Local newspapers published reports on a decline in remittances by expatriate workers in Kuwait by at least 13 percent in the first quarter of 2018, and that the decline has been continuing since 2017. Official figures last year showed remittances fell 9 percent – from KD 4.56 billion in 2016 to KD 4.14 billion in 2017. An exchange company said the monthly transfer amount by foreign workers, excluding domestic laborers, was an average of $626 per person per month, but recently dropped to $545.
According to Central Bank data, average remittances in Kuwait exceed KD 4 billion annually – up to $15 billion. Clearly, the figures show that in the past two years, remittances in Kuwait have been very volatile. According to the National Bank of Kuwait’s research unit, the decline in remittances reached its lowest level since 2012 due to the increase in the cost of living and reduced subsidies, as well as high fees of some services and goods. The national employment policy (Kuwaitization) also has a role in reducing demand for expatriate labor.
At the beginning of this year, the parliamentary finance and economic affairs committee approved a proposal to impose fees on expatriate transfers. This proposal resulted in many negative reactions and rejections. Experts said imposing taxes on expatriates will only have negative consequences in the future. Meanwhile, other alternatives were proposed to take advantage of the amounts transferred by expat workers, such as investment opportunities for expatriates, allowing them to buy property or even keep their savings in local banks with a decent deposit rate.
Personally, I was against this proposal, especially since those who would be affected the most will be poor workers, who are already hit by rising costs. A tax on them would lead them to resort to illegal and informal channels that would increase security risks and hamper regional efforts to combat money laundering, counterfeiting and terrorist financing.
I believe that labor transfers in Kuwait contribute to improving the economy in their home countries, for example, and we should not threaten this just to make some profit in the short term. For example, the Central Bank of the Philippines revealed that remittances by Filipino workers from Kuwait decreased by 13.3 percent in January and February to reach $106 million. The fall came in tandem with the announcement by the Philippine president to ban sending Filipino workers to Kuwait after the killing of a Filipina maid, as well as the parliamentary proposal to approve a tax on remittances in Kuwait.
The Central Bank of the Philippines recently said remittances by Filipino workers from Kuwait improved significantly during the month of March, in conjunction with the new agreement for the employment of domestic workers in early May.
I know that the proposal to impose taxes on remittances is not limited to Kuwait, but was preceded by other countries, whether Gulf or otherwise, except there has been different methods for this. It is known that the past years have been characterized by a decline in oil prices that affected several sectors in the country, and the high and expensive cost of living forced some men to send their families home to cut expenses.
I think the subject of remittances must be studied well regardless of a tax proposal. It is necessary to study how expatriates can benefit from the money they earn here, such as opening up new ways of investment and establishing one-person companies to stimulate the economy away from bureaucracy and excessive conditions, such as the requirement of a Kuwaiti sponsor. There should be no impediment for expatriates to own small businesses. There are concerns an expatriate can flee in the event of financial loss or involvement in a crime, and so they are forced to have a Kuwaiti sponsor, but this can happen to anyone, whether they are citizens or expatriates.
We are a developing country and we need expatriate workers, so their rights must be respected. We must allow them to feel that they are in their second home, especially since we have expats who been living in Kuwait since the 1940s and 1950s.