When governments don’t pay companies, salaries get delayed and migrant workers suffer
By Leila Hatoum and Abdullah Alelyan
Mohammed, a Lebanese man in his thirties, spends his days worrying about how he will repay the loans he has taken against his overdue salary payments. He has sold his car, his furniture, sent his wife back to Lebanon, and currently lives with a friend in Saudi Arabia waiting for Saudi Oger to pay him what he is owed.
Saudi Oger, the company Mohammed and over 30,000 employees work for, is one of the Kingdom’s larger construction conglomerates. Similar to its Saudi competitor the Binladin Group, it has been facing financial troubles, strains of hefty debts, and delayed government projects and payments.
Both Saudi Oger and Binladin group were denied access to new government contracts over the past year, which added to their financial burdens.
“We haven’t been paid since last October,” Mohammed (not his real name) tells Newsweek Middle East.
“My parents send me money from Lebanon every now and then, after I used to transfer money to them. Currently the guys [fellow workers] here are borrowing money from each other just to make ends meet,” he adds.
Like millions of migrant workers in the Arab Gulf region, Mohammed left his native Lebanon to work abroad to provide for his family.
Little did he know that the reputable company he happily joined, owned by Lebanon’s former prime minister and Saudi sheikh, Saad Hariri, would bail out on him and leave him in a sticky situation.
And he isn’t the only one in this tough spot. Tens of thousands of migrant workers across the Gulf Cooperation Council countries (GCC), mainly in Saudi Arabia and Kuwait, have been stuck in a similar situation, unable to provide for their ticket back home or even buy food as their money runs out, their salaries remain unpaid, and for many, their jobs terminated.
Most of these workers hail from India, Philippines, Pakistan, Nepal and Lebanon.
Over the past year, oil prices have failed to reach their past glory levels above $75 per barrel and have stagnated around $40pb, with many fearing the prices may further slide.
The Bad News
For oil consumers, that forecast is nothing short of winning the jackpot. Their economies will not be burdened by climbing oil prices and would perhaps allow them to focus their spending on socio-economic and development-related projects.
However, for oil exporting economies, who eagerly await the Organization of the Petroleum Exporting Countries’ meeting towards the end of November for a possible revival in oil prices, the revenues from their black gold commodity are down.
The prolonged drop in oil prices has impacted the hydrocarbon-rich GCC states’ revenues, forcing most oil producers/exporters in the Middle East to cut back on spending, and many are hedging for possible historic deficits in their national budgets this year—perhaps for the first time.
As a result, economists tell Newsweek Middle East that some GCC governments have delayed in paying companies that are executing projects on their behalf, mainly construction companies. The trickle-down effect from the delayed government payments affected the companies dealing with it, and some were even forced to shut down due to lack of work.
“The drop in oil prices has resulted in delayed projects, and a delay in government payments for months… This may lead to a liquidity crisis, especially in Saudi Arabia, with the lending process and economic and financial cycles suffering because of the cash shortage,” says Nasser Saidi, a renowned economist.
And when companies fail to pay salaries, banks will not be able to retrieve loans they have granted, and subsequently this will filter through to the economy and lead to a shortage in liquidity.
“The delay has also impacted the company suppliers among others and the situation may further snowball,” adds Saidi, who is also a former Lebanese minister of economy and industry and the former vice governor for the Lebanese Central Bank.
Kuwait’s Migrant Workers
Raj, an Indian migrant worker in his thirties, toils for 12 hours a day working at Kuwait’s airport for $150 a month, which barely covers his family’s needs and his food expenses. And even that payment gets delayed most of the time, he tells Newsweek Middle East.
Like thousands of fellow migrant workers in Kuwait, most of the foreign employees at government facilities are hired via private contractors, and according to some workers, scoring a job in a government facility “is like buying a lottery ticket. You never know if you would be happy ever after, or live for months without being paid.”
Raj’s salary barely makes ends meet, and he is forced to illegally work in side jobs to survive and help his family. Begging, living on charity, delivering food and cleaning houses are but some of the jobs that most low-income migrant workers resort to, to be able to send money back home.
He and dozens of other workers at the airport have protested in the past against delayed cheques, which they did not receive for nearly three months, according to him, but the situation persists.
According to a Kuwaiti union official who preferred to remain anonymous, there are “other companies in Kuwait which have delayed payments for months, but that most employees fear to file a complaint because they believe that they wouldn’t see their money then.”
There were 4,223 complaints by Indian migrant workers between July 2015 and July 2016, related to a delay in salaries, according to Hind Al Sabeeh, Kuwait’s minister for social affairs and labor, as well as the minister for planning and development.
“That is less than one percent of the total Indian workers in Kuwait,” she adds.
In the UAE, the situation is different as the Ministry of Labor makes sure there is a financial guarantee against each employee secured by the company. The ministry directly intervenes to solve issues related to delayed payments and often helps in sending workers back home or transfers them to a new work facility if they wish to.
“An employer cannot run from his obligations,” says Habib Al Mulla, chairman of Baker & McKenzie Habib Al Mulla law firm.
“There is a system that protects the workers’ wages, and the government forces the employer to register with the ministry of labor which monitors the flow of salaries. Everyone has to be registered in this system,” he adds.
According to the Deputy Chief of Mission at the Indian embassy, there have been some individual cases in the UAE, and the embassy helps every time a case is brought to its attention.
However, news of people being laid off is not unusual in the UAE, though it doesn’t happen as often and on a large scale as is the case in Saudi Arabia and Kuwait.
Several government-related entities’ (GRE) employees, including in the capital Abu Dhabi, for example have been recently laid off. The reason given by one company is: everyone over the age of 60 will be out by law.
Meanwhile, Mohammed says the Lebanese consulate and embassy are yet to provide any help.
“The consul general is expected back in Jeddah around August 21. A Sudanese man who works at the Lebanese embassy is handling the situation. All the embassy has asked us for is a copy of our residency visa and our IBAN in Lebanon,” he adds.
Going Back Home
Unlike Lebanon’s disregard for its diaspora’s woes, India was quick to act on the matter of helping its citizens abroad. Indian workers facing a food crisis in Saudi Arabia and Kuwait may finally be able to return home as India sent Junior Foreign Affairs Minister to handle the situation earlier this month. Minister Vijay Kumar Singh said that the Saudi government will help on the matter of repatriating thousands of Indian nationals in Saudi Arabia.” India’s Foreign Minister Sushma Swaraj said late in July that more than 10,000 Indians were stuck in Saudi Arabia and Kuwait and were facing a “food crisis.”
“Large number of Indians have lost their jobs in Saudi Arabia and Kuwait. The employers have not paid wages, closed down their factories,” she tweeted.
The Indian Consulate General in Jeddah has also been distributing food aid to its suffering nationals since July. An estimated 3 million Indians live in Saudi Arabia, and millions others live across the Arab Gulf states including in Kuwait. Lower oil prices and gulf countries tightening the belt on government spending have resulted in many companies laying off thousands of workers.
Despite news of the Saudi government moving to solve the issue of thousands of Saudi Oger employees’ ordeal, Mohammed says nothing has materialized yet.
Zaid Al Subaie, director general of Jeddah Labor Office, promised the employees last week that the government will take care of their situation, something which Mohammed says has yet to happen.
“Around 15 days ago, he gave the employees three choices: to get a final exit visa with a one way ticket back home; or renew their residency visa for free; or move them to another facility. Nothing has been executed as far as I know of,” says Mohammed.
But according to the Saudi Labor Ministry around 500 final exit visas have been issued to workers from Saudi Oger so far. The priority for paying the salaries would go to those who are exiting the country, according to Saudi officials, though no payment has been made yet, and the matter may take an extra few weeks.
According to economists, there may be more people losing their jobs going forward, including hundreds of Saudi nationals who may find themselves unemployed soon.
Companies such as Saudi Oger and the Binladin Group, which employ tens of thousands of workers, and owe their employees millions of dollars in unpaid salaries, are not too big to fail.
There has been unconfirmed news that Saudi Oger may be announcing its bankruptcy soon, which may impact its 30,000 employees. Moreover, medical facilities have recently stopped serving Saudi Oger employees after the company’s insurance contract expired mid last month, which means the employees cannot even afford to get sick at the moment. Other smaller businesses, mainly in the services and retail industry may also find it hard to thrive amid a slower economic activity and shortage in cash.
According to official numbers, more than 14 percent of the Saudi population is unemployed.
“Among Saudi youth, this percentage is much higher, and reaches 30 percent,” says Saidi.
Too Big to Fail!
With the possibility of some of the big Saudi companies currently suffering from a liquidity crisis negatively impacting Saudi Arabia’s reputation and its credit rating, a government response is needed; especially if the Kingdom wants to succeed in borrowing money from international markets to pay for its development projects. Saudi Arabia is set to issue multi-billion dollars bonds later this year.
“Perhaps that is why the government intervened to solve the workers’ crisis,” says Saidi.
There is also news that the government is negotiating with the owners of Saudi Oger and even Binladin Group for possible acquisitions, though nothing has been made official or finalized yet.
Until a final agreement is reached, one thing remains for sure, and that is thousands of migrant workers will continue dreaming of two things: getting paid to repay their loans, and going back home.