ABU DHABI, 9 August 2003 — Foreign workers in the six-nation Gulf Cooperation Council (GCC) have siphoned out more than $240 billion over the past 10 years as lack of investment opportunities and a general trend to save at home are discouraging them from keeping their money in the region.
Saudi Arabia has been the most affected by this capital flight, accounting for more than 60 percent of the total cash transfers made by Indians, Pakistanis, non-GCC Arabs and other expatriates working in the region.
Between 1993 and last year, more than seven million expatriates based in the GCC remitted a total $240.5 billion, an average $24 billion a year, according to official figures.
The transfers have allied with heavy defense spending by the six GCC countries and persistent volatility in oil prices and production to upset their balance of payments, although most of them have enjoyed huge trade surpluses.
The figures by the Abu Dhabi-based Arab Monetary Fund (AMF) and other regional organizations showed cash transfers by expatriates totaled around $24.6 billion last year and the level is expected to remain unchanged this year as no counter measures have been taken by GCC governments.
Between 1993 and last year, remittances from Saudi Arabia alone totaled $152.8 billion while those from the UAE stood at $36.9 billion.
Transfers by expatriates based in Kuwait stood at $17.5 billion while they were estimated at $14.7 billion from Oman, $11.8 billion from Qatar and $6.08 billion from Bahrain, according to the figures published in the 2002 Arab economic report and estimates by Henry Azzam, a Jordanian economist.
“Expatriate remittances from the GCC have always been large and have strong adverse impact on their fiscal systems,” said a Riyadh-based economist.
“I don’t see any letup because there have been no drastic measures by the GCC to cut the foreign labor while the six members adopt a liberal financial system…this means you can transfer out any sum you want…another reason is that there are no major investment opportunities for foreigners here as they are not allowed to buy property or shares in most members.”
AMF figures showed most other Arab states recorded a positive net cash transfer as incoming remittances outsized outgoing transfers. Only the GCC and Libya, which is also a key base for foreign labor, suffered from such capital flight.
Egypt, the most populated Arab country, recorded a positive net transfer of $3.9 billion in 2001 while Jordan, which also relies heavily on transfers from its citizens working in the Gulf, netted nearly $2.23 billion. All other non-GCC Arab countries recorded positive balance, according to the AMF.
Expatriate transfers from the GCC states have largely benefited the economies of the expatriates’ home countries.
In 2001, Saudi Arabia had a balance of payment surplus of only $889 million while it was as high as $12 billion in 2000 mainly because of strong oil prices. In 1999 and 1998, it reeled under a staggering balance of payment deficit of $8.89 billion and $7.76 billion respectively mainly because of low oil prices.
“The balance of payments in the GCC could be higher since all of them are recording a large surplus in their trade of goods and services in most years…but it has remained under pressure by the annual remittances by expatriates and their heavy defense spending,” said another Arab economist.
