You are here

Saudi Arabia encouraged foreign workers to leave - now it's struggling

Massive exodus of expats from labour force illustrates challenges facing crown prince

Riyadh

MOHAMMED Iqbal joined the throng of foreign workers bound for Saudi Arabia during the oil boom of the 1970s, after recruiters from Pepsi visited his native India and dangled an opportunity in the kingdom driving a delivery truck.

The workers arrived from Asia and the Middle East, often on short-term contracts, to satisfy the Saudi government's ambitious development plans. But Mr Iqbal stayed, raising three children and finding work over the decades, even as the Saudi government's priorities changed and its control over the foreign labour market tightened.

Recent shifts in government policy, however, have forced Mr Iqbal to consider pulling up stakes, at the age of 60.

sentifi.com

Market voices on:

The government has imposed fees on the dependents of expatriate workers and restricted foreigners from working in certain sectors.

Rising costs, as part of an overhaul of the economy intended to make Saudi Arabia less dependent on oil, have hit low-wage foreign workers especially hard. The result has been a massive exodus of foreigners from the labour force.

The abrupt outflow has also illustrated the steep challenges facing Crown Prince Mohammed bin Salman as he tries to remake the Saudi economy. A central pillar of his plan involves creating employment for Saudi citizens in the private sector, where jobs are now overwhelmingly held by foreigners.

In the short term, though, Saudi citizens have not filled the jobs that expatriates are vacating, adding to the pressure on business owners already struggling with an economic downturn.

Between early 2017 and the third quarter of last year, more than 1.1 million foreigners left the workforce in Saudi Arabia, according to the latest figures from the government statistics agency. It is not the first recent large-scale exodus of foreigners: hundreds of thousands left or were deported in 2013 and 2017.

But while that exodus was largely the result of a government crackdown on people violating a work visa sponsorship programme, the latest flight appears to reflects broader hardships and unease, among foreigners and Saudi citizens alike.

The upheaval has added to a sense of uncertainty in the country as Saudi leaders grapple with a depressed economy, struggle to attract foreign investment and try to repair the kingdom's image after the murder of Washington Post contributing columnist Jamal Khashoggi by Saudi officials in Istanbul four months ago.

In the long term, the flight of foreigners serves one of the government's most urgent priorities: finding jobs for the more than half of the Saudi population that is under the age of 30 - and in doing so, staving off the kind of youth dissatisfaction that has led to protests in other Arab countries and unnerved the Saudi leadership.

But for now, a major concern has been a spike in the unemployment rate over the past two years to as high as 12.9 per cent. The increasing jobless rate is forcing the government to revise its short-term unemployment goals and further exposing the gap between the expectations of Saudi workers and the jobs that are becoming available to them - in lower-wage construction or retail jobs, for example - as the foreigners leave.

Karen Young, an expert on the political economy of the Persian Gulf states at the American Enterprise Institute, said that while it was good news that more Saudi women were entering the workforce, many with higher education degrees were not finding positions that matched their skills.

The business environment in Saudi Arabia has also suffered because of the crown prince's more aggressive policies, including the arrests of hundreds of business executives, public officials and royal family members during what the government called an "anti-corruption" sweep last year.

As the crackdown spooked international investors, "local investors complain of new hurdles to license and register businesses, and comply with new hiring policies" that require the hiring of Saudi citizens, Ms Young said.

The government's response - to focus on "pump-priming", or increased government capital expenditures - was in line with what many economists would suggest to start growth when foreign investment and the local economy were sluggish, Ms Young said. "But that is not a sustainable long-term growth strategy. The government cannot spend its way out of this forever," she added. WP