Saudi Arabia Planning To Abolish Kafala Sponsorship System; Will It Impact Indian, Pakistani Workers?

Saudi Arabia has planned to cancel a foreign worker sponsorship system, known as Kafala, and replace it with a new form of contract between employers and employees, as per a local news outlet.

The system has been in place for seven decades and has long been criticized by rights groups as it leaves workers vulnerable to exploitation. 

Financial newspaper Maaal has quoted the Ministry of Human Resources and Social Development as saying that they will “announce a new initiative that improves the contractual relationship between employers and expatriate workers next week.” As per the ministry, the initiative will be implemented in the first half of 2021.

The Kafala system governs the relationship between the expatriate worker and the employer. Under the system that binds a migrant worker to one employer, the worker upon his arrival in the kingdom becomes obligated to work for his sponsor in accordance with the terms of the contract, and he is not entitled to work with others without transferring his sponsorship.

The system has undergone several changes to protect human rights, along with the behavioral and financial rights of both parties. The local newspaper Maaal has claimed that the system resulted in a sizable number of employers misusing many provisions of the system. 

As some sponsors misused the system for individual gains at the expense of the country’s interests, international organizations called for abolishing the system. The negativity around the existing system has adversely impacted the Kingdom’s unemployment rates as well as its image. 

Another negative impact of the Kafala system was that it resulted in a flourishing black market for the visa trade. 

The abrogation of the sponsorship law would lead to limiting the relationship between the employer and the expatriate worker to the employment contract that defines the rights and duties of both the parties. The end of the Kafala system is aimed at promoting economic growth and expanding commercial activities. 

A Saudi Gazette report, earlier this year in February, had stated that the decision to end the sponsorship system was part of economic reforms after the launch of Vision 2030 by Crown Prince Mohammed bin Salman. 

The new plan will allow the expatriate workers freedom to secure their exit and re-entry visas while also getting their final exit stamped on their own. They will be able to take up employment without any restriction or approval of the employer.

The workers will be able to have complete freedom of movement according to what is stipulated in the employment contract.

The new system is likely to benefit the Saudi labor market as it will now attract highly competent and specialized expatriates from different countries, besides improving the working environment for the talented workforce.

The media is speculating a push to the economic growth and expansion of commercial activities as the new residency system will give expatriates freedom of movement, rights for issuance of residence, and visit visas for their relatives and thus attracting more capital into the kingdom.

Currently, more than 10 million foreign workers live in Saudi Arabia under the Kafala system. In 2016, the Crown Prince had announced a first permanent residency program. It was approved by the Shura Council in May 2019. 

The system titled Premium Residency Card (PRC) only for selected expatriates allowed them to reside in the country with their families without a Saudi sponsor.