More than 50 percent of small and medium-sized contracting firms have exited the local market following the end of the legalization period, which ended last November, local media reported.

The grace period was the most grueling for contracting companies, which also suffered a shortage in qualified labor at the time.

In fact, wages have skyrocketed to as much as SR200 per day, several contractors said.

Contractors have requested the Ministry of Labor to grant them certain exemptions through issuing temporary visas to hire laborers in order to complete projects on time.

“The shortage in manpower and ever-increasing wages will remain the biggest challenges facing the contracting sector,” Fahad Al-Hamadi, head of the National Contractors Committee at the Council of Saudi Chambers (CSC,) told a local daily. “These factors combined have led to the faltering of small and medium-sized enterprises (SMEs) and their exit from the local market after incurring huge losses over the last four months. Some 60 percent of subcontracting companies implementing mega-projects are SMEs and are no longer capable of finalizing such massive-scale projects for these reasons.”

“The Ministry of Labor has allowed 11 companies to hire laborers to implement projects,” said Abdullah Rudwan, head of the Contracting Committee at the Jeddah Chamber of Commerce and Industry (JCCI). “However, these firms could not continue operating on the ground. The Ministry of Labor was supposed to ensure a safety net for such firms before launching legalization campaigns to ensure their survival.”

“The contracting sector has faced a major crisis since the Nov. 3 deadline and the campaign against illegal workers,” said Raid Al-Aqaili, a member of the Contracting Committee at the JCCI. “In addition, the Nitaqat nationalization program is difficult to implement on small-scale projects without falling into the yellow and red zones of the system, as these companies are obliged to recruit qualified manpower from abroad.”

“The new regulations did not consider the disparity in income between big and small companies, which forced more than 50 percent of smaller firms out of the market,” he said.

Abdullah Abu Thanyyan, ministry undersecretary for inspection and development, said that the building and construction sector accounted for the highest number of change-of-profession applications — over 1 million requests out of the 2.4 million — in addition to 1.2 million sponsorship transfers out of a total of 2.5 million requests and 1.9 million new work permits out of 3.8 million issued country-wide.