By Elena McGovern – One only needs to compare images of the Dubai skyline in 1991 and today to understand the amazing transformation that the emirate, and the UAE as a whole, has experienced. And on the surface, there seems to be no end to the country’s economic boom. Today the country very much imagines itself as the trading and logistics hub for the region, boasting high levels of government efficiency and a corporate-friendly environment. Indeed, such growth has many analysts discussing the “Dubai effect” as a model for economic modernization. But recent events, including major labor riots, have illustrated that perhaps the UAE’s strong economic structure may be built upon an unsettled foundation.
To be sure, sustaining such levels of economic and physical growth requires large amounts of skilled and unskilled labor. Local labor is the UAE’s scarcest resource: the population is small and not yet trained to fill the range of positions needed in the short and mid-term. This is why this ever-increasing demand for labor is met by expatriates, with the vast majority coming from South Asia to fill menial and difficult jobs. Laboring for remittances to send home, these unskilled workers often live in poor conditions on the construction sites where they are employed, with abuses ranging from extremely low wages and the withholding of pay and passports to the failure of the UAE government to prosecute unfair employers, all of which have been well documented by Human Rights Watch and other organizations.
The labor situation in the UAE is also vulnerable to global pressures which may be beyond the state’s ability to cope with through domestic reform. Double-digit inflation, coupled with the high price of oil and subsequent cost of shipping and transportation, as well as a current global shortage of food, raised the cost of basic commodities in the UAE by 30 percent in 2007. But the minimum wages of foreign workers are not being adjusted to match this rise.
The largest riot in the UAE’s history occurred in March 2008, when hundreds of workers demanding higher wages rioted at an industrial park in the emirate of Sharjah after the company’s minimum 10 percent increase in salaries failed to meet the workers’ needs for food, housing and remittances as a result of inflation and high food prices. Cars and trucks were burned, as well as considerable damage done to company buildings. Another Sharjah riot occurred in April. And Dubai experienced similar riots in 2006, most notably at the Burj Dubai construction site where over 1 million dollars worth of damage was done in protest of poor working conditions and low wages. Further highlighting the problem, a “sympathy strike” then began at DubaiInternationalAirport. The UAE experienced over two dozen labor strikes in 2005.
Recognizing the country’s tenuous reliance on, and therefore vulnerability to, flows of cheap imported labor, and facing both internal and external pressures to reform, the UAE and emirate governments have made significant efforts to manage the risk of such a large disgruntled labor force. Examples of such legislative efforts are the UAE’s 2007 Draft Labor Law and the Labor and Human Resource policy included in the Plan Abu Dhabi 2030: Urban Structure Framework Plan. Additionally, the number of labor inspectors was increased from 80 to 400 just last year, the UAE government asked the UN’s International Labour Organization to review the Ministry of Labor’s policies (the first country in the region to do so) and the Ministry of Economy recently announced plans to begin surveying the labor community to establish its size and rates of unemployment.
Critics say that these measures do not go far enough. They highlight the fact that these laws do not protect the rights of workers to organize and strike (which is currently illegal) as well as other major loopholes and a lack of inspection capacity. Perhaps even more troubling though is that the laws do not extend to domestic workers, a major component of the immigrant labor force.
Additionally, the ability of the UAE government to control such skyrocketing inflation, another major cause of workers’ frustration, is currently limited due to the dirham’s peg to the dollar. And although the government has taken measures to alleviate the pressure from inflation and the rising cost of living, including fixing the price of 32 basic commodities to 2007 prices, the problem persists.
Sub-standard work conditions combined with labor unrest have the potential to damage the UAE’s image of a lean, competent country and drive away investors. Reputation matters, especially as the UAE markets itself as a unique hub in an otherwise troubled region.
Elena McGovern is a Research Assistant with the Southwest Asia/Gulf project at the Stimson Center.