Executive Summary
Saudi Arabia's economy, with a GDP of USD 1.07 trillion, depends heavily on foreign labour, as migrant workers make up 75% of the workforce, making labour migration from South Asia crucial to economic functioning. This policy paper aims to identify how the migration stakeholders in South Asia perceive the institutional context and migratory environment in Saudi Arabia, and how their perceptions shape migration flows from South Asia to Saudi Arabia corridor. Saudi Arabia’s Vision 2030 aims to attract more migrant workers with simplified and efficient visa regimes and residence permits and improve living and working conditions for expatriates by offering real estate ownership, improving their quality of life, and establishing more private schools for foreign-born students. Yet, there is a mismatch between these efforts and how they are perceived in South Asia. While Saudi policies and legal systems such as Saudisation of labour, the kafala system, the iqama (residency) rules and regulations, and Nitaqat programme have undergone various reforms to improve conditions for migrant workers, the South Asian stakeholders continue to perceive these programmes as contributing to limiting workers’ mobility, increasing chances for exploitation, and creating barriers for migrant workers, especially in low-skilled sectors.
There is growing need to change the current approach and provide policy changes for various reasons. Firstly, certain worker categories have been excluded from the bilateral labour agreements (BLAs) and memorandums of understanding (MoUs) that exist between Saudi Arabia and migrant sending countries. While these agreements provide protection to specific groups, they leave other workers, such as low-skilled or undocumented migrants, unprotected. Moreover, there is a weak oversight on recruitment that leads to unregulated recruitment agencies exploiting workers, imposing high costs and committing fraud when fraud recruiting migrant workers.
Furthermore, recent reforms to the kafala system allow most migrant workers to leave the country or switch jobs without their employer’s consent upon completing their contracts, or during the contracts if the employer is informed within a specified timeframe. However, excluding the most vulnerable workers, such as domestic and undocumented workers from these reforms contribute to their continued exposure to abuse. Policies like Nitaqat and Iqama (residency) are aimed at protecting migrant workers. However, the associated cost tends to push migrants towards undocumented status.
Additionally, restrictive family and residency policies present another challenge. While Saudi Arabia has policies that allow some workers to bring their families and obtain permanent residency, these policies have strict eligibility requirements that exclude most migrant workers. As a result, most workers cannot bring their families or settle permanently in the country, which reduces their long-term prospects and overall quality of life.
High remittance costs also pose a significant issue. While remittance fees are low for some South Asian countries, they remain high from Saudi Arabia to the South Asian region overall. There is an opportunity for Saudi Arabia to optimise the economic benefits of migration by lowering remittance fees and meeting SDG 10.c.
This policy report puts forward the following recommendations:
- Strong demand for South Asian migrants: Gulf countries need both low-skilled workers (due to their work ethic) and highly skilled workers (due to technical competencies), but external shocks can destabilise this demand.
- Improve enforcement: Strengthen implementation and enforcement of rules and regulations for migrant workers.
- Engage international organisations: Consider allowing organisations like the ILO and IOM to establish offices in Saudi Arabia to support migrant workers.
- Recruitment standards: Ensure recruitment in countries of origin attracts the required skilled workers for Saudi Arabia.
- Reintegration programs: Involvement in providing support for return and reintegration of temporary migrant workers.
- Competitor strategies: Understand strategies adopted by competing labour-receiving countries and simplify mechanisms in Saudi Arabia to enhance its attractiveness as a country of destination.
- Reduce remittance costs: Adopt measures to reduce the cost of sending remittances from Saudi Arabia to South Asia.
Context and Importance of Issue
Saudi Arabia has a stable and growing economy, with a GDP of USD 1.07 trillion, making it the 19th largest economy in the world in 2023 1 2. Labour migration to Saudi Arabia from South Asia is a critical component of the country's economy and an essential factor in shaping the labour market landscape. The key characteristic of the Saudi economy is its reliance on foreign labour, with migrant workers making up about 75% of the total workforce as of the fourth quarter of 20233.
Saudi Arabia's Vision 2030, launched in 2016, aims to diversify the economy and reduce dependence on oil by creating new opportunities and positioning the country among the top 15 global economies. A key aspect of this vision is attracting a skilled workforce, both domestically and internationally, through initiatives that improve education, vocational training, and the living conditions of expatriates. In 2022, nearly half of all non-national workers in the Kingdom came from South Asian countries such as Bangladesh, India, Pakistan, Sri Lanka, and Nepal 4, and are integral to Saudi Arabia’s workforce, particularly in the private sector. Against this backdrop, this paper aims to expand the understanding of drivers and perceptions linked to migration to Saudi Arabia from South Asian countries of origin. The analysis aims to identify how the migration stakeholders in South Asian countries perceive the institutional context and migratory environment in Saudi Arabia, and how their perceptions of the labour migration policies and processes in these countries shape migration to Saudi Arabia. Additionally, the paper examines how future socio-political and economic dynamics in South Asian countries of origin influence labour migration to Saudi Arabia.
Table 1: Stock of employed persons in KSA by sector and country of citizenship: 2022 (refer to the table in the file)
Migrant labour in Saudi Arabia is critical due to the country’s ongoing infrastructure and development projects under Vision 2030, including the 2034 FIFA World Cup and construction of the tallest building, which are expected to increase demand for migrant workers, particularly in the construction and infrastructure sectors. However, this growing demand faces competing global trends that could affect the supply of migrant workers to Saudi Arabia including, rising global demand for care workers, especially in Western countries with more favourable migration policies, and increasing ease of migration to other Gulf countries such as the UAE through their job seeker visit visa scheme. These factors may decrease the flow of migrant workers to Saudi Arabia, as workers may prefer destinations with fewer cultural restrictions, better protection, and potential pathways to citizenship.
South Asia as a labour-sending region faces a complex interplay of socio-economic factors that make Saudi Arabia an attractive destination. While the South Asian economy is expected to grow, job creation has not kept pace with the growing working-age population, leading to continued reliance on migration. Climate change, particularly its impact on agriculture, has contributed to rising migration trends as households seek income diversification through remittances. Political instability, weak investment climates, and slow economic reforms in Pakistan, Bangladesh, and Sri Lanka will likely continue to push labour migration to Saudi Arabia.
Nepal, despite its stable economic outlook, may continue to experience strong migration flows to Saudi Arabia, especially as demand for labour in Qatar and Malaysia declines, while India's projections for strong economic growth and job creation could reduce future migration trends to Saudi Arabia. The dynamics of labour migration to Saudi Arabia are shaped by local economic conditions, global labour demands, and political and socio-economic factors that will continue to evolve over the coming years making it a critical issue for both migrant workers and the Saudi economy.
Critique of Policy Options
Labour migration from South Asia to Saudi Arabia is governed by a set of institutional frameworks and policy agreements. South Asian countries such as Bangladesh, India, Nepal, Pakistan, and Sri Lanka have well-established structures to manage migration, with dedicated ministries and agencies that oversee migration, protect workers’ rights, and provide welfare support.
Each South Asian country has agencies focused on migrant labour management. For example, Bangladesh's Ministry of Expatriates' Welfare and Overseas Employment (MEWOE), India's Protector General of Emigrants, and Sri Lanka’s Bureau of Foreign Employment (SLBFE) play critical roles in coordinating migration to Saudi Arabia. These institutions provide support to migrants before, during, and after their time abroad, offering services like financial assistance, dispute resolution, and reintegration programmes.
In addition, BLAs and MoUs between South Asian countries and Saudi Arabia regulate aspects of labour migration, such as recruitment standards, worker rights, and employment conditions. These agreements also aim to protect workers, particularly in sectors like domestic labour, through more targeted policies.
Despite these frameworks, several challenges hinder effective migration management. Many BLAs and MoUs focus on specific worker categories, such as female domestic workers, and exclude broader sectors in the labour market. For example, Nepal has not yet finalised a comprehensive BLA that covers all migrant workers, leaving large portions of the workforce without protection.
In South Asian countries, monitoring mechanisms remain inadequate, especially when informal sub-agents are involved. These agencies often operate without sufficient oversight, leading to exploitation, high recruitment costs, and fraudulent practices, such as misrepresenting job conditions or charging excessive fees.
Gender-specific barriers, particularly for female domestic workers, persist. For instance, Bangladesh has imposed quotas on female migration to Saudi Arabia, while Nepal has placed a ban on sending female domestic workers to countries without BLAs, including Saudi Arabia, and Sri Lanka has an age-specific barrier for sending female domestic workers to Saudi Arabia. Although these policies in South Asian countries intend to protect women, these restrictions limit their access to legitimate employment opportunities and often push them into unregulated migration channels, where they are more vulnerable to abuse.
Saudi Arabia’s labour and migration policies, including Saudisation, the kafala system, and the Iqama and Nitaqat programmes have undergone various reforms to improve conditions for migrant workers. While these policies aim to reduce dependence on foreign labour and increase employment for Saudi nationals, South Asian stakeholder perceive their impact on South Asian workers, particularly in low-skilled sectors, as minimal.
Saudisation aims to increase the employment of Saudi nationals in the private sector, particularly in areas such as construction, retail, and manufacturing. However, South Asian migrants predominantly fill roles that are less attractive to Saudi nationals, and these sectors remain exempt from Saudisation targets. As a result, despite Saudi Arabia’s efforts to reduce foreign labour dependency, stakeholders in South Asia perceive that, the demand for South Asian workers in low-skilled jobs is expected to persist, with limited impact on overall migration trends.
The reforms to the kafala system have allowed workers to change jobs and leave the country without employer consent under certain conditions. Nevertheless, the perception in South Asia is that these changes are insufficient, as the most vulnerable workers, such as domestic workers and undocumented migrants, remain excluded from these reforms. South Asian stakeholders are concerned that the discretionary power of employers over workers’ status continues to leave migrants vulnerable to abuse, with inadequate enforcement mechanisms to hold sponsors accountable for violations like wage non-payment and mistreatment.
The Iqama rules and regulations, aimed at protecting migrant workers, require employers to pay for workers' residency permits. This may lead to increased costs for employers, prompting some to avoid renewing permits which leaves workers unemployed or undocumented as perceived by stakeholders in South Asia. Similarly, the Nitaqat programme that sets quotas for Saudi employment in firms is perceived by South Asian stakeholders to have increased costs for employers, leading some to bypass regulations and leave workers undocumented. Additionally, the nationality-based quotas under Nitaqat are perceived to create disparities in migration opportunities, further entrenching reliance on informal and undocumented labour markets, which undermines workers’ legal protections and rights.
Beyond employment regulations, Saudi Arabia’s policies towards long-term settlement further shapes South Asian migration patterns. While Saudi Arabia’s policies on family unification and permanent migration are contribute to ensuring a high quality of life for those bringing their families, migrants and stakeholders originating from South Asia perceive these policies as discouraging long-term settlement and integration for migrant workers. They also feel that family reunification policies are highly selective, and permanent residency is largely inaccessible to most South Asian workers. As a result, Saudi Arabia is often viewed as a temporary destination, where migrants travel alone, leaving family back in South Asia, with long-term plans to migrate to Western countries after their time in Saudi Arabia.
Despite constructive reforms, including changes to the kafala system, issues like forced labour, wage theft, and limited rights continue to undermine the well-being of migrant workers. While Saudi Arabia has made efforts to emulate international labour standards through bilateral agreements with sending countries, South Asian stakeholders are not satisfied and view these as hampering effective enforcement of labour rights. The imbalance of power between Saudi Arabia and migrant-sending countries is perceived by South Asian stakeholders to weaken efforts to improve working conditions, particularly when South Asian governments compete for employment opportunities and struggle to negotiate better terms for their nationals.
From an economic perspective, Saudi Arabia’s position as a preferred destination for South Asian migrant workers is based on a trade-off between its high wages and the high cost of living, balanced against the amount of remittances that can be sent back. However, despite large remittance flows from Saudi Arabia to South Asia, the high remittance costs discourage migrants from sending money home, reducing the overall economic benefits of migration. To meet SDG 10.c, which calls for reducing remittance costs to less than 3% of the total value, Saudi Arabia would benefit from introducing policies that lower these fees, such as fostering competition among remittance providers or supporting state-run, low-cost channels.
Policy Recommendations
- There is a strong demand for South Asian migrant workers in Saudi Arabia: low-skilled workers due to their industrious nature and flexibility regarding working conditions, and high-skilled workers due to their technical competencies. However, large external shocks can destabilise this demand. When introducing policies such as Nitaqat and the Iqama, it is important to be mindful of foreign worker-related costs borne by firms and the related push for migrants to become undocumented workers in Saudi Arabia.
- Saudi Arabia could benefit from improved implementation and enforcement of rules and regulations on migrant workers, as well as revisiting opportunities for international organisations such as the International Labour Organisation (ILO) and the International Organisation for Migration (IOM) to establish offices in Saudi Arabia. Additionally, it would be ideal for Saudi Arabia to pay attention to the type of recruitment conducted in countries of origin to ensure it attracts the required skilled workers and to facilitate the successful return and reintegration of temporary migrant workers coming into Saudi Arabia. In this regard, Saudi Arabia can learn from South Korea and its exemplary role in contributing towards return and reintegration of temporary migrants under their “Happy Returns Programme”.
- Furthermore, Saudi Arabia should understand the strategies adopted by competitor countries of destination to attract migrant workers, such as the UAE and its job seeker visit visa scheme, whilst also working to reduce the cost of remittances to South Asia. For remittances, Saudi Arabia may benefit by learning from the UAE, which introduced a framework in 2023 for the “use of local currencies in cross border transactions and cooperation for interlinking payment and messaging systems between India and the UAE” 6.
Endnotes
- The World Bank. 2024. World Bank. GDP of USD 1.07 trillion. Accessed October 18, 2024. https://data.worldbank.org/country/saudi-arabia.
- Vision2030. n.d. Vision 2030 Kingdom of Saudi Arabia. Government of the Kingdom of Saudi Arabia.
- GLMM. 2023. Saudi Arabia: Employed population (aged 15 and above) by nationality (Saudi/non-Saudi), sex and age group (Q4, 2023). Gulf Labour Market and MIgration Programme.
- GLMM. 2022. Saudi Arabia: Non-Saudi population by country of citizenship and sex (selected countries, 2022). Gulf Labour Markets and Migration Programme (GLMM). doi https://gulfmigration.grc.net/saudi-arabia-non-saudi-population-by-country-of-citizenship-and-sex-selected-countries-2022/.
