Humaid Bin Demas, assistant labour under-secretary, said that there are about 50,000 companies that have violated labour card regulations.
"Around 80 per cent of these companies fall into three categories companies that only exist on paper, companies that mainly sell work permits and businesses that are going through financial crises," said Bin Demas.
Many workers purchasing labour permits from such companies stay in the country illegally after their permit expires. As they stay illegally, they have to survive with low salaries and could claim no rights or compensation if injured.
According to Ministry of Labour statistics, around 90 per cent of the firms violating labour card rules are for people who do not work for the companies sponsoring them.
A colleague calls this "turning workers loose on the local economy." There are companies whose business is, or has become, selling work visas by importing labor and then setting the worker lose in return for an annual payment; they would not exist otherwise. These foreigners are willing to pay a flat fee for the opportunity of finding work on their own. Or the workers are leased to firms that want to hire, but cannot get visas approved.
As long as work visas are rationed, there will be a market for the visas and those who get the visas obtain a rent. The government could, however, wipe out this kind of business by going into the business and selling the visas itself. But since it does not sell permits, if it wants to deny permits to firms that have no purpose except to collect and resell work visas then it has an enforcement problem.
I have a conjecture that the plethora of small businesses on the edge of survival that you see in many cities and towns in the UAE are a variation on this theme. The local owner has in effect sold the business to a foreigner who needs the owner to acquire the work visa and the business license. The foreigner is in effect working for himself.
It would be interesting to know how many of these companies are owned by staff or former staff of the Ministry of Labour.
Labels: **2006, Best of EmEc 2006, Best of Emirates Economist