DUBAI, 9 June 2003 — Saudi Arabia’s moves to limit the number of foreign nationals in terms of total inhabitants and workforce could undermine efforts to attract foreign investments and enhance the private sector role in the economy. A partial goal of the initiatives is ensuring the availability of employment opportunities for Saudi nationals.
In recent months, the authorities have undertaken a series of measures designed to reduce the size of foreign communities in the Kingdom.
In February, the Manpower Council made a strategic decision aimed at reducing the number of foreign nationals working and living in Saudi Arabia to 20 percent of the population by 2013.
Currently, Saudi Arabia’s total population is put around 24 million including 7.5 million expatriates. Thus, foreign workers and their dependents constitute 31 percent of the total inhabitants. Accordingly, the total number of foreign nationals must be reduced to 6.6 million by the target date.
Also, the government body has stipulated a quota system whereby no nationality should exceed 10 percent of the total expatriates.
It is estimated that nationals of India and Egypt separately comprise around a quarter of expatriates. Also, there are large communities from Pakistan, the Philippines and Bangladesh.
Annually, expatriates remit some 70 billion riyals ($18.7 billion) to their home countries. The amount is uniquely sizeable, as it represents just above 10 percent of Saudi Arabia’s GDP. The authorities are tempted to see more of this fund remaining and circulating in the domestic economy.
However, a proposal to tax foreign workers was vetoed.
Earlier in the year, the appointed Consultative Council rejected a bill to apply a 10 percent tax on expatriates earning some SR3,000 ($800) a month, fearing an exodus of skilled workers and additional complexity in negotiations for accession to the WTO.
However, the council has plans to propose penalties against expatriates who overstay their permits in the Kingdom.
On the labour front, the Ministry of Labour and Social Affairs has banned expatriates from working in some 34 job categories. These include training managers, public relations officers, administrative assistants, purchasing managers, secretaries, operators, warehouse supervisors, debt collectors, customer service accountants, tellers, postmen, data handlers, librarians, book sellers, ticket kiosk keepers, taxi drivers, auto salesmen, janitors, internal mail handlers and tour guides.
Still, the ministry is contemplating expanding the list of jobs barred to foreign workers. Saudi Arabia’s total workforce is estimated at 8.13 million, of which two-thirds or 5.36 million are expatriates.
Nationals comprise less than 15 percent of employment in the private sector versus nearly 80 percent in the public sector. The government sees employment opportunities for Saudis in the private sector.
The exact level of unemployment in Saudi Arabia is not known for certain. The Central Department of Statistics puts the jobless rate at 8.1 percent, but other private studies give estimates of 20 to 30 percent. Press reports have suggested that there is even unemployment amongst expatriates — possibly as high as half a million by some estimates.
The seventh five-year plan running up to 2005 calls for creating some 817,000 jobs for Saudi nationals. The authorities intend to achieve the ambitious goal through a combination of new jobs and the Saudization process.
But if performance is any guide, the authorities might succeed employing three-fourths of the number. Ultimately, the government hopes to have full Saudi employment by 2025.
Fearing consequences for their financial results, the business community is not necessarily pleased with the government restrictions on expatriates and the Saudization process. Some stress the need for training and reforms in the educational programs. Nearly 80 percent of Saudi nationals study humanitarian and social sciences.
Others regard the moves as interference in business affairs and contend that they pose challenges including loss of competitiveness in labour-intensive industries, which prefer to employ relatively cheap foreign workers.
A report by a Saudi bank has found that a Saudi national with a post-graduate degree expects to earn a monthly salary of $5,630 versus $2,895 for an expatriate.
It is feared that the moves to restrict the size of expatriates could undermine efforts to attract foreign investment and encourage the private sector to play a more vital role in the economy.
In fact, the authorities need to ease rather than enlarge restrictions in order to attract investments, both of local and foreign sources.
Indeed, in response to attacks against Westerners over the last few years and the recent terrorist attacks in Riyadh, the government ought to look for means to make working in Saudi Arabia attractive to foreign professionals. Otherwise Dubai and Qatar could emerge as the main beneficiaries by attracting businesses at the expense of Saudi Arabia.
