Saudi Arabia renews itself and penalizes the recruitment of foreign workers


The lastest measure of the Saudi Arabian government  to promote the recruitment of local workers has set off controversy among political and economic authorities of the Arab kingdom.

The government of Riyadh has been trying unsuccessfully for years to increase the percentage of Saudi workers in all areas of the economy. Saudi Arabia has a population of 32.6 million people (20.4 million Saudis and 12.2 million foreigners). Regarding the active population, the proportions are reversed: there are 13.5 million workers (5.8 million Saudis and 7.7 million foreigners).

The generous income from oil that has enriched the State for the last decades has allowed a significant part of the Saudi population to enjoy a certain standard of living through subsidies, discounts, fiscal exemptions and the access to jobs in the public sector. But in recent years, because of the increase in population, the economic recession and the prudence in the face of the inevitable reduction in the global demand of fossil fuels as a result of energy transition, the State has launched a plan of economic reforms through the substitution of foreign workers for local staff. At present there are more than 3 million jobless Saudi Arabians and the unemployment rate exceeds 30 percent among the youth.

Until now, the State has encouraged the youth to study and work, and boosted the recruitment of Saudis through plans that were met with relative success. The Saudis are partly responsible for the failure of Saudization in many professional fields because they are reluctant to take lower paid jobs or jobs with less occupational prestige. Besides, the better paid professions require qualifications and experience that, in many cases, only foreign workers can offer.

On this occasion, however, Riyadh has opted for a more expeditious method. It has decided to dismiss the foreigners working in the public sector and to penalize private companies that hire more foreigners than Saudis with new taxes.

Regarding the Administration, last year it announced the progressive substitution of 28,000 foreign public employees for Saudi nationals. The plan, which will conclude in the year 2020, started in October with the King Saud University deciding not to renew the contracts of 478 foreign workers.

That is not all. The Ministry of Labour and Social Development also published a list of 12 activities off-limits for non-Saudis. The measure will enter into force on the 1st of Muharram of 1440, the Islamic New Year’s, that corresponds to the 11 September 2018. From this date on, only Saudi citizens will be able to work in shops selling watches, eyeglasses, medical equipment, electrical appliances and electronics, car parts, building materials, carpets, cars and motorbikes, home furniture and ready-made office materials, ready-made garments, children’s clothes, menswear, household utensils, and pastries.

Female participation in the labour market

The exclusion of foreign labour in these areas is part of an ambitious plan that also considers the incorporation of women into the labour market. Among others, a program was launched in October 2017 to increase the presence of women in clothes, make-up and women’s accessories shops.

Regarding the economic pressure to discourage the recruitment of foreign workers, it has been strongly criticised by the Council for Saudi Chambers of Commerce and Industry. The organization has refuted the law that since January has imposed a new tax on companies that have more foreigners employed than local Saudis. In particular, these companies are charged 107 dollars a month per foreign worker. When the presence of local and foreign staff is matched, the company has to pay 80 dollars per expatriate. This amount will be increase to 133 dollars in 2019 and to 187 dollars in 2020. As for the companies with a higher percentage of foreign workers, they will have to pay 160 dollars a month per foreign employee starting in 2019. This tax will increase up to 213 dollars in 2020.

Some companies assert that if the law is not lifted, the government will tax them out of business, leaving the foreigners and also the Saudis who work for them unemployed. As a matter of fact, the immediate application of this fee will force the closing of many small and mid-sized companies, with the consequential damage to the national economy. However, the large construction businesses and the oil industries can afford to pay the new tax without running the risk of losing the uneducated and underpaid foreign workers who form the bulk of its staff.

The Saudi government also impedes the presence of immigrants in the country through another strategy. In addition to the tax on the companies, last June a tax on foreign workers relatives was announced. They will have to pay for each dependant of their family per month 27 dollars in 2017, 53 dollars in 2018, 80 dollars in 2019 and 107 dollars in 2020. A foreigner that has three dependents, a wife and two children, for example,  has to pay 1,920 dollars this year. This amount is very important if we take into account that the average salary for the foreigners is about 12,000 annual dollars. While for the Saudis who work in the private sector the average is 25,000 dollars.

The program ‘Saudi Vision 2030’

Since the Saudi Crown Prince Mohammed bin Salman announced on 25 April 2016 the program Saudi Vision 2030, several announcements regarding reform, liberalization of the economy and incorporation of women in the labour market in order to reduce the country’s dependence on oil have been made. Western media have focused their attention on the end of the ban on women driving that will come into effect in June. But there are other much more significant changes that should be looked at. The lastest improvements in this sense are the announcement that women will be able to start a business without needing permission from her parents, husband or brothers, depending on the case. They will also be able to access new professional areas in the police force and the Public Prosecutor’s Office and they will be allowed to obtain licenses to become tourist guides.

Saudi Vision 2030 intends to introduce political and economic reforms, reinforcing investments, job creation, privatizations and the increase of exports. All these policies are aimed to reduce dependence on oil, which at present provides 80% of the country’s income. The authorities also want to increase the weight of the private sector from 40% of the current PIB to 65%.

The dependence on oil has restricted and harmed the growth of the Saudi Arabia economy in other areas. For example, it has limited the establishment of industries and it has created a society with little entrepreneurial spirit and dependency on State subsidies. In general, Saudi Arabians are used to receiving allowances on basic goods such as water and electricity, and paying fewer taxes in exchange for their loyalty to the regime. This is at the expense of an increasing deficit that the State cannot assume indefinitely.

Because of this, some analysts foresee confusion in the society and even a popular dissatisfaction in the coming years because of the reduction in subsidies and the forced entry of many Saudis in the job market through unappealing professions. Innovation and new policies also affect the cultural sphere. The Government has allowed the opening of cinemas after 35 years of prohibition and the construction of an opera house has recently been announced.

Indeed, the wind of change in Arabia is not received with the same optimism by everybody. For example, several sources blame the increase in divorces cases on foreign influence. The main religious personality of the country, the Grand Mufti of Saudi Arabia Abdul-Aziz ibn Abdullah Al ash-Sheikh, said that “singing concerts and cinemas are a depravity” and that cinemas “might show movies that are libertine, lewd, immoral and atheist, because they rely on films imported to change our culture”. Al-Sheikh also affirmed that women who drive will be exposed to the devil. Other Muslim scholars have assured that driving prejudices the ovaries of women who cannot drive because they have a quarter of brain, or that because of the end of the ban on driving there will not be anymore virgin women… Everything indicates that these scholars do not speak on behalf of every Saudi, but represent the opinion of a significant part of the population.

Nonetheless, there is no doubt that Saudi Arabia will move on, but not always in the best direction or with expected success. Often, some reforms draw a great deal of  attention from foreign media, as did the possibility for women to drive. But sometimes these improvements do not imply any relevant change to the political or economic organizations nor the mentality of the Saudi society.

The failure of the Jeddah touristic bus, the most cosmopolitan city of the Kingdom, is a good metaphor of the real impact of many of the apparently revolutionary, but deep down superficial changes, that Saudi Arabia is experiencing in recent times. The touristic bus was launched in March and before three months the authorities announced the service would be discontinued. The vice president of the Committee of Tourism of the Jeddah Chamber of Commerce & Industry made clear the lack of planning and of care from the authorities when it comes to managing public resources when he recognized that “since there are no tourists coming from abroad, the project has been a failure.”

Jordi Llaonart is an Arabist and an expert journalist on Islam and the Middle East. He has studied at the Universities of Tunis and Damascus. He has covered electoral processes in Iran, Yemen, Kuwait, Bahrain, Lebanon, Syria, Sri Lanka and Nepal, and has interviewed the Taliban and Iraqi insurgents influenced by Saddam Hussein.