Friday, April 17, 2009

Structural Flaws: Part 2

Before I begin, I just want to give tip of the hat to Seabee, who correctly noted that my argument yesterday was not quite correct. While it is true that only locals can own businesses in Dubai, a foreigner can own a business in Dubai if that business operates in a designated free zone. That said, the free zone work force is generally drawn from a different pool than the laborers of Dubai, as those who work in the free zones are generally well educated professionals. Also, while this is more tangentially related, but factors in nonetheless, companies located in the free zones do not so much do business in Dubai as they are in Dubai to do business. This is why those who work in free zones don't face the same visa restrictions as the rest of the hoi polloi. That said, onwards to part two.

In yesterday's post I took a look into the unenviable situation of laborers in Dubai, examining the issue of employers withholding employee passports, an issue linked with the notion of the denial of freedom, which is one of the three key reasons why Dubai laborers are being called slaves by the international media. Tonight I want to look at the second of three key factors that have led the international media to take this position, namely the withholding of wages.

There were times last year when fantastical figures were being bandied about almost daily. Dubai, it was said, had 20% of all the large cranes in the world. Very quickly that number shifted to a quarter, then a third, finally reaching, according to some wider eyed sources, on a figure of 40%. While the numbers always sounded interesting, I always found them hard to believe, especially considering the fact that the average Chinese suburb has a larger population than the entire UAE. More construction in Dubai than in all of China? A country where the annual number of babies born is close to quadruple the population of the UAE? Hard to take seriously. Still, it couldn't be denied that there was a whole lot of construction going on, and if you stood on Garhoud Bridge, the center of Dubai proper, you could literally see towers springing up in every direction.

In order to raise these towers from the dust, a literal army of laborers was needed. Just to give a sense of just how large this army of laborers is, or was until recently, the number of construction laborers in Dubai was larger than the combined armed forces of the entire British commonwealth. That's a quite a few people.

The key reason I mention this is because there is this persistent meme in the international media that every laborer in Dubai is a slave, meaning that they work, and have worked for years, with no pay. Since you don't pay a slave, the notion goes that if the workers aren't paid, then they are not workers, they are slaves, right?

On that point, they are wrong. Construction laborers in Dubai are not slaves, so that part is not true. Honestly, when I say army of laborers, it is no joke. Remember the movie "Antz" by Dreamworks? They're the ants of the story, who realize, at the end of the film that they not only outnumbwer the grasshoppers, but by a large margin. In the UAE, the construction laborers vastly outnumber not only the UAE Army, but all of the various Emirati police and security forces as well. In fact, at one point there were perhaps twice as many construction laborers in the UAE as actual Emirati citizens. If that many people were truly suffering under Pharaoh's lash, starved, beaten and forced into penury by the cruelty of their uncaring overlords, it is pretty safe to say that there probably would have been little more unrest and disruption over the past two decades.

So, if the construction labor force has been generally restive for two decades, where do these claims of non-payment come from? Are they even true? The answer to the latter is yes, but for a different reason than you might think.

In Dubai, when a massive new building is built, or is about to be built, a government associated company will often spearhead the project. These companies are basically arms of the ruler, and their funds are drawn from him as well. The current ruler of Dubai is one of the wealthiest royals in the world according to Forbes magazine. But that doesn't mean that when he or one of his companies decides to develop a new massive skyscraper they will write a big fat cheque to the Johnny-Build-a-Lot Construction Company (Here you go! Call me when it's done!) and let them at it. No way. They will usually kick in the initial start-up funds, say 20% of the venture, and then finance the rest internationally.

But even when the building is fully financed, that doesn't necessarily mean the construction companies will have a dime to their name, because quite often those initial start-up funds are the entire operating budget for the project. The way development contracts are structured factors heavily in the plight of construction laborers because the companies they work for are often in a tight bind when working on large projects. If a deadline is missed, penalties are incurred, and the vast majority of the funds are not released until completion of a project. It is a way of ensuring that companies stick around to finish their work, but it also means that if those slim start-up funds run dry, there would literally be nothing left in the bank with which to pay the workers. This wouldn't be an issue of every building was built on time and on schedule, since construction companies do make sure they have the funds to pay for labor for a set period of time. But when a deadline is missed, and penalties are incurred, or there is a massive increase in the price of certain materials that was unplanned for, those start-up funds dry up quicker than thought.

The companies want to pay their workers, but due to contractual constraints, find themselves having to ask employees to work without pay for an indefinite period of time, with the caveat that once the building is done and the money is released from escrow, they will all get their owed wages.

Which means that while workers find themselves not receiving wages from time to time, the reason for their situation boils down to, literally, the most benign, boring, dry-as-dust reasons on record - a contractual dispute.

So this is how the workers end up getting a raw deal. It's not due to malice on the part of the employers, or greed, but an institutionalized lack of faith which has developers holding the vast majority of funds over the construction companies as leverage to force them to complete their work, on time, and within budget.

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