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Remittances, construction and takaful industry dominates PAK-GCC relations

While remittances to South Asian countries from the Gulf Cooperation Council (GCC) countries declined by 2.3 percent in 2016, Pakistan witnessed 5.1 percent growth during the same period according to World Bank. However, remittances from the GCC countries continue to decline due to lower oil prices and labor market ‘nationalization’ policies in Saudi Arabia. Policies favoring employment of nationals over migrant workers have discouraged demand for migrant workers in the GCC countries. Low oil prices continued to be a factor in reduced remittance flows from the GCC countries. In addition, structural factors have also played a role in dampening remittances growth. Anti-money laundering efforts have prompted banks to close down accounts of money transfer operators, diverting activity to informal channels.

Global financial institutions are increasingly terminating or restricting correspondent banking relationships with remittance companies and smaller local banks in many regions of the world — a practice that is called “de-risking.” De-risking has been rampant in regions that are generally perceived to be high risk. Bankers say GCC region is perceived as ‘high risk’ because of the volatile political situation prevailing in the neighboring countries and regions. Coordinated action among global banks, regulators and regional institutions are required to save the correspondent banking channels and access of regional institutions to global financial markets. De-risking practices by global financial institutions threaten to cut off access to the global financial system for remittance companies and local banks in certain regions including the GCC.

It seems the situation is not as bad for Pakistanis in KSA: remittances are up 6% in 2016, close to $600 million a month from about 1.5 million to 2 million workers contributing to a record breaking remittance volume to the country of $20 billion for Fiscal Year 2016 as most Pakistanis are not employed in construction work but as drivers and doing other type of jobs.

Ahead of the football World Cup in 2022, Qatar has emerged as the brightest spot for remittances in the Gulf. The population in Qatar, which has the largest expat population in the Gulf, reached 2.43 million last year, compared to 1.3 million a few years ago, creating robust demand for services like remittances.

In terms of growth, Qatar has been ahead of other countries in the Gulf, registering 18 percent growth last year. In Qatar, there have been a lot of investments in infrastructure. Even after the World Cup, things will be in good shape in Qatar. The rest of the Gulf markets, including the UAE and Saudi Arabia, saw a double-digit growth last year in remittances. The Middle East remits about $110 billion out of the global $600 billion yearly, contributing to about 18 percent of the pie, according to World Bank’s 2016 estimates.

The development activities under Saudi Arabia’s vision 2030, which provide a roadmap for Kingdom’s development and economy for next 15 years, the FIFA World Cup 2022 in Qatar and Expo 2020 in Dubai will create more labor demand, which will have positive impact on remittance inflows going forward. During the recent visit of prime minister to Kuwait, the restrictions on issuing of visas to Pakistani nationals have been lifted by the Kuwaiti government. There may be some respite from Kuwait corridor following the recent decision to lift restrictions on issuing visas to Pakistani nationals, but that may not be enough to offset the decline from other corridors. Until last year, remittance inflows from Kuwait were small – 4 percent of the total inflows – and there is no reason to expect inflows from this corridor to grow leaps and bounds.

Also, the Pakistan Remittance Initiative (PRI) is encouraging banks to increase their outreach efforts and facilitating expat workers to send money to Pakistan through official channels. These developments are likely to keep remittance inflows close to the target.


The GCC construction sector will see an uptick of recovery this year as growth becomes increasingly evident in the market. The GCC market is starting to show signs of recovery – although the sector will continue to face some challenges over the next two years. Dubai and Saudi markets are the key growth drivers in the region into 2018-19, with the Kingdom expecting the effects of NTP and Vision 2030 to gain momentum in the years ahead. Contracting awards are also driving growth in the UAE after a slow start to the year, fueled by Dubai Expo 2020 preparations, though many overly-ambitious projects maybe scaled back – or scrapped altogether – if they are deemed unfeasible economically. Alternative financing methods such as Public-Private Partnerships (PPPs) are currently gaining traction in the region, specifically in Saudi Arabia.


Takaful (Islamic Insurance) industry has grown in high double digits across the Gulf Cooperation Council (GCC) in recent years according to the Global Takaful Report 2017. In terms of gross written contribution (GWC) equivalent of gross written premium in the conventional industry, the GCC markets grew by a compounded annual growth rate (CAGR) of 18 percent during 2012 to 2015 period.

GCC had an overall market share of 88 per cent of general takaful market in 2015. Saudi Arabia and UAE reported the strongest growth in general takaful in 2015 with 20 percent and 19 percent growth in total contributions, respectively. In the GCC, family takaful achieved a record growth of 34 percent in 2015 in total contributions mainly as a result of high growth in the UAE driven by the introduction of compulsory health insurance in Dubai. There are significant growth opportunities for family takaful in GCC given current low penetration rates.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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