A decision by Saudi Arabia to limit the stay of expatriate workers to six years appears to have triggered fears among foreigners residing in the region that such a move could also be enforced by other Gulf oil producers in line with a proposal discussed at the Gulf Cooperation Council Summit in 2008.
Nitaqat (limits), the new Saudi government programme to be enforced in June, compels private sector firms in the Gulf Kingdom to recruit Saudis and provides incentives to companies which abide by the new rules. The programme will limit the stay of foreign workers, mainly unskilled, to six years for certain categories of firms while it will also ban visa renewals for non-compliant companies.
While Saudi Labour Minister Adel Faqih did not provide many details of the new decision at the time, the Ministry has since issued a clarification
on the new system.
“This decision apparently targets a quantitative rather than a qualitative policy... in other words, if the decision is issued in this form, this means the Ministry of Labour is focusing on quantity not quality,” Khaled al Suleiman, a well-known Saudi economist told Al Arabiya television before the clarification was issued.
More than 18 million expatriates live in the six-nation GCC, remitting home tens of billions of dollars every year, seen by regional economists as drainage of the Gulf countries’ wealth. Unskilled labour is estimated at around 3m in Saudi Arabia and 10m GCC-wide.
The Saudi programme comes amidst reports that unemployment in the country is widening because of the private sector’s preference of the cheaper expatriate labour and the fact that the population is growing faster than the economy.
Faqih put the official unemployment rate in Saudi Arabia, the largest Arab economy, at around 10.5 per cent but noted female joblessness largely exceeds that rate, standing at nearly 26.6 per cent. Unemployment among Saudi high school graduates is also as high as 40 per cent.
He said nearly six million foreigners work in the Saudi private sector, accounting for around 90 per cent of the sector’s total workforce.
“We have nearly half a million unemployed Saudi in the country while around 8m expatriates live here…6m of them work in the private sector, transferring nearly SR100 billion every year,” he said.
Faqih is expected to meet Saudi businessmen in the eastern region tonight, and the meeting will cover Saudization of jobs while the minister will explain the new programme in detail, according to Abdul Rahman al Rashid, chairman of the chamber of commerce and industry in Saudi Arabia’s eastern region.
“The decision to limit the stay of expatriate workers to six years is not clear and needs further clarification as is the case with Nitaqat,” said Suleiman. The Ministry, however, has since issued a clarification
on the new system.
“Nitaqat will be an effective tool to eliminate malpractices in the labour market… We are not completely stopping visas for foreign workers but we want to find jobs for our people… Companies in the green zone will not have any problem while there is a plan to limit the stay of most expatriate labour to six years,” Faqih said.
Government data released early this year showed Saudi Arabia is suffering from very high jobless rate among young men as more than 43 per cent of citizens aged between 20 and 24 years are unemployed. The rate at the end of 2009 was higher than in 2008 despite an ongoing campaign to find jobs for the fast-growing nationals.
The report by the government statistics and information centre showed about 43.2 per cent of the Saudi males and females aged 20-24 years were unemployed at the end of 2009, nearly 20 per cent above the 2008 rate.
“This comes at a time when one million labour visas for foreign workers were issued last year,” the report said. “The private sector continued a drive to import foreign labour although nearly 111,000 Saudis were looking for jobs,” it said.
Saudi Arabia, which controls over a fifth of the world’s recoverable oil deposits, is suffering more from unemployment than other Gulf hydrocarbon producers given its large population and the slowdown in its economy in some years.
The government is now seeking help from the private sector to create jobs for Saudis. “The present situation requires strong cooperation and coordination between the government and the private sector to tackle the unemployment challenge as hundreds of thousands of Saudi continue to search for jobs,” Faqih said.
“Nitaqat is just one of 10 new programmes to be implemented in the coming stage… Our aim is to make Saudisation of jobs an advantage to companies.”
Suleiman, on the other hand, said the Ministry of Labour has been issuing successive decisions because it has been under pressure to tackle unemployment. “Under such pressures, which are often highlighted by the Saudi media, the ministry appears to be looking for a way out by presenting such ideas.”
He warned against the repercussions of that decision on the Saudi private sector, which relies heavily on “cheaper” expatriate labour. He said job nationalization in the Saudi private sector would boost cost of labour and this in turn would increase the financial burden on national companies.
Suleiman also criticized the deadline for the implementation of Nitaqat, which requires national firms to start Saudization of jobs within three months. “These decisions will hurt the private sector because they should not be presented in such a random way,” he added.
Other analysts believe Faqih’s announcement of the six-year limit is intended to block the way for Saudi-based foreigners to demand political rights, including Saudi citizenship. But Suleiman believes such demands are not “in the pipeline” on the grounds that many expatriates have been residing in Saudi Arabia for more than 50 years and have not made such demands.
He noted that the idea of replacing the foreign labour with nationals was discussed by the GCC heads of state in Bahrain several years ago.
In Egypt, Minister of Manpower Ahmed Al Burghi said he had contacted his labour representatives in Riyadh and Jeddah and was told that they have not received any official notification about the new decision.
Saudi Arabia is home to around 1.5 million Egyptian workers, who could be sent home in case that decision was fully enforced.
The new programme will give four classifications to companies including “excellent and green” to those which adhere to job nationalization and “yellow and red” to firms which fail to employ enough Saudis.
Analysts described the programme as the most radical measure taken by the Saudi government to force its private sector establishments to employ more Saudis following the failure of previous procedures.
The government in the world’s dominant oil power has not yet published details of the programme but its labour minister said it includes “generous” incentives to compliant companies and punitive measures against non-abiding firms.
“Companies which abide by Nitaqat will be moved to the green zone, which will allow them to receive many benefits, including visas and others,” Faqih told businessmen this week. “It will also allow them to get skilled labour from firms in the red zone.”