Negative Impacts on the Middle Eastern Labour Market: What Should We Do?
In today’s interconnected world, the economy, labour markets, and energy supply are so deeply intertwined that a war or conflict in one region can quickly generate adverse effects across the globe.
The ongoing conflict in the Middle East has once again brought this reality to the forefront.
For an economy like Bangladesh—highly dependent on labour exports and remittances—this conflict is not merely an indirect concern; rather, it poses a complex and immediate economic risk.
If the current tensions among Iran, Israel, and the United States, along with broader regional instability, persist, their multidimensional negative impacts are almost certain to be deeply reflected in Bangladesh’s labour market.
Remittances constitute a major pillar of Bangladesh’s economy. An analysis of relevant data reveals that:
• In the fiscal year 2023–24, Bangladesh received approximately USD 21–23 billion in remittances.
• Around 55–60% of total remittances originate from the Middle East.
• Saudi Arabia alone contributes about 25% of total remittances.
• The United Arab Emirates, Qatar, Kuwait, and Oman collectively account for roughly 30–35%.
According to Bangladesh Bank data, a significant portion of the country’s foreign currency earnings comes from remittances, which play a crucial role in financing imports and maintaining economic stability.
The cumulative number of Bangladeshi migrant workers stands at approximately 13–14 million, with several million actively employed in the Middle East.
Of these, around 2–2.5 million are in Saudi Arabia, 1–1.2 million in the UAE, 700–800 thousand in Oman, 500–600 thousand in Qatar, and 300–400 thousand in Kuwait.
This vast workforce is primarily engaged in low- and mid-skilled occupations—segments that are considered most vulnerable during times of conflict.
The direct impacts of Middle Eastern conflict on Bangladesh’s labour market can be observed in the following ways:
First: Decline in Labour Demand (Demand Shock)
Experts suggest that during wartime, infrastructure projects in Middle Eastern countries can decline by 30–40% based on historical trends.
Public investment falls significantly, particularly affecting the construction sector, which leads to a sharp drop in labor demand. Consequently, new recruitment from Bangladesh declines at an alarming rate.
Second: Increased Risk of Job Loss for Migrant Workers
During economic downturns in the Gulf region (such as in 2008 or during the 2020 pandemic), there have been instances where 10–20% of foreign workers lost their jobs. Low-skilled workers are usually the first to be laid off. There is a strong likelihood that this trend may repeat under the current conflict scenario.
Third: Negative Impact on Remittance Inflows
If the conflict prolongs, remittance inflows could decline by 10–15% or even more. This would directly exert pressure on Bangladesh’s foreign exchange reserves.
Fourth: Interconnection Between Energy Markets and Labor Markets
Middle Eastern economies are heavily dependent on oil. Approximately 20% of the world’s oil passes through the Strait of Hormuz.
At present, this route is effectively disrupted, leading to a significant increase in global oil prices. Governments are compelled to cut development expenditures, and labour markets have already begun to shrink considerably.
If the conflict continues, Bangladesh’s economy may face the following adverse consequences:
1. Decline in Foreign Exchange Reserves
A drop in remittances would create a substantial shortage of foreign currency reserves.
2. Rising Inflation
An increase in energy prices raises transportation costs, which in turn can drive food prices up by 5–10%.
3. Increase in Unemployment
A rise in returning migrant workers will naturally increase domestic unemployment.
Given this situation, immediate policy actions are essential. Without delay, the following measures should be undertaken:
1. Diversification of Labor Markets
At least 20–30% diversification in labor markets is necessary. Bangladesh must explore new destinations such as Europe, Japan, South Korea, Malaysia, and even emerging markets like Guyana. Expanding overseas employment markets is crucial.
2. Skill Development of the Workforce
Significant efforts must be made to enhance the skills of the workforce. As the number of skilled workers increases, remittance inflows will also grow.
Currently, about 70% of migrant workers fall into the low-skilled category; this must be reduced by increasing the share of highly skilled labor.
3. Digitalization of Remittance Channels
Greater emphasis should be placed on digital remittance systems. Replacing informal channels like hundi with formal banking channels could generate an additional USD 2–3 billion annually.
4. Establishment of a Protection Fund
A protection fund of at least USD 1 billion should be created for migrant workers abroad.
5. Domestic Employment Generation
Employment opportunities must be expanded within the country. Returning migrant workers should be supported with easy financing options to invest in small and medium enterprises (SMEs).
As part of a long-term strategy, Bangladesh must reduce overdependence on a single region. The country should focus on three key areas:
• Export diversification
• Increased government support for domestic industrialization
• Human resource development
It is important to recognize that while the Middle Eastern conflict poses a significant challenge for Bangladesh, it also presents an opportunity to restructure the country’s economic framework.
If timely and appropriate policies are adopted—and if all segments of society, regardless of political, social, or economic differences, commit to implementing them—this crisis could lay the foundation for a stronger and more sustainable economy in the future. Seizing this opportunity requires swift and well-informed decision-making.
(The writer is an Economist, Banking Specialist, and Political Analyst.
Email [email protected])
