By George S. Naufal and Ismail H. Genc
Blessed with generous natural endowments of oil and gas, but lacking an economically and educationally suitable indigenous population, the Gulf Cooperation Council (GCC) countries have turned to foreign workers to satisfy the labor demand. Initially the source countries were fellow Arabs from the MENA region due to cultural, religious and geographical proximity. Given that the GCC is among top remitters in the world, this policy resulted in the flow of tremendous sums of income to labor sending countries in the MENA region. GCC employment policy however has changed over time shifting the interest in hiring to mainly the Indian Subcontinent. We, in fact, find in our study that a gradual but permanent shift in the direction of remittances occurred in early 1990s depriving countries such as Egypt of a significant source of income through overseas employment, especially that of the youth.
Our study does not directly analyze the employment issues in the labor source countries, in particular those in the MENA region. But it stands to reason that these countries have long ignored and/or failed to cope with the actual implications of the GCC labor policy shift. Naturally, labor exporting countries should have taken timely precautions to eliminate economic hardships, with likely significant social implications. However, large remittance inflows allowed receiving countries to avoid real labor market reforms. Unfortunately, the resultant impact of the aforementioned problems rendered their solutions intractable. The stress piled up on their citizens and governments. Eventually, the situation came to a full blown social explosion in 2010, toppling the long running dynasties in some countries in the Middle East. Obviously, a more focused study on the causes and effects of labor sending countries’ employment policies is needed to more precisely shed light on the impact of the implied policy failures. Yet, our study aims at pointing to a relationship between the shift in the direction of remittance flows in the MENA region and likely employment, and eventual political consequences.
 The GCC countries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia (KSA) and United Arab Emirates (UAE).
 To such countries as India, Bangladesh, Pakistan and the Philippines.
 Naufal, G. S. and I. H. Genc (2013) “Structural Change in MENA Remittance Flows,” IZA Discussion Paper Series IZA DP No. 7485, (July).