International Studies. Interdisciplinary Political and Cultural Journal
Vol. 29, No. 1/2022, 69–83
https://doi.org/10.18778/1641-4233.29.05

The Political Economy of the Kafala Abolishment in Saudi Arabia

Założenia polityczno-ekonomiczne dotyczące uchylenia systemu kafala w Arabii Saudyjskiej

Md. Mufassir Rashid ^*

https://orcid.org/0000-0003-3757-2806

The KRF Center for Bangladesh and Global Affairs (CBGA)
e-mail: mufassir.emil199@gmail.com

Introduction

In November 2020, Saudi government announced that it would abolish the Kafala system in the near future through its Labour Reform Initiative. By March 2021, the reform is in full effect, and Kafala has been abolished. But looking at the details, it is a partial abolishment due to its exclusion of domestic and farmworkers, who are still operating under Kafala. However, the reform did not come out of nowhere; rather, it came as a part of a bigger transition.

Since 2017, the Saudi government has been working on their Vision 2030, which is basically an economic liberalisation project to diversify the Saudi economy. At present, the Saudi economy is a ‘Rentier’ economy heavily dependent upon one source of income, namely the oil market. But over the year, the performance of the oil market is not very good, and fiscal deficits are visible. The pandemic and a disruption in supply chain also revealed the volatility of the oil market. Even though the oil price skyrocketed immediately after the Ukraine war, the sustainability debate is still on the table. Moreover, sceptics also believe that Saudi oil will also run out in the future. According to Allianz Trade, the oil reserve is likely to sustain only 60 years, while gas reserve is likely to sustain for 70 years (Saudi Arabia: Pre-Crisis…). In these circumstances, the Saudi government is looking for alternative sources of income, and in order to do so, they are opting for industrialisation on a massive scale to sustain the economy in the future. Such actions will also enable the government to address the growing unemployment problems. However, the economic reform will also result in evolving labour demand. Before, the Saudi labour market mostly ran on unskilled labour, but under the industrial economy, they will require skilled labourers mostly. In this aspect, Kafala is also not suitable.

Moreover, domestic workers and farmworkers were excluded from the reform, and as a result, they will continue to operate under Kafala. Such observation shows that the abolishment is a partial one, not a full abolishment, and the abolishment is motivated by political-economic incentives rather than humanitarian and moral interventions.

In this context, the objective of this paper is to provide a political economy analysis of the Kafala abolishment. In order to do so, this paper will follow the political economy of migration policy as an analytical framework. Using the framework, this paper will describe the political economy aspects of the recent abolishment.

Methodology

This is a qualitative article based on secondary literature derived from relevant books, journal articles, newspapers, magazines, and semi-scholarly literature. To conduct the study, the content analysis method is implemented on secondary data mostly. To provide a theoretical understanding, this article will develop an analytical framework of the political economy of migration policy. To explain the Kafala abolishment, the article will follow statist model and the sub-state institutions perspective.

To provide a political economy analysis of the Kafala abolishment, this article will ask two questions.

1. How does the Kafala abolishment serve as a pre-requisition to Saudi Vision 2030 and advancement of Economic Liberalisation? and
2. What are the political economy aspects of a shift in migration policy regarding the Kafala abolishment?

Existing literature

A political economic analysis of Kafala and its abolishment is relatively a new study project as the abolishment only took place in March 2021 with the announcement in November 2020. The study project includes several topics such as political economy of migration policy, the Kafala system and its features and abolishment details, and understanding Saudi Arabia’s economic reform.

To understand migration policy from the political economy approach, Hillman’s study covered the role and use of migration policy in the transition of states. Hillman explained that, beyond economic needs and factors, behind every migration policy there are political-economic interests such as employment consequences, distress, and transitions (Hillman). On the other hand, Rudolph’s study shows that migration policies have a lot of dynamics, including political, social, economic, and foreign policy (Rudolph). However, Freedman and Kessler’s work is worthy of mention in this regard as the authors provided a cross-disciplinary political economy approach where they linked migration policy and economic effects with state, institutions, and interest groups (Freedman, and Kessler). Facchini and Mayda’s research also acknowledged the role of government and interest groups in adopting migration policy, and contributed to the conceptual understanding of the political economy of migration policy (Facchini, and Mayda).

A lot of studies can be found on Kafaala and its features as well as on abolishment strategies. Most of them are self-sufficient and self-explanatory. Azhari provided a critical perspective on Kafala and Kafeel from Islamic law, international Law, and human rights perspective, where the features and critiques are mostly covered (Azhari). Khan and Harroff-Tavel explored the challenges and opportunities of the Kafala abolishment (Khan, and Harroff-Tavel). However, Damir-Geilsdorf also explored the Kafala system from a legal perspective, the debt bondage and the role of the Kafeel in the system, and the notorious ‘maid trade’ and absconding crime regarding runaway workers (Damir-Geilsdorf). Apart from scholarly works, Rothna Begum’s semi-scholarly writings are worth mentioning here. In her writing in human Rights Watch’, Begum identified five key elements of Kafala that give the Kafeel control over the migrant workers’ life including entry and exit from the country, power to cancel residency and work permit any time, controlling the job of migrants, and, finally, the absconding crimes such as runaway (Begum). In her article, Begum also recommended that if Saudi Arabia wants to abolish the system, the abolishment must address these five issues (Begum). Apart from Begum, Robinson also wrote in the Council for Foreign Relations in the context of the Qatar World Cup human rights abuse on the Kafala system. Robinson’s all-encompassing article covers almost every aspect of the Kafala system (Robinson).

Saudi Arabia’s economic reform under “Vision 2030” is also explored by various scholarly and semi-scholarly writings. Al-Sulayman briefly discussed the reform and identified the ‘dual pressure’ for the government to adopt the reform (Al-Sulayman). According to Sulayman, Gulf Countries, due to their reliance on oil, are facing global pressure due to fall of oil price and, as a consequence, are facing deficit issues because of their ‘super rentier’ nature; and the second pressure is growing unemployment and the lack of domestic production market (Al-Sulayman 2). Moshashai et al.’s research also shows that the reform plan is motivated to diversify the revenue sectors and decrease reliance on the oil market as the performance of the market has recently declined (Moshashai et al.) Again, Khashan’s study also supports the previous research as he identified the reform as expanding and diversifying the revenue generation (Khashan). For Khashan, this is only an economic reform of liberalisation, not a political reform (Khashan, 4). Khashan’s claim is also supported logically by Feierstein. Feierstein, in his writing in American Foreign Service Association, also identified the reform as an economic liberalisation only and not democratisation or political reform (Feiersterin).

However, the aim of this study is to establish the political economy of the Kafala abolishment as a part of an economic reform, as it is a relatively new phenomenon in contemporary migration studies and in political economy research. Though in many semi-scholarly articles and opinion-editorials, the issues have been discussed for past six or seven months, they are brief, scattered, and lack further delve into the topics. In this regard, the objective of this study is to provide a better and more organised political economy explanation.

The political economy of migration policy

Political economy as an approach believes that behind every migration policy, there are political-economic incentives for the policymakers. It tries to overcome the economic and political understanding of migration policy and provide a new systematic understanding instead.

The political economy approach of migration policy believes that there can be both economic and politico-cultural influences, gainers, and losers in a migration policy. However, through the policy, political-economic consequences, distress, or transition may take place (Hillman 268–269). In the empirical aspect, it may result in employment or unemployment, change in job security, etc. For instance, Germany’s transition from socialism to capitalism and migration policy was also adopted accordingly (Hillman 268). However, the migration policy ensured a liberal market but also allowed inequality to take place, unlike before in socialism (Hillman 268–269).

Over the time, the approach evolved, and researchers facilitated the role of the state, institutions, and interest groups to make the approach more dynamic. Freeman and Kessler categorised the approach into three models. Firstly, there is the statist model, which analyses the strategic and interest-based needs of the state and places the state at the centre of the policy (Freeman, and Kessler).

Secondly, there is the institution model, which prioritises the sub-state institutions (Freeman, and Kessler). Institutions and their aggravated economic and fiscal premises motivate them to pursue certain policies; in their pursuit, a wide range of variables are present, such as domestic negotiations, various existing political economies in domestic settings, party politics, political system, etc. (Freeman, and Kessler); institutions pursue migration policy based on their motivation and needs. Here, variables are important, because they influence the policy orientations. For instance, an anti-immigrant party may prefer restrictive policies, and a capitalistic free market may prefer open policy. Culture is also important as it also influences the policy. Rudolph’s study supports such claim as the author’s study shows that after 9/11 and securitisation phases, the US government’s migration policy was also affected by it (Rudolph 615–616).

The third and final model is the interest group’s dynamics. It reflects the influential roles of interest groups in policymaking (Freeman, and Kessler). For Instance, the liberal market promoters seek open policies. Again, trade unions and rights watch groups call for better treatment of migrants. Facchini and Mayda’s empirical study on the US migration policy between 1976 and 2007 also shows the importance of interest groups in migration policy (Facchini, and Mayda).

However, Facchini and Mayda also acknowledged the central role of the state in policy adoption. While adopting and passing policy, the government is the final decision-maker, and it formulates policies by taking all the factors into consideration (Facchini, and Mayda 26). For instance, the recent trend of migration policy is adopting the temporary labour migration, which allows the state to meet its economic demand and simultaneously meet the politico-cultural demand of its citizens who may dislike ‘outsiders’ for a long time in their countries.

Using these existing ideas, the next sections of this paper will assess the political economy of Saudi Arabia’s migration policy shift from the Kafala system to its abolishment.

Kafala, problems of Kafala, and abolishment

Kafala

Kafala is a notorious sponsor system that has existed mainly in the Gulf countries since the 1950s (Azhari 63). Apart from Gulf countries, Kafala can also be found in Lebanon and Jordan. The system originated from the Islamic tradition, which emphasised ‘guarantying’ safety (Azhari 63). Through the system, the state gives power to private citizens and companies to control every aspect of migrant workers’ life while they stay and work in that country (Robinson). Under this system, states relieve and transfer their governance duty to the private citizens (Damir-Geilsdorf 166–167). It is basically designed to maintain and employ the unskilled labour force on a temporary basis. In Kafala, a private citizen or private company works as the ‘Kafeel’, meaning a sponsor who covers all the expenses including travel and dormitories for a migrant (Robinson). Kafeel controls five key elements of migrant workers’ life including entry permission and facilitation, residency, work permit, controlling absconding decisions, and existing permission and facilitation (Begum).

However, the Kafala system had been relevant till the present as GCC countries mostly needed unskilled labourers. To meet the required skilled labour force, they used to launch a handful of visa schemes called ‘Golden visa’ or ‘Free visa’.

Problems of Kafala

From its inauguration, Kafala was highly criticised by human rights workers. Over the year, with the rising number of abuse cases by exploiting the powers given to Kafeel, Kafala can be identified as ‘modern-day slavery’ (Robinson). This is due to Kafeel’s controlling key aspects of migrant workers’ life. Debt bondage and unpaid labours are some of the common complaints about the system; excessive work hours and unpaid wages are common dissatisfactions among the workers (Saudi Arabia: Domestic Workers…). Moreover, as the Kafeel can take away and control the passport of migrants, migrants have no power or authority over their decisions (Begum). Apart from all these, the jurisdiction is also under the interior ministries rather than labour ministries, and so workers have no protection under the host country’s labour law (Robinson). Furthermore, a greater political economy is at play by exploiting the system as recruiters and middlemen exploit the workers for recruitment and other issues (Robinson). In many cases, Kafeel also exploits workers by charging extra money for renewing, and in many cases, the Kafeel collects tax from the workers though it is the duty of the Kafeel to pay tax for the migrants according to the law.

Abolishment

Saudi Arabia announced the abolishment first in November 2020 (Saudi Arabia: Labor Reforms…). The announcement came from the Ministry of Human Resource and Social Development under new labour reform. And according to the ministry, the aim is to ‘enhance the contractual relationship between workers and employers’, help establish an ‘attractive job market’, and ‘improve the working environment’ in the country (Saudi Arabia: Labor Reforms…). Under the new reform, migrant workers will no longer need the Kafeel’s permission to change jobs, travel abroad, or leave the country, and the reform also abolished absconding crime (Nereim).

After the reform, workers can change jobs willingly after one year of the contract, can travel outside the country without any permission from the employer (Saudi Arabia: Labor Reforms…), and under the digitalisation, they will be provided IDs, and they will be required to use the digital system prior to their switching jobs, travelling or leaving the country. The reform has been in effect since March 2021. However, farmers, domestic workers, drivers, gardeners, and home security are not covered under the reform (Domestic Worker, 4 Other…); for these workers, Kafala is still in effect. Such observation shows that the abolishment is only focused on transforming and boosting the profitable economic aspects rather than encompassing all aspects.

In the next section, the Saudi economic reform will be discussed, where the transformation of migration policy will be established as a prerequisite for achieving Vision 2030.

Vision 2030 – Saudi economic reform

Saudi Arabia till today is a ‘Rentier’ state depending on its vast oil reserves. In the last fifty to sixty years, the Sheikhs have earned a gigantic fortune from the oil trade. But in the past decade and at present, the oil market is not doing much good. There are huge fiscal deficits recorded in the oil market, and with demographic expansion over the year, unemployment also increased drastically. Moreover, speculations are present about Saudi’s oil reserve, namely that it is over-calculated (Rapier). Many sceptics believe the Saudi oil reserve will run out soon. In these circumstances, the government needs to generate alternative sources of income that will both allow the generation of money and ensure employment for the unemployed youths. In order to achieve these policies, crown prince Mohammad Bin Salman introduced a new economic reform under “Vision 2030”.

Its prime objective is to reduce its ‘Rentier’ nature by reducing dependency on oil and diversify the revenue sectors. According to Al-Sulayman, the negative performance of the oil market lately and the increasing unemployment constitute the ‘dual pressure’ behind this reform (Al-Sulayman 2). However, Moshashai et al.’s research also supports such claim; the unsatisfactory performance of the oil market pushes the government to diversify the revenue sectors (Moshashai et al. 389–390). Under the reform, the government expects to boost ‘thrust sectors’ such as energy, tourism, information, and communication. In order to boost these sectors, they require Foreign Direct Investments (FDIs), a large number of skilled and unskilled workers, and, most importantly, productive work hours. Hence, in order to achieve these by 2030, Saudi Arabia has chosen the path of economic liberalisation under “Vision 2030”.

However, it is only an economic reform, not a political transformation (Feierstein); the proof of such a claim can be found by looking at the main elements of the plan. The three core elements of Vision 2030 are: diversified sustainable economy, shifting economic growth from public to private sector (privatisation in general), and job creation for unemployed citizens (Feierstein). So, ultimately, it is an economic liberalisation, and the aim is to diversify revenue generation (Khashan 6–7). Again, liberalisation and boosting these sectors require skilled and unskilled foreign labour (Khashan 3). Moreover, the Saudi labour market is sustained by foreign workers as the number of foreign workers is almost one-third of the total population (Nereim). So, under the reform, it is important to ensure better management and equal field to attract skilled labour force and foreign investment. As a result, the abolishment and the new Labour Reform Initiative serves as a pre-requisition for Vision 2030 and the advancement of economic liberalisation.

Such observation suggests that Saudi Arabia’s Kafala abolishment can be understood under the statist model described by Hillman and Kessler. The abolishment is an outcome of interest-based need of the state. And hence, the Saudi government opted for abolishment, as it is a pre-requisite for their Vision 2030.

The observations till now suggest that there are various important political-economic aspects of the abolishment. In the next section of this paper, I will try to explore these aspects.

The political economy of Kafala abolishment

The latest abolishment has various political-economic aspects for the government. As the country heads for a ‘dual’ labour system, where domestic workers still fall under the system, such developments indicate that the abolishment may or may not be motivated by moral-social values. Rather, it is definitely motivated by the political-economic incentives for the state; there are various political economy aspects of the abolishment that are lucrative and essential for the state.

Implementing the labour reform initiative

As Saudi Arabia is now aiming to use its labour market in diverse revenue generation, a labour reform is a prerequisite. Kafala was designed only to maintain the unskilled labour forces to continue development works and had trifling participation in generating revenue. But now, as large-scale industrialisation is about to take place, labour rights are a must to enhance productivity and to ensure required labour. The Kafala abolishment and implementation of a labour reform will help the government to achieve so. The Kafala abolishment will allow liberalisation that includes wage protections, digital documentations, and labour reform (Saudi Arabia Eases…). However, the Labor Reform Initiative will also ensure mobility and regulation, as well as decrease disputes and high work rates (Ministry Of Human Resources…).

Revenue generation and job vacancy

The new reform will increase revenue for the government as under the reform, the levy will increase for both the migrant workers and for their employers. Under the levy introduced in 2017, migrants with dependants are supposed to pay a certain amount to the government. Now it is increased to around 90 USD per a dependent (Allinson). It is also an attempt to replace the foreign workers by levying with the high rate with unemployed Saudi citizens. As a result, under the new reform, revenue generation will be increased for the government, and Saudi citizens will replace their foreign counterparts in many aspects. While the revenue generation is likely to increase for the government, it will put additional economic pressure on the migrant workers.

Kafeel’s hegemony

Under the Kafala system, Kafeel used to enjoy a direct hegemony in every aspect of migrants’ life. They would also make a profit out of the system by burdening the migrants with unlawful insurance and tax bills. In most cases, Kafeels and intermediaries made a profit from the early stage of recruitment by charging the candidates. By controlling the migrant, they are also notorious for enjoying unpaid labour and poor wage. Under the Kafala system, Kafeel was the ultimate gainer rather than the government, and the government only shared its governance and facilitated the labour demand. After the abolishment, due to the labour reform, Kafeel’s hegemony will surely decrease at least to some extent, and taxation and other fees introduced under liberalisation will also benefit the government directly.

Prerequisite for Vision 2030

The labour reform and Kafala abolishment is a prerequisite for ‘Vision 2030’ and its liberalisation. For Vision 2030, to diversify the economy, Saudi Arabia will require a large amount of inflow of FDIs. It is because due to the existing mistrust and vulnerability in the political landscape, Saudi businessmen do not prefer to invest in their inland; rather, they prefer to invest outside the country. It is a very common trend, especially with the people who are not on the very good side with the government. On the other hand, bonded labour under Kafala is not very suitable for industry works; rather, ensuring workers’ rights and facilities is important for productivity. As a result, the a bolishment is a prerequisite for liberalisation and implementing Vision 2030.

Evolving labour demand

As mentioned earlier, Kafala was designed to maintain unskilled labour that would provide service works and developmental activities, and had a trifling contribution to revenue generation. But now, liberalisation requires skilled workers as they will be engaged in profit-making businesses and will work in industries. Khashan also expressed the same, as according to him, “Privatisation requires a huge skilled worker which Saudi needs from outside” (Khashan 4–5). Moreover, dependency on unskilled foreign workers also needs to be reduced as the government wants to address unemployment in the domestic economy. So, Saudi Arabia right now has a demand for skilled labour unlike before. Before, Saudi Arabia required a handful of skilled labour which they met through their various visa schemes such as ‘golden visa’ or ‘free visa’. But now, under the Vision 2030, with evolving demand of labour, they require skilled labour, and skilled workers are not willing to work under Kafala. So, by abolishing Kafala, the Saudi government will also meet their evolving labour demand.

Therefore, the abolishment is also a part of a transitional process in the Saudi labour market under Saudi Vision 2030, which perfectly matches with Hillman’s approach to migration policy.

Institutions and the political economy of migration policy

The abolishment was announced by the Human Resource and Social Development (HRSD) ministry (Domestic Worker, 4 Other…). Before the reform, under the Kafala system, the jurisdiction of migrant workers was under the Interior Ministry (Homeland Security). But the reform was adopted and jurisdiction was shifted to the HRSD ministry. Such a shift in jurisdiction also shows that, under Kafala, the orientation was to manage the migrants from a security perspective, and now the situation is changed, and the orientation is also changed, resulting in an institutional shift in the policy. This also supports the ‘Institutions and Political Economy of Migration Policy’ model of Freeman and Kessler mentioned before that sub-state institutions pursue migration policy based on their needs and motivations; in this case – to diversify the economy and achieve transformation – ministries have pursued the policy of abolishment and shifting jurisdiction.

A partial abolishment

One considerable observation is that the Kafala abolishment did not cover all of the workers; rather, it excluded domestic and farmworkers, including maids, gardeners, drivers, security guards. These categories are still working under Kafala. The reason for not including these categories also has political-economic dimensions. First of all, these categories do not have any significance in profit generation as they mostly provide service. Secondly, reforming these categories will result in increased wages and VATs, which will not be liked by most of Saudis (Allinson); and, lastly, employers do not want to lose the ultimate control over their labour at home. As a result, the abolishment is only partial. Aaccording to Begum, “This is not full abolition of the system,” (Nereim). Hence, the abolishment is only a partial one, motivated to set and advance the Vision 2030.

Conclusion

Saudi Arabia’s quest for Vision 2030 has several prerequisites and means to carry on the vision. Here, the labour reform is one of the crucial prerequisites. The abolishment of Kafala is, therefore, a part of this reform. Moreover, it is also an important shift in policy as the labour demand also shifted from unskilled to skilled. Kafala is not suitable to attract and maintain skilled foreign labour and FDIs. It is also not very suitable for industrialisation as the bindings may hamper productivity. So, the Kafala abolishment was inevitable once the Vision 2030 was planned. As a result of the abolishment, the government will be one step further in its quest for liberalisation. Apart from this, the abolishment will not only ensure meeting labour demand, but it will also bring increased tax for the government. Moreover, it will also reduce the Kafeel’s hegemony. However, the exclusion of domestic workers and farmworkers from the reform means ‘partial abolishment’, not a full one. Such exclusion is also motivated to maintain the ‘unskilled labour’ who is not engaged in profit generation but, rather, provides services. So, the abolishment is highly motivated by political-economic concerns that serve the government and the Sheikhs in the best way. Kafala is still not fully abolished, and it will be a long road to ensure the full abolishment of such inhumane practices. However, though it is a partial abolishment motivated by political-economic incentives, such a policy shift is also a milestone in Saudi Arabia’s modern history.

Funding
This is an independent project. There is no funding for this study.

Conflict of interest
There is no conflict of interest regarding this study.

^* Mufassir Rashid
MD Mufassir is currently working as a Research Associate at the KRF center for Bangladesh and Global Affairs (CBGA). Prior to that, he has completed his BSS in International Relations from the Department of International Relations, University of Dhaka, Bangladesh. He has also completed his MSS from the same department with a specialization in International Political Economy.

© by the author, licensee University of Lodz – Lodz University Press, Lodz, Poland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution license CC-BY-NC-ND 4.0 (https://creativecommons.org/licenses/by-nc-nd/4.0/)