Slow 'Kafala' Reform To Harm Diversification Ambitions

BMI View: Qatar's proposals for labour reform - including an overhaul of the controversial 'kafala' system - will not be implemented quickly. The slow pace of reform will continue to damage the country's international image, in turn harming the government's ambitions to turn Qatar into a knowledge-based economy.

Qatar unveiled tentative plans for labour reform on May 14, in a press conference that largely fell short of human rights groups' expectations. The government announced a series of changes meant to address concerns over the country's treatment of migrant workers, including the eventual abolition of the controversial labour sponsorship system, known as 'kafala'. Yet no timetable was given, and the proposed reforms will now have to go through the advisory Shura Council, as well as Qatar's Chamber of Commerce and government departments, for approval. This is in line with our view that comprehensive labour reform, while inevitable over the longer term, will be slow and gradual - damaging Qatar's international image in the process.

Reforms Good On Paper, But Implementation Is Key

BMI View: Qatar's proposals for labour reform - including an overhaul of the controversial 'kafala' system - will not be implemented quickly. The slow pace of reform will continue to damage the country's international image, in turn harming the government's ambitions to turn Qatar into a knowledge-based economy.

Qatar unveiled tentative plans for labour reform on May 14, in a press conference that largely fell short of human rights groups' expectations. The government announced a series of changes meant to address concerns over the country's treatment of migrant workers, including the eventual abolition of the controversial labour sponsorship system, known as 'kafala'. Yet no timetable was given, and the proposed reforms will now have to go through the advisory Shura Council, as well as Qatar's Chamber of Commerce and government departments, for approval. This is in line with our view that comprehensive labour reform, while inevitable over the longer term, will be slow and gradual - damaging Qatar's international image in the process.

Reforms Good On Paper, But Implementation Is Key

Under the current 'kafala' (Islamic jurisprudence) system, nationals and companies can hire migrant workers who are dependent on their employers for food and housing - conditions of which are often inadequate, particularly in the construction and household services sectors. Migrants' passports are typically retained by the employer (who can withdraw their sponsorship at any time) and residents are required to obtain an exit permit before leaving the country, severely limiting workers' mobility rights and bargaining power. These laws have come under increasing international scrutiny since the end of 2013, ahead of the FIFA 2022 World Cup that Qatar is due to host.

The government's proposed reforms, which follow a commissioned review of Qatar's labour system by law firm DLA Piper, are outlined below:

QATAR - PROPOSED LABOUR LAW REFORMS
Employees who sign a fixed-term contract would be free to transfer to a new employer at the end of their contract. Currently they require a no-objection certificate from their employers before they can change jobs.
Employees signing an indefinite contract would still have to work for their employer for five years before being allowed to change positions.
Exit permits will be granted automatically by the Interior Ministry, rather than needing approval from employers. Employers will still have a 72-hour period to object, but will need 'compelling proof'.
The maximum penalty for confiscating a worker's travel documents will be increased from QAR10,000 (USD2,746) to QAR50,000 per passport.
Workers will have their wages paid electronically to avoid late payments.
A new accommodation standard for workers' housing will be adopted. No details of these standards were provided.
Source: Doha News, Reuters, BMI

While the proposals broadly go in the right direction for migrant workers, the convoluted path they must now take in Qatar's byzantine bureaucratic structure means that actual changes are likely to be years away. Rights groups expressed concern about the undefined timeframe, with Amnesty International calling the proposed reforms a 'missed opportunity'.

Moreover, the strong support that the 'kafala' system enjoys from the local population and business groups means that most of the measures outlined above risk being watered down. The most recent study of social attitudes by Qatar University's Social and Economic Survey Research suggests that only 5% of native Qataris want the sponsorship system totally eliminated, while 30% want it tightened to make workers more dependent on their employers. This resistance against change has scuttled previous reform efforts. In 2007, Qatar's then-Prime Minister likened the 'kafala' system to a form of modern-day slavery, but never followed through on plans to abolish it. Enforcement will remain an issue even if all of the measures do pass: at present, penalties on employers flouting the current laws are rarely applied.

Opprobrium Complicates Knowledge Hub Ambitions

With the pace of labour reform set to be sluggish, Qatar's practices will continue to represent a liability for the country's image abroad. As we have previously warned, this holds tangible long-term implications to the success of the government's economic diversification strategy (see 'Brand Qatar' Facing Its First Crisis', November 21 2013). The government hopes to turn Qatar into a knowledge-based economy, with Doha eventually becoming a regional hub of culture, sports, education and finance. Yet the success of these sectors is heavily dependent on continued access to human capital, and facilitated by soft power and a solid reputation. The recent wave of negative publicity therefore sets hurdles to these ambitions. It also compounds Qatar's international isolation, at a time of strained relations with other members of the Gulf Cooperation Council as well as Egypt (see 'Highly Public Breakdown In GCC Unity', March 5).

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Sector: Country Risk
Geography: Qatar
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