JEDDAH: Saudi Arabia is stepping up efforts to lower unemployment among its citizens by imposing a fee on private sector firms that employ more foreigners than Saudis, the Labor Ministry said yesterday.
The policy, which will be implemented Thursday, will require private companies with a majority of foreign workers to pay a fee of SR 2,400 annually for each excess foreigner.
The fines will not be applied for foreigners with Saudi mothers, citizens of other Gulf Cooperation Council countries — the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain — or household help, the ministry said.
“The aim of this decision is to increase the competitive advantage of local workers by reducing the gap between the cost of expatriate labor and local labor,” it said.
If strictly enforced, the policy could have a major impact on some firms. Roughly nine in 10 employees of private companies in Saudi Arabia are expatriates, according to official estimates; firms prefer to hire foreigners, many from south or Southeast Asia, because they command lower wages than locals.
This has helped boost the unemployment rate among Saudi citizens to about 10.5 percent — a social problem and potentially a political one in the long run. Saudi Arabia has a population of over 27 million, of which about 9 million are believed to be foreigners.
The Ministry of Labor is attempting to change the private sector’s culture from one of “importing cheap labor from abroad to one of developing national talent that is needed by the sector,” said Deputy Labor Minister for Planning and Development Moufarrej Haqbani.
In order to press private firms to hire more locals, the government last year introduced a quota system, which imposes minimum numbers of Saudi employees on companies depending on their size and sector. Firms that do not comply face restrictions on obtaining visas for their foreign workers.
Ministry of Labor officials said in September that it had created 380,000 new jobs in 10 months through that system, which has been criticized by some employers for raising their costs or disrupting their operations. Some companies have complained that qualified Saudi workers are not always available.
In January, Labor Minister Adel Fakeih said the Middle East’s largest economy needed to create 3 million jobs for Saudi nationals by 2015 and 6 million by 2030, partly through “Saudizing” work now done by foreigners.