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Saudi Arabia's Attempt to Decrease Foreign Labor is Already Failing

Saudi Arabia's Attempt to Decrease Foreign Labor is Already Failing

Since Saudi Arabia is suffering from a budget deficit of 297 billion riyals ($79 billion) and is in massive national debt, the country has been forced to take dramatic measures in attempt to survive.

The government has cut the wages of officials and slashed energy subsidies, but this is just the beginning. 

There is another problem that plagues the country. It is dependent on foreign labor. 

Out of the 31.7 million people in the country, 11.7 million are foreigners which is 37% of the total population, according to the Saudi General Authority for Statistics. It is because the country has a large number of foreign workers from America, Britain, Filipino and Sri Lanki. 

So Saudi Arabia’s Deputy Crown Prince Muhammad Bin Salman, introduced a permanent residency program for expatriate workers. 

“In the era of low oil prices, the benefit to the kingdom would be increased revenue from fees charged to process applications, penalties levied against companies which exceed foreign worker quotas, and monies from permanent foreign residents (potentially numbering in the millions) eligible to pay taxes,” writes American Thinker.

In an attempt to limit the dependence on foreign workers and avoid the higher taxes and penalties on expatriate workers, industries like the mobile have been trying to replace workers with Saudis quickly.

“It was impossible to replace expats with Saudis all of a sudden.  We should have allowed Saudis to work with expats for some time to get the necessary experience and overcome difficulties. The program was a failure in terms of training as well as financial and salary support,” said Economist Mansour Al-Ghamdi.

Recently rumors emerged that the Saudi Arabia’s ministry of labor planned to abolish the sponsorship program for foreign workers, where they can have an in-country sponsor look after their employment visa and legal status, in an effort of further Saudization of the country.

However, the ministry tweeted that “no decision had been taken to this effect.” Neighboring countries Qatar and Bahrain both have plans to abolish the sponsorship system.

Although Saudi Arabia has yet to halt the sponsorship program, the country plans to introduce more taxes on expat workers and the companies that employ them.

“From 2017, it will introduce a levy on expat workers and their dependents. The tax will start at 100 riyals per month and rise to as much as 800 riyals ($213) per month in 2020,” writes CNN Money. 

Author’s note: So far, forced Saudization has not been successful. It looks like the country is digging itself into a deeper hole by forcing companies to employ more citizens who may or may not be qualified over foreigners. Not to mention, at the rate Saudi Arabia’s going, they won’t even be able to afford their servant class. The country is trying to profit over the fact that it is so dependent on foreign labor, but this will only backfire.

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