.
It seems, Bangladesh is yet to wake up to an adverse situation set to emerge out of critical state of six Gulf economies. Millions of Bangladeshi workers most of whom are now working in Saudi Arabia and other Gulf countries might face the fallout of sluggish economies of the Gulf Cooperation Council (GCC) member-states. Although about 650,000 Bangladeshis secured jobs in 2015, most of them in Gulf states and the remittance inflow also surged to $15 billion this year, things might not remain so in the foreseeable future if analysts' prediction come true.
There has already been a negative trend in job opportunities for males in Saudi Arabia. The kingdom employs the highest number of Bangladeshis going overseas on jobs. According to official figures, about 1.3 million Bangladeshis are at present working in Saudi Arabia. Now the Saudi authorities have stopped hiring Bangladeshi male workers through recruitment agencies. Only a few are going to the kingdom to work for their relatives' businesses there.
Meanwhile, the kingdom, its finances hit by low oil prices, has announced plans to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation. Even its 2016 budget, released by the Saudi finance ministry, has marked the biggest shake-up to economic policy in the world's top crude exporter for over a decade, and includes politically sensitive reforms from which the authorities previously shied away. The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil. The International Monetary Fund warned in October that Riyadh would run out of money within five years if it does not tighten its belt.
The construction industry of Saudi Arabia, which provided jobs to Bangladeshis in record numbers, presently faces difficult times ahead as the state budget cuts have been added to painful labour reforms, according to a major builder. Companies in the sector had benefited from a construction boom over the past decade as the world's top oil exporter took advantage of high crude prices to spend heavily on transport, social infrastructure and industrial facilities. But prices have more than halved since last summer due to a global supply glut and the volume of building projects looks set to shrink as the Saudi government, facing a mammoth budget deficit, starts to economise by slowing or shelving some plans.
Construction firms, including foreign companies operating there, have also been hit hard by labour reforms by a government seeking to reduce its reliance on oil, and also avoid the kind of social unrest seen elsewhere in the Arab world. The Saudi government has been pushing companies to hire more Saudi citizens instead of cheaper foreign workers, in order to move Saudis out of the state sector and into private industry. It is also keen to keep a lid on an unemployment rate standing at 11.6 per cent.
The Reuters in an analysis said, companies in Saudi Arabia are facing troubles mainly due to the labour reforms. "Now we are in a situation where the pain is already there", the news agency quoted a builder as saying. Brent crude prices have fallen to around $45 a barrel from over $115 in June last year, slashing Saudi Arabia's oil export cash - so-called petrodollars - which traditionally account for around 90 per cent of its state revenues.
The oil price slide has hit Oman and Bahrain too. These two countries, which have employed thousands of Bangladeshis, will face the most pressure, as their budgets are already in deficit. The area that could suffer, particularly if the dip in oil prices is deeper and more prolonged than international agencies are currently forecasting, is capital spending, mainly on infrastructure.
Oman has cut planned capital expenditure by 11 per cent in its 2015 budget and Saudi Arabia has cut it by 25 per cent.
In Qatar, many projects have been announced in advance of the 2022 football World Cup, and it was already becoming clear that capacity constraints meant that delivering all of these would be extremely difficult without significant disruption to Doha city and major cost overruns. In this regard, the fall in oil prices may provide a more even spacing of projects, with media reports that the US$12 billion Sharq Crossing, a set of bridges and tunnels across Doha Bay that was due to be tendered this year, will be put on hold until potentially after 2022. The cutback in infrastructure spending will no doubt be negative for companies operating in construction and related sectors.
It is time for Bangladesh to draw up a contingency plan to address the grim labour market situation in the Gulf countries. Thousands may return home as unskilled workers will be phased out from different projects in the GCC countries gradually. What is badly needed is a well-though-out plan to make workers skilled because the Gulf countries will be facing shortage of skills. Needed badly is a survey of different skills labour-importing countries need and train people at home so that one of the main pillars of the Bangladesh economy-manpower export-does not crumble.