Highlights
– Substandard housing conditions and withheld payments prompt the eighth Dubai labor strike since May 2005.
– Delayed implementation of labor reforms, such as a minimum wage and prohibition of passport confiscation, is damaging Dubai’s reputation among some foreign laborers and leading to labor shortages.
– Labor demonstrations will be increasingly commonplace in the near term. In the mid- to long-term, however, the UAE may be forced to implement labor reforms.
On October 28, 2007, thousands of migrant workers went on strike in the United Arab Emirates (UAE). The strike followed threats by the government of Dubai’ to deport participants in the October 27, 2007, labor demonstration. The eighth such public demonstration in Dubai since May 2005, Human Rights Watch reported labor abuses in the UAE to include: “nonpayment of wages, extended working hours without overtime compensation, unsafe working environments resulting in deaths and injuries, squalid living conditions in labor camps, and withholding of passports and travel documents.” Due to these ongoing concerns, we believe demonstrations will likely continue in the near-term.
Recent Demonstrations
On October 27, 2007, over 400 construction workers blocked the main entrance to Jebel Ali Industrial Road and a construction site in the al-Qusais residential neighborhood. The blockades included protestors throwing stones at police officers before being forcefully dispersed.
According to Dubai’s Deputy Head of Police, Colonel Abdullah al-Gaithi, the demonstrators blocked one of the entrances at 5 am for over 20 minutes. Minister of Labor Ali bin Abdullah al Ka’abi responded by calling the demonstrators’ actions “uncivilized” and on October 30th announced that 4,000 “rioters” who participated in the strike would be deported.
As part of the campaign, demonstrators demanded a salary increase of 200 to 400 dirhams—their current salary is 600 to 800 dirhams. The requested increase in salary is linked to inflated housing costs and the falling value of the dollar-pegged Dirham.
Insufficient Implementation of Reforms
Past United Arab Emirates (UAE) labor reforms were never implemented; including, the Labor Law of 1980, requiring the institution of a minimum wage, and a 2006 law prohibiting the confiscation of workers’ passports and the withholding of payments. Likewise, the promised legalization of labor unions in response to violent March 2006 labor demonstrations never came to fruition. Instead, in September 2006 the government banned strikes and called for the deportation of workers participating in acts of civil disobedience.
However, the government did make limited progress. In 2006, it rescinded 1,300 companies’ labor permits for late or non-payment of workers and passed legislation allowing for the voluntary transfer of labor—previously prohibited without the employer’s consent. Nonetheless, nearly 20,000 workers filed complaints with the Committee for Labor and Immigration in 2005 with little to no recompense.
A shortage of trained government inspectors is blamed for the government’s inability to implement legislation. Currently, the government employs 140 inspectors to monitor 240,000 businesses, which employ approximately 2,738,000 migrant workers. In July 2007, the government was training 286 additional inspectors, with a target total of 400 by year’s end.
Impact on Dubai’s Real Estate Sector
In an effort to enhance both national security and labor relations, the UAE Labor Ministry granted a general amnesty to illegal laborers and provided them with free plane tickets to return to their native countries in June 2007. The ministry received 280,000 requests from migrant workers, the majority of which are South Asian. However, in the midst of rapid economic growth and a construction boom, Dubai-based construction and investment companies are displeased with the government’s general amnesty program and the deportation policy, which further exasperate labor shortages.
Together the rising cost of raw materials and skilled labor shortages, threaten to extend construction times and further increase construction costs, an unacceptable scenario for global investors.
Future Outlook
For foreign workers, the declining dirham (which is pegged to the dollar) and economic growth in Asia, as well as the institution of job creation projects in India is increasingly making employment in Dubai less attractive.
As a result, migrant workers will be increasingly willing to demonstrate and risk deportation. On the other hand, construction companies faced with a depleted labor recruitment base will be increasingly willing to meet workers’ demands in order to meet construction deadlines.
Therefore, labor demonstrations are anticipated to increase in the near-term. However, as a result of increased loads placed on Dubai’s booming real estate industry, worker grievances will be addressed in the mid to long-term.