Saudi Arabia’s crackdown on foreign workers may have upset the market but the economy should benefit in the long run as Saudi nationals fill the gaps and cut their dependence on the state.
Nearly a million foreigners have left the Kingdom since March, when authorities stopped turning a blind eye to visa irregularities they had tolerated for decades, and tens of thousands more have been detained in raids on offices and marketplaces that began this month.
Though most of the roughly 10 million foreigners in the Kingdom are expected to remain, alongside a Saudi population of 20 million, the crackdown is part of government efforts to nudge more Saudis into jobs, tackling a problem seen by many as one of the biggest challenges facing the country.
Official unemployment is just 12 percent, but that excludes a much larger group of people who are not actively seeking work. This time, by cracking down on visa irregularities that allowed companies to cheat the system, and by spending billions of dollars on vocational training for young Saudis, the authorities hope their policies will be more effective. Economists interviewed by Reuters said they expected the tough new policies to improve the Kingdom’s economy in the long run despite some disruption now. The government is well placed to weather any short-term costs after years of record budget surpluses that have created foreign currency reserves equal to more than 100 percent of gross domestic product.
Small unregistered companies face the biggest immediate impact, and the Kingdom’s newspapers have documented the consequences, including drinking water deliveries canceled, crops not harvested and school classes suspended. Many small businesses are illegally owned and run by foreigners, while a Saudi is paid to put his name to any official paperwork.
More immediate problems are faced in the construction sector, which relies on a plentiful supply of cheap workers.
“40 percent of the medium and small companies have been hit now ... new tenders are becoming more expensive,” said Fahad Al-Hammady, chairman of the Contractors’ committee at the Saudi Chambers of Commerce. But despite the exodus of foreign workers in the past 10 months, second-quarter growth in the non-oil private sector was 4.2 percent, official figures show, and Capital Economics expects the non-oil sector to grow 5-6 percent this year.
One early benefit of having more workers registered properly should be better economic planning.
Economists also said private-sector productivity should improve if labor becomes more expensive.
The biggest economic advantage of replacing foreign workers with Saudis, however, is raising household income, thereby boosting consumer spending. That is already being felt.
Muhammad Al-Agil, chairman of Jarir Marketing, the biggest listed Saudi retailer, told Reuters last month that rapidly growing sales over the past two years were partly due to the higher number of Saudis with jobs.
Instead of money being sent overseas by expatriates, he said, it was now being spent in Saudi shops.







