الرئيسية
By Angus McDowall, Reuters
DUBAI, Nov 23 (Reuters) - Saudi Arabia's suggestion last month
that it will try to limit how much money expatriate workers send home
showed concern about the cost of having foreigners make up nearly a
third of the population.
An estimated 9 million foreign workers
and their dependents remitted 26.8 billion riyals ($7.1 billion) out of
the country in the second quarter of this year, central bank data shows.
That amount was equivalent to 17 percent of Saudi Arabia's current
account surplus at a time of historically high oil revenues.
With
the stability of the global financial system threatened by the euro
zone debt crisis, and Saudi Arabia keen to use more of its monetary
resources domestically under a $130 billion government spending plan
announced this year, the outflow of funds may be starting to look
uncomfortably large.
Saudi Arabia, which wants to develop its
economy to reduce its reliance on oil revenue, also appears to be waking
up to the opportunity cost of having so much economic output produced
by foreigners, most of whose money is not spent or invested within the
kingdom.
"The balance of payment considerations are obviously a
risk, and they are a structural risk in that if oil prices come down,
they would become a challenge," said Jarmo Kotilaine, chief economist of
National Commercial Bank in Jeddah.
"But the Saudi economy has
gone through a number of rough patches over the decades without
compromising the basic stability of the monetary situation."
He
added, "It's not an unmanageable problem, but the issue is the
opportunity cost of the remittances. Many residents live here for the
pure purpose of making as much money as they can and sending as much of
it back home to their families as they can. That money isn't being used
to stimulate domestic economic activity."
PRIVATE SECTOR
Expatriates
account for nine out of 10 private-sector jobs in Saudi Arabia, the
world's top oil exporter. They fill roles that range from domestic
service and factory work to management positions in large finance
companies.
The value of their remittances has almost doubled in
the past five years from an officially recorded 15.3 billion riyals in
the second quarter of 2006. Three economists told Reuters that the true
figures for money outflows were probably much higher because they did
not include informal transfers.
"In practice, when oil prices are
high remittances go up, and when oil prices fall, remittances go down
automatically because employment falls and new recruitment falls," said
Khan Zahid, chief economist of Riyad Capital.
Labour Minister
Adel al-Fakieh said in an Oct. 22 television interview that the Labour
Ministry was "preparing a monitoring programme aimed at reducing the
huge quantity of transfers of foreign workers".
He did not
elaborate, and economists said it would be difficult to develop
practical measures to limit remittances, partly because money can be
taken out of the kingdom in many different ways.
Most of the
money is thought to be remitted by lower-paid workers, most from South
and Southeast Asia, who frequently carry cash with them on trips home
rather than making formal bank transfers.
Higher-paid workers
tend to spend more of their income inside Saudi Arabia because they are
more likely to bring their families with them, but they often have their
salaries paid directly into foreign bank accounts.
An even
bigger obstacle to controlling remittances is the fact that foreign
workers are needed to keep the economy running. Weaning businesses off
them is a difficult and long-term task.
"Theoretically there is
an opportunity cost because when expats do not consume here they are not
adding to domestic demand, which is a leakage from the economy," said
Zahid.
"But foreign workers are producing more than they consume,
making a net contribution to the economy. The only way to avoid this is
to have Saudi workers instead of foreigners."
UNEMPLOYMENT
Addressing
unemployment among Saudi nationals, which officially stands at 10
percent, is a key goal for King Abdullah in a country where the
population is growing more quickly than the government can provide
public sector jobs.
Around half of Saudis in full-time employment
work for the government, central bank data shows, and King Abdullah
announced the creation of tens of thousands of new Interior Ministry
jobs earlier this year.
On Oct. 21, Eqtisadiah newspaper reported
that the kingdom planned to cap the number of long-term foreign workers
at a fifth of its total population -- a measure which, if implemented,
could mean an exodus of several million people. The newspaper quoted an
unnamed Labour Ministry source and did not give a time frame or details
of how the goal might be reached.
Economic reforms over the past
decade have aimed at creating jobs by strengthening the private sector,
while the government has tried to force companies to employ Saudis in
these posts by using a quota system.
"Saudi Arabia went through
years of ambitious regulatory and institutional reforms which had
significant success in accelerating economic growth, yet somehow the job
opportunities for Saudis haven't materialised in the way they were
supposed to," Kotilaine said.
Earlier this year, the government
refined its "Saudisation" programme by rewarding companies that employ
more Saudis and making it more difficult for those that employ fewer
Saudis to gain visas for expatriate workers.
Efforts to move
local people into the workforce are contradicted, however, by a decision
to provide a more generous social safety net in the wake of this year's
Arab Spring social unrest elsewhere in the region. In March, King
Abdullah announced an unemployment benefit which will start to be paid
when the new Islamic year begins at the end of this week.
Economists
also point to a perception among private companies that a substantial
proportion of Saudis are unwilling to work hard, lack the skills to
replace foreign workers and are protected by a legal framework that
makes them hard to sack.
For these reasons, cutting the flow of
worker remittances out of the country substantially may be impossible
for at least several years.
"You can trim remittances and it
won't have too much impact on the economy," said Gamble. "But there are
costs to the private sector because they need to train nationals to make
them suitable for the positions they would want. It means the
transition may well cause some short-term disruption."
DUBAI, Nov 23 (Reuters) - Saudi Arabia's suggestion last month
that it will try to limit how much money expatriate workers send home
showed concern about the cost of having foreigners make up nearly a
third of the population.
An estimated 9 million foreign workers
and their dependents remitted 26.8 billion riyals ($7.1 billion) out of
the country in the second quarter of this year, central bank data shows.
That amount was equivalent to 17 percent of Saudi Arabia's current
account surplus at a time of historically high oil revenues.
With
the stability of the global financial system threatened by the euro
zone debt crisis, and Saudi Arabia keen to use more of its monetary
resources domestically under a $130 billion government spending plan
announced this year, the outflow of funds may be starting to look
uncomfortably large.
Saudi Arabia, which wants to develop its
economy to reduce its reliance on oil revenue, also appears to be waking
up to the opportunity cost of having so much economic output produced
by foreigners, most of whose money is not spent or invested within the
kingdom.
"The balance of payment considerations are obviously a
risk, and they are a structural risk in that if oil prices come down,
they would become a challenge," said Jarmo Kotilaine, chief economist of
National Commercial Bank in Jeddah.
"But the Saudi economy has
gone through a number of rough patches over the decades without
compromising the basic stability of the monetary situation."
He
added, "It's not an unmanageable problem, but the issue is the
opportunity cost of the remittances. Many residents live here for the
pure purpose of making as much money as they can and sending as much of
it back home to their families as they can. That money isn't being used
to stimulate domestic economic activity."
PRIVATE SECTOR
Expatriates
account for nine out of 10 private-sector jobs in Saudi Arabia, the
world's top oil exporter. They fill roles that range from domestic
service and factory work to management positions in large finance
companies.
The value of their remittances has almost doubled in
the past five years from an officially recorded 15.3 billion riyals in
the second quarter of 2006. Three economists told Reuters that the true
figures for money outflows were probably much higher because they did
not include informal transfers.
"In practice, when oil prices are
high remittances go up, and when oil prices fall, remittances go down
automatically because employment falls and new recruitment falls," said
Khan Zahid, chief economist of Riyad Capital.
Labour Minister
Adel al-Fakieh said in an Oct. 22 television interview that the Labour
Ministry was "preparing a monitoring programme aimed at reducing the
huge quantity of transfers of foreign workers".
He did not
elaborate, and economists said it would be difficult to develop
practical measures to limit remittances, partly because money can be
taken out of the kingdom in many different ways.
Most of the
money is thought to be remitted by lower-paid workers, most from South
and Southeast Asia, who frequently carry cash with them on trips home
rather than making formal bank transfers.
Higher-paid workers
tend to spend more of their income inside Saudi Arabia because they are
more likely to bring their families with them, but they often have their
salaries paid directly into foreign bank accounts.
An even
bigger obstacle to controlling remittances is the fact that foreign
workers are needed to keep the economy running. Weaning businesses off
them is a difficult and long-term task.
"Theoretically there is
an opportunity cost because when expats do not consume here they are not
adding to domestic demand, which is a leakage from the economy," said
Zahid.
"But foreign workers are producing more than they consume,
making a net contribution to the economy. The only way to avoid this is
to have Saudi workers instead of foreigners."
UNEMPLOYMENT
Addressing
unemployment among Saudi nationals, which officially stands at 10
percent, is a key goal for King Abdullah in a country where the
population is growing more quickly than the government can provide
public sector jobs.
Around half of Saudis in full-time employment
work for the government, central bank data shows, and King Abdullah
announced the creation of tens of thousands of new Interior Ministry
jobs earlier this year.
On Oct. 21, Eqtisadiah newspaper reported
that the kingdom planned to cap the number of long-term foreign workers
at a fifth of its total population -- a measure which, if implemented,
could mean an exodus of several million people. The newspaper quoted an
unnamed Labour Ministry source and did not give a time frame or details
of how the goal might be reached.
Economic reforms over the past
decade have aimed at creating jobs by strengthening the private sector,
while the government has tried to force companies to employ Saudis in
these posts by using a quota system.
"Saudi Arabia went through
years of ambitious regulatory and institutional reforms which had
significant success in accelerating economic growth, yet somehow the job
opportunities for Saudis haven't materialised in the way they were
supposed to," Kotilaine said.
Earlier this year, the government
refined its "Saudisation" programme by rewarding companies that employ
more Saudis and making it more difficult for those that employ fewer
Saudis to gain visas for expatriate workers.
Efforts to move
local people into the workforce are contradicted, however, by a decision
to provide a more generous social safety net in the wake of this year's
Arab Spring social unrest elsewhere in the region. In March, King
Abdullah announced an unemployment benefit which will start to be paid
when the new Islamic year begins at the end of this week.
Economists
also point to a perception among private companies that a substantial
proportion of Saudis are unwilling to work hard, lack the skills to
replace foreign workers and are protected by a legal framework that
makes them hard to sack.
For these reasons, cutting the flow of
worker remittances out of the country substantially may be impossible
for at least several years.
"You can trim remittances and it
won't have too much impact on the economy," said Gamble. "But there are
costs to the private sector because they need to train nationals to make
them suitable for the positions they would want. It means the
transition may well cause some short-term disruption."