x Abu Dhabi, UAEWednesday 17 January 2018

UAE sponsor system in the spotlight

Ministry of Labour is planning limited reforms to make it easier to change jobs, but rules out abolition of the system, which some employers have been accused of exploiting.

The Minister of Labour, Saqr Ghobash, says the sponsor system regulates the labour flow of the UAE's expatriate workers, which is a right of sovereignty. Pawan Singh / The National
The Minister of Labour, Saqr Ghobash, says the sponsor system regulates the labour flow of the UAE's expatriate workers, which is a right of sovereignty. Pawan Singh / The National

ABU DHABI // The Minister of Labour is facing increasing calls to alter the sponsorship system as reforms are enacted across the Gulf.

Saqr Ghobash will appear before the Federal National Council to address demands for reform.

He has already acknowledged that limited reforms will take place. The Ministry of Labour will soon announce changes that make it easier for expatriates to find new jobs if they leave their old ones.

"When the contractual relationship ends between the two parties, logic dictates that each party becomes free in determining the new relationship they want to enter into," Mr Ghobash wrote in a letter to the FNC this week.

Some employers have abused the "sponsor" system, which mandates a local sponsor for expatriates, to stop their employees from working at another job in the UAE immediately after resigning. The system is to ensure people have a job when they come here, or a local sponsor if they are starting a business.

Mr Ghobash ruled out abolition of sponsorship in the UAE, saying it was an issue of sovereignty.

"This system emanates from the country exercising its sovereignty over its land in terms of its policies and choices with regards to allowing the entry and residency of foreigners," he said, which "international law considers a sovereign choice."

Yousef al Neaimi, an FNC member from Ras al Khaimah, posed a question on labour reforms to Mr Ghobash.

"The country took the example of the GCC countries in the local sponsor system, but the region is now witnessing a debate on measures that should be taken to renounce this system," said Mr al Neaimi.

He asked what the Government's intentions were on abolishing sponsorship and "treating its negative effects".

Mr al Neaimi presented his arguments for and against the system.

Abolishing the system would provide more job opportunities for nationals and limit the "domination" of expatriates over the workforce if it is introduced in tandem with more fees for expatriate workers, he said. It would ensure that foreign workers are priced competitively with Emiratis.

Mr al Neaimi's report said foreign workers cost the UAE between Dh45 to 55 billion a year in social assistance and costs, which includes government subsidies for electricity and their use of public services and infrastructure and security.

He said it would also mean generally higher wages and productivity for workers.

The downside is that it could create "chaos" in the local labour market, he said, because it would deregulate unskilled labour and compound the imbalance in the UAE's population. Expatriates make up an estimated 80 per cent or more of the UAE's population.

It could also limit the number of Emiratis in the private sector if more foreign labour is brought in. Nationals make up just 1.5 per cent of the private sector - 69,000 out of an estimated 2.6 million private sector workers, according to 2009 figures.

Unskilled labour makes up 80 per cent of the UAE's expatriate workers.

The expatriate population belongs to 200 countries, representing a large cultural impact on the country and worsening the demographic imbalance, said Mr al Neaimi.

He concluded the Government would need additional measures to limit the negative impact of a decision to abolish the sponsor system.

Bahrain passed legislation in May abolishing the system and Kuwait is studying a proposal to do the same.

But Mr Ghobash ruled out dropping the sponsor system.

"We have affirmed publicly that the sponsorship system in principle is an acceptable system," he said in a written response to the FNC.

The United States, Australia and Britain, as well as several other countries in the European Union, have similar systems that allows them to bring in temporary workers, he said.

Any efforts targeting the sponsor system will be to improve it, make it more robust and provide a better balance in labour relations, said Mr Ghobash.

Since the sponsor system regulates the flow of labour in the country, it is one that signifies the UAE's sovereignty over its land, he said.

Mr Ghobash acknowledged that there are problems with the system.

The ministry is now taking steps to address some of these problems and is finalising a decision that would make it easier for employees to find new jobs after leaving their former ones, as long as there is a need for them in the labour market and they have a clean record.

The goal is to resolve problems arising from "placing unnecessary obstacles on workers finding new work after their relationship with the original employer is over".