Editorial: Making Nitaqat work is important

Editorial: Making Nitaqat work is important
Updated 19 July 2013

Editorial: Making Nitaqat work is important

Editorial: Making Nitaqat work is important

The law of unintended consequences is universal, reaching it could be argued even in to medicine. Thus, on average every medicine aimed at dealing with one problem, can potentially, by its side effects, throw up seven other problems. Likewise with legislation, especially that relating to the dynamic world of business.
Here in the Kingdom we have sought to cure unemployment with a range of measures designed to channel to Saudis, work that is currently being done by expatriates. While few in the business community argue with the logic and necessity of such a policy, there is now widespread complaint that the Nitaqat Saudization program, most particularly the expatriate levy, is doing more harm than good.
Influential business groups have called for an end to the SR2,400 levy which must be paid for every expatriate worker who is deemed under the Nitaqat quota program, to be doing a job that could be undertaken by a Saudi national. One new study commissioned by the Council of Saudi Chambers from a business consultancy has argued that, not only is the levy responsible for recent hikes in the price of goods and services, but it also causing damage to the Kingdom’s economy.
In one area highlighted by this study, it would seem at first glance, that there are grounds for a rethink. It looks as if small and medium-size enterprises are suffering from what appears to be an uneven application the rules. Thus for instance, small firms that hire cleaning and contract workers, are being obliged to pay the levy, even though Saudis would not normally be available to take on such employment.
On the face of it, there is some justice in this argument, but the issue merits closer examination. The first thing to appreciate is that this is not in reality “the little guys” suffering from legislation that was designed to have big business in Saudi, embrace the Saudization program fully.
SMEs dominate economic activity in the Kingdom. The Saudi genius for business is expressed in tens of thousands of small, often family-owned firms, with conservative management policies and outlook. These enterprises will almost certainly have employed expat workers because they are both cheaper and more readily available. For such businesses the levy can pose a double challenge. In profit terms, does it make better sense to pay up for expat workers that make a known contribution to the business, or should unproven nationals be hired in their stead and indeed be paid more than foreign workers?
Medium-sized enterprises are more likely to pushing for extra growth and driving to play their part in building our nonoil economy. They will have the flexibility and human resources capability to address the Nitaqat and the expat levy issues. They are also certainly more capable of finding ways to absorb the extra costs, especially in the service and retail sectors where foreign workers have generally played an important role. Just how important indeed, has been revealed by the drive to remove illegal workers, which has seen some retail outlets struggling to stay open, because staff without the proper papers have fled, fearing discovery and deportation.
Some in the business community are arguing that the levy is responsible for recent price hikes. It might be thought that they are on dangerous ground here. Consumers are, with some justice, cynical about the pre-Ramadan price hikes and what appear to be artificial shortages of certain key foodstuffs. Such manipulation has been a feature of the holy month for many years. The expat levy is therefore hardly a reasonable justification for these increases.
Shoppers are not naïve. Anyone who has to run a household budget knows perfectly well the seasonal movement of prices and the often clear reluctance of retailers to increase their stocking levels to meet extra demand.
Those who are calling for the expat levy to be abandoned on the grounds that it is already causing economic damage should wait for clearer evidence that this is true. Moreover, if there are problems, then the way in which the levy is applied, can perhaps be adjusted to allow for them. Maybe some of the quotas need to be changed.
However in the arguments about cost and economic disruption, the over-arching importance of the whole Nitaqat program must not be forgotten. In a country that is experiencing an extraordinary boom, we have nationals who cannot find work, because the jobs that they could be doing, have been taken by foreign workers. For the social as well as the economic good of the Kingdom, this unacceptable situation cannot be allowed to continue.