CCLA’s Investor Engagement in the Gulf
27 October 2020
There are 11 million migrant workers in the Gulf Cooperation Council, comprising 67% of the region’s workforce. In Qatar and the UAE, they make up more than 80% of the total population.
Lack of lucrative work in Bangladesh, Pakistan, Nepal, India, Kenya and Turkey (among others) means that there is a high demand for jobs overseas. Until now, Gulf countries have possessed the perfect blend of capital abundance and low domestic labour capacity.
This imbalance has had its advantages; migrants in the Arab States remitted more than $124 billion in 2017, with the UAE and Saudi Arabia ranking second and third globally in remittance outflow. Nepal generates as much as 27% of its GDP from overseas remittance.
However, the high demand for jobs in the Gulf has historically tipped the advantage heavily in favour of employers. Unlike most Western economies – where employers typically cover recruitment costs – fees are instead paid by the workers and jobseekers who can least afford it. The labour supply chain is often six or seven steps removed from the employer itself. This leaves migrants liable for layer upon layer of fees – certainly unethical, frequently illegal – in their journeys from home to work.
There is no social safety net for foreigners in these countries. While some governments have promised to cover any shortfalls in their own nationals' wages, most foreign workers are excluded. What is more, the kafala system – under which workers are beholden to the employers who sponsored their visas – creates an environment ripe for exploitation. Migrants may now have to start choosing between their health or their pay.
A report by Impactt, based on interviews with migrant workers in Qatar, shows the extent of the problem. The average recruitment fee reported by Nepalese migrants, like BK, is $874. Those coming from Bangladesh have been paying a reported average of $2,901. It would take about two years for a low-skilled worker to earn this amount at home.
Sometimes migrant workers will stay overseas for a few years, earn enough money to pay down their debts, buy a house, and return home. Happy endings of this kind are uncommon. This is because in order to pay the recruitment fees, workers from these countries often sell their possessions, their buffalos, cows, goats, yaks and land before heading overseas. To cover the costs, they borrow money from friends, family, banks and loan sharks, with interest rates of up to 45%.
“I only got to work 48 days. I couldn't even recover the amount I paid for the job. I ended up taking more loans.”
Bhakti BK reached Dubai from his home in Nepal on 7th January. His work as an airport baggage handler started on 1st February; six weeks later – as the world woke up to the curse of a global pandemic – it stopped. He had spent the equivalent of $800 on recruitment fees. He is left away from home, without work, having failed to repay even half of the loan.
BK is not alone. A sharp economic downturn has resulted in the cancellation of work contracts, job losses, salary delays and millions in unpaid wages for migrant workers in the Gulf. The loss of a job leaves these people without means to repay the large debts they had acquired from unethical recruitment practices.
The effect of the pandemic
The Covid-19 pandemic has highlighted the precarious balance of forces at play. As domestic and commercial cleaners, security guards for hotels and shopping malls, scaffolders, labourers, airline cargo handlers, maids; these people are the oil in the Gulf’s economic engine. But what happens when the engine stops?
Migrant workers being forcibly repatriated (deported) return home empty handed and hugely in debt. Often the breadwinners of the family – and having sold their possessions to pay their recruitment fees – these people are left desolate. Those unable to get home remain housed in overcrowded, unsanitary accommodation, lacking income for food, travel or healthcare. In short, an outright violation of basic human rights.
What can we do?
Despite the fact that only 60 to 85 percent of migrant workers report having paid recruitment fees, we believe that unethical recruitment practices are ubiquitous in the Gulf region. The current socioeconomic crisis has shone a spotlight on the daily suffering of millions of migrants living, as a result, in a state of perpetual debt bondage.
Given our ongoing focus on modern slavery in company supply chains (Find It, Fix It, Prevent It), we believe that we have a moral obligation to effect positive change. In August, we gathered a coalition of 38 investors with $3tn in AUM and wrote to 54 companies operating in Gulf nations. The target companies were in the high-risk sectors of oil and gas, construction and hospitality.
We asked these companies to provide details of how they are safeguarding workers. The letter highlighting that because of the complicated nature of recruitment supply chains, they may be unaware of the abuse. We asked for information on labour outsourcing arrangements, and policies and processes in place to identify and – crucially – reimburse migrants who have been impacted by recruitment fees.
What have we found?
To date, 20 companies have responded. Most express a commitment to human rights in policy documents, such as a supply a chain code of conduct, which includes the prohibition of recruitment fees. Even so, real engagement with the problem is lacking. It is likely that abuse exists earlier in workers’ recruitment journeys, which is not easy to trace. Two companies show elements of good practice. They have interviewed workers to check if they’ve paid fees and are prepared to discuss the outcomes of these investigations with us.
We will continue to follow up with these companies, focussing on how policy operates in practice. Interviewing workers in their own language is key; and it is necessary to do so in a safe and supportive environment. Leading companies show a willingness to take extra care to uncover problems that are, all too often, fully concealed.
CCLA against modern slavery
Our clients’ assets are invested in businesses that have global operations and supply chains. While our direct operations are limited to the UK, it is certain that we are exposed to modern slavery through the companies and assets held in client portfolios.
To address the problem head on, we have launched the Find It, Fix It, Prevent It initiative. It has four distinct workflows:
- Engagement: we have an active engagement programme pushing investee businesses to proactively identify – and address – instances of modern slavery.
- Public policy: we co-ordinate engagement with UK and overseas policy makers to encourage better regulation and development of the UK Modern Slavery Act.
- Data provision: a lack of data constrains the potential for companies to act. We bring together investors, academics and NGOs to develop better datapoints and encourage ESG data providers to include them.
- Academia: our project partner, The University of Nottingham Rights Lab, is drawing on the engagement programme as a case study. The aim is to aid research into what is, and what is not, effective in corporate action on slavery.
The views expressed do not constitute financial, investment or professional advice. CCLA Investment Management Limited (registered in England, No. 2183088) and CCLA Fund Managers Limited (registered in England, No. 8735639), whose registered address is: Senator House, 85 Queen Victoria Street, London EC4V 4ET, are authorised and regulated by the Financial Conduct Authority.