RIYADH, 22 June 2007 — The development of four economic cities in the Kingdom should proceed according to a phased plan to offset any negative impact as a result of hastening the pace of the projects, Dr. John Sfakianakis, chief economist of SAAB, told Arab News on Wednesday.
He said the government would have to work out the projects schedule in consultation with contractors, since they will need 1.3 million skilled and unskilled manpower when the projects are scheduled to be completed by 2020. They should also look into the demand and supply situation concerning the various sectors to avoid any adverse impact.
“If these mega projects are undertaken at the same time, there will be a huge demand for labor which will create bottlenecks in the economy, which the economy will not be able to cope with. So the issue now is the pace of development vis-à-vis the manpower supply. The mega projects could be implemented at the same time, but the pace will have to be adjusted. Otherwise, the cost of production could go up,” the SABB chief economist said. The cost of living in the Kingdom increased by 2.9 percent in April 2007 compared to the same period last year, according to the report from the General Statistical Information Department of the Ministry of Economy and Planning. This figure is still well below the inflationary spiral in the UAE, for example, where it hovers between 15 and 20 percent.
Regarding the scheduling of the mega projects for the economic cities, informed sources said there is no definite timeline for them, since there is no separate authority similar to the Royal Commission for Jubail and Yanbu to act in a coordinated manner.
A cross-section of opinion among expatriates from south and southeast Asia is in favor of reviewing the existing salary structure to make employment opportunities in the Kingdom an attractive proposition. They point to five to 10 percent increase in the cost of consumer goods, 15-25 percent hike in rents, and depreciation of Saudi riyal vis-à-vis their own currencies. The increase registered in the price of food and drinks was 6 percent, rent and cost of maintenance of buildings, fuel and water increased by 5.9 percent, commodities and services, medical care by 2.3 percent and household furnishing by 0.8 percent, said Syed Pervez Ali, who works for a major hypermarket in Riyadh.
However, Sfakianakis believed any such salary hike would have a ripple effect by further fueling inflation and jacking up prices across the board. Expatriates, however, have their own concerns. “I am losing 200,000 rupees annually following the appreciation of the Indian rupee against the riyal,” said Vinod Menon, a media specialist, who noted that the exchange rate for Indian rupee which once stood at Rs.12.30 to the riyal is now down to Rs.10.30.” As a result, he said, he has to pay more for his monthly remittances back home, besides house rent, food, shopping expenses and on travel, which he undertakes frequently. Even the price of car battery has shot up from SR90 to SR160 over a period of two years.
Banny M. Quiambao, president of Calabarzon, said the inflationary trend in the Kingdom has had a negative impact on his savings. Sri Lankan find themselves in the same boat, with the exchange rate of Sri Lankan rupee to the Saudi riyal down from Rs. 29.50 to SR26 in three months alone. The worst affected, however, are Palestinians, especially those who have to support their family in the Kingdom and their relatives in Gaza.
As Abdul Lateef Mahmoud explained: “The situation has become extremely difficult for us. My house rent in Riyadh has gone up by 25 percent. Besides the rise in food and consumer prices by five to 10 percent, I have to support my relatives stranded in Gaza. How can I manage with my salary which has remained unchanged for the last several years during which Saudi riyal has been losing its value steadily.”
Saudis will also be feeling the pinch, since they usually travel abroad during their summer vacation. According to Muhaideb Al-Muhaideb, chairman of the travel agents committee at the Riyadh Chamber of Commerce and Industry, some 4.5 million Saudi tourists will spend nearly SR70 billion on foreign tourism this year, an increase of 40 percent against the preceding year, amid Saudi riyal’s low exchange rate. This could encourage many Saudis to spend their holidays within the Kingdom.
The inflationary cycle has created a situation in which expatriates from the subcontinent travel with their families once in three years or more, since their employer does not provide tickets for their dependents. Prolonged absence from home in such cases has resulted in a growing incidence of household thefts or encroachment on their properties.
As for manpower recruitment, restrictions imposed by the Ministry of Labor on the transfer of sponsorship have had a negative impact on the market. In the IT sector, for instance, some Saudi organizations have started outsourcing projects to India. So instead of creating job opportunities for Saudis, it is contributing to that country’s multibillion-dollar outsourcing market.
At the same time, the BBC said Indian workers have gained the highest pay rises in Asia in the wake of the growing strength of its call center and information technology sectors. A new survey by global human resources firm Hewitt Associates said Indian workers gained an average salary increase of 14 percent. This was twice as much as second placed Philippines, where pay was up by about seven percent.
