Cost of low-skilled migration to Saudi Arabia, South Korea and Malaysia

The high cost of securing employment abroad is a barrier to cross-border labour mobility for low-skilled workers in developing countries. The migration cost is distributed among many stakeholders in the migration value chain. 

This Policy Insight highlights the main findings of the study ‘Cost of Low-Skilled Migration to Saudi Arabia, South Korea and Malaysia: Value Chain Analysis – Sri Lanka’. 

The study utilises the value chain framework to map the migration process and cost for low-skilled workers from Sri Lanka to Saudi Arabia, South Korea and Malaysia with a view towards identifying the leverage points in the chain for policy intervention to reduce the migration costs. These three corridors are selected due to their unique importance in the Sri Lanka migration scenario.

Saudi Arabia is the leading destination for low-skilled migrant workers from Sri Lanka and the recruitment to Saudi Arabia from Sri Lanka is governed by private-to-private arrangements between the recruitment agents in the two countries. 

In comparison, South Korea is a leading non-Middle Eastern destination of Sri Lankan workers, where the entire recruitment process is carried out by the governments, involving the bilateral agreements and bypassing the private recruiters. 

The choice of Malaysia is based on the growing opportunities in that country for Sri Lankan workers and the evolving recruitment networks in the corridor.

For Saudi Arabia, the scope of the study is limited to the female domestic workers because they account for nearly half of Sri Lankan workers heading for Saudi Arabia. For Malaysia and South Korea, the study focuses on the low-skilled workers in the manufacturing sector, given the significance of these occupations for Sri Lankan migrant workers in these countries. 

The study adopts a qualitative methodology and collected data through key informant interviews and focus group discussions in Sri Lanka.

Findings Saudi Arabia value chain 
By mapping the value chain to Saudi Arabia, the study identifies employers, recruitment agents in Saudi Arabia and Sri Lanka, the Sri Lanka Bureau of Foreign Employment (SLBFE), sub-agents and migrants as the key players, while the Saudi Arabian Embassy in Sri Lanka, Sri Lankan Embassy in Saudi Arabia, financial institutions, medical centres, Grama Sevaka officers, District Officers and migrants’ families are other players. (See Chart 1)

The analysis of the value chain finds that migration to Saudi Arabia is a private-to-private recruitment arrangement and the total cost of approximately US $ 4,750 (Rs.500,000) is financed by the employer in Saudi Arabia and the migrants do not bear any upfront cost.

This cost consists of incentives to migrant’s family, commissions to agents and sub-agents, administrative and regulatory fees to the SLBFE and cost of fulfilling the documentary requirements/amassing credentials.  

When lump sum payments to the migrant’s family and sub-agent are excluded, the subtotal is US $ 902 (Rs.129,882), out of which 47 percent goes as payments to the SLBFE. The contract period of a housemaid in Saudi Arabia is generally two years and they receive a monthly salary of about US $ 243 (SAR 1,000).

In the Saudi Arabia value chain, when involved, the most powerful player is the sub-agent, who is an informal entity operating at grass root level to mediate between the licensed agent and the prospective migrant in Sri Lanka. The sub-agent also assists the potential migrant to navigate the migration process. 

The bargaining power of sub-agents allows them to shop around different agencies and demand higher commissions for his services, while they are also criticised for engaging in malpractices leading to exploitative and abusive situations of migrants. 

South Korea value chain 
Under the Employment Permit System (EPS), the government-to-government labour migration arrangement between Sri Lanka and South Korea is a relatively streamlined process with fewer key players, namely, HRD (a public recruitment agency within the Employment and Labour Ministry, which supports foreign workforce employment under the EPS system), the SLBFE and migrants. (See Chart 2)

The other players include the immigration authorities in the two countries, Korean Embassy in Sri Lanka, financial institutions, medical centres, language training instructors, Criminal Investigation Division, lawyers and migrant’s family. 

The more streamlined process contributes to keep the recruitment costs low at approximately US $ 1,389 (Rs.200,000). Here the entire recruitment and migration cost is borne by the migrant and 63 percent is paid out to the SLBFE. 

However, due to the involvement of the Korean language training requirements, the wait time to migrate to South Korea is longer than that of Saudi Arabia, while a work contract to South Korea is three years and the  monthly salary ranges between US $ 694-868 (Rs.100,000-125,000). 

Malaysia value chain 
The value chain for the recruitment of low-skilled manufacturing workers to Malaysia consists of the key players such as employers, recruitment agents in Sri Lanka, Kementerian Dalam Negeri (KDN) - Home Affairs Ministry in Malaysia, SLBFE and migrants. 

The recruitment agents in Sri Lanka play a significant mediation role between the employees and employers and have close links with the final employers in Malaysia. 

The other players in the value chain include immigration authorities in the two countries, the Malaysian Embassy in Sri Lanka and medical centres in Sri Lanka. Unlike in the case of the Saudi Arabia value chain, the involvement of sub-agents in Sri Lanka and recruitment agents in Malaysia is not extensive in the recruitment process. (See Chart 3)

The migrant’s cost of securing employment in Malaysia is approximately US $ 1,041 (Rs.150,000). Moreover, due to the agent’s significant involvement in the recruitment process and its related preparatory work, here the agent bears an additional cost of nearly US $ 3,472 (Rs.500,000) for ground work in preparation for recruitment. 

Given that these costs are applicable to recruiting a batch of migrant workers, the per migrant cost declines when large numbers of migrants are recruited through the given agent. 

The contract period for a low-skilled worker to Malaysia is generally three years and the monthly wage is in the range of US $ 206- 275 (RM 900-RM1,200). (See Table)

Policy recommendations
To lower the migration cost, the study suggests the following:

• Converting upfront incentive into a higher monthly salary and benefits package
• Reducing opportunity cost to migrate
• Amalgamating functions of sub-agent with agent and streamlining migration process
• Opening up more competition for medical testing
• Re-evaluating need for family background report
• Staggering of training programmes
• Imposing maximum chargeable amount for Korean language training
• Reducing administrative inefficiencies
• Better aligning of local and foreign training programmes
• Introducing Malaysia-specific pre-departure training
• Providing migrant a breakdown of entire cost
• Setting up of a separate division within the SLBFE focusing on recruitment to Malaysia
• Need for national survey on labour migration from Sri Lanka

(This Policy Insight is based on findings from a study on ‘Cost of Low-Skilled Migration to Saudi Arabia, South Korea and Malaysia: Value Chain Analysis – Sri Lanka’ by Bilesha Weeraratne, Janaka Wijayasiri and Suwendrani Jayaratne. Contact [email protected] or [email protected] for more information)