My car is still there (in Saudi Arabia), the one I drove.

Saudi Arabia’s decision to end a ban on women driving could help families save billions of dollars as the move could reduce the number of household drivers. The rule change could affect some of the 1.4 million men employed as chauffeurs in the kingdom, including a large share of its migrant workforce, while boosting upscale car sales as households upgrade for their new drivers. The decree will also reassure investors that the kingdom’s push to diversify its economy beyond oil is on track.

It should also encourage more women into the workforce and raise productivity in the economy.

Thousands of male drivers risk losing their jobs, whereby they could no longer send money back to their families, strengthening Saudi Arabia’s balance of payments but reducing incomes in their home countries.

The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz of Saudi Arabia, issued the decree on Tuesday, allowing women to drive cars.

The move could change the lifestyle of millions. About 10 million women over the age of 20, including foreigners, live in Saudi Arabia; nearly 1.4 million foreigners work as household drivers, earning roughly $500 a month in addition to being provided with accommodation and food.

It may take years rather than months for women to become a major presence on the roads in some areas.

But families’ disposable incomes are likely to rise as they lay off their chauffeurs. Saudi economic news service Maaal estimated the drivers now collectively earn about $8.8 billion annually.

“The removal of the need for a family driver — even when women don’t work — will help boost real income for mid- and lower-income families,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. The drivers have been sending much of their pay back to their home countries, and their departure will reduce this outflow, leaving more foreign reserves available to defend the Saudi currency from pressure caused by low oil prices. Saudi Arabia posted a current account gap of $27.6 billion last year.

However, energy consultancy FGE estimated a 10 per cent increase in Saudi driving activity due to women would add 60,000 barrels per day to domestic gasoline demand.

Although it is the world’s biggest crude oil exporter, Saudi Arabia is a net gasoline importer.

Malik said there could be a short, one-off boost to Saudi car sales in coming months, as women buy vehicles before a scheduled imposition of value-added tax in January 2018. In many cases, however, women would not need to buy as they could use vehicles relinquished by departed chauffeurs.

The share prices of companies selling auto insurance rose on Wednesday, while car servicing company Saudi Automotive gained 1.6 per cent and car rental and leasing company United International Transportation, which operates under the name Budget Saudi Arabia, jumped 4.0 per cent.

“We certainly expect volumes to increase, in terms of short-term rentals, but it’s definitely too early to put a number on that,” said Anil Mathews Abraham, regional manager for Budget. An exodus of drivers to their home countries could — AFP mean an immediate hit to Saudi domestic demand. Malik said that the reform might add only a few tenths of a percentage point to economic growth in the next few years.

But she added that the ultimate impact could be larger, because it would remove an impediment for women to work, making the economy more productive.

Reforms launched by Crown Prince Mohammed bin Salman last year aim to increase women’s participation in the workforce to 30 per cent by 2030 from 22 per cent. Letting women drive could eventually raise pressure to remove other obstacles to their employment, such as a male guardianship system. Khalid Alkhudair, chief executive of Glowork, an employment agency serving women, said there were about 400,000 to 450,000 job opportunities open for women in the retail industry, but many could not afford to hire drivers to take them to work.

“This law will assist in the mobility of hundreds of thousands of women. The main obstacle we face is transportation, so this is a fantastic move.”

One of the biggest benefits of the announcement may be to strengthen the confidence of foreign and local investors that Crown Prince Mohammed is willing and able to push through far-reaching reforms of the economy. —

Manal Al Sharif