In era of cheap oil, Saudi loses shine for for­eign work­ers

The Pak Banker - - 6BUSINESS -

Mo­barak Musa, a mo­bile tele­phone sales­man from Syria, has spent 10 years work­ing in Saudi Ara­bia, send­ing part of his wages back home to sup­port his par­ents and three brothers. A shift in Saudi la­bor pol­icy means he won't be able to do so for much longer. In early March, the Min­istry of Labour an­nounced that within six months for­eign­ers would be banned from sell­ing and main­tain­ing mo­bile phones and ac­ces­sories for them, in an ef­fort to keep open more jobs for Saudi cit­i­zens.

So Musa be­came one of hun­dreds of thou­sands of for­eign work­ers in Saudi Ara­bia who may lose their jobs and be sent back to their home coun­tries this year, as low oil prices slow the king­dom's econ­omy and prompt the govern­ment to re­strict em­ploy­ment op­por­tu­ni­ties for ex­pa­tri­ates.

"I don't know where else can I go - I don't know any other job to do," Musa, in his 30s, said in his small shop at a mo­bile phone mar­ket in down­town Riyadh. Mil­lions of for­eign­ers from south Asia, south­east Asia and else­where flocked to work in Saudi Ara­bia dur­ing the eco­nomic boom of the past decade, fill­ing rel­a­tively low-paid posts in the oil in­dus­try, con­struc­tion and ser­vices as well as many middle-man­age­ment and pro­fes­sional po­si­tions.

For­eign­ers ac­counted for 10.1 mil­lion of the to­tal pop­u­la­tion of 30.8 mil­lion in 2014, ac­cord­ing to the lat­est of­fi­cial data. The money they sent home was im­por­tant for their home coun­tries; they re­mit­ted $9.1 bil­lion out of Saudi Ara­bia in the third quar­ter of 2015, cen­tral bank data shows.

The in­flow of peo­ple may now go into re­verse. Saudi eco­nomic growth is slow­ing as low oil prices pro­duce a state bud­get deficit that to­taled nearly $100 bil­lion last year, forc­ing the govern­ment into spend­ing cuts.

Many an­a­lysts ex­pect gross do­mes­tic prod­uct growth, which av­er­aged over 5 per­cent an­nu­ally be­tween 2006 and 2015, to fall well below 2 per­cent this year. Partly be­cause la­bor rules make it hard and costly to fire Saudi cit­i­zens, lay­offs in the early stages of a down­turn tend to hit for­eign­ers al­most ex­clu­sively.

Mean­while the govern­ment, lack­ing the cash to cre­ate pub­lic sec­tor jobs for Saudis as freely as be­fore, and wor­ried that the of­fi­cial un­em­ploy­ment rate of 11.5 per­cent among them could rise, is in­ter­ven­ing more heav­ily in the la­bor mar­ket to push Saudis into jobs pre­vi­ously held by for­eign­ers.

A top ex­ec­u­tive at a ma­jor Saudi com­pany told Reuters in Jan­uary that he wouldn't be sur­prised if one mil­lion for­eign­ers had to leave the king­dom by the end of this year. "The eco­nomic changes have started to pres­sure the la­bor mar­ket, and this has trig­gered the start of the mi­gra­tion of a large seg­ment of for­eign work­ers," said prom­i­nent Saudi econ­o­mist Fadl al-Boainain. "De­clin­ing cor­po­rate prof­itabil­ity has made the for­eign work­force a tar­get for man­age­ments seek­ing to cut fixed fi­nan­cial obli­ga­tions." So far, lay­offs have been con­cen­trated in the con­struc­tion sec­tor, which an­a­lysts es­ti­mate em­ploys around 45 per­cent of for­eign­ers. Hit by shrink­ing state con­tracts and de­lays in pay­ments owed to them by the govern­ment, con­struc­tion firms have been lay­ing off tens of thou­sands of peo­ple since last year.

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