Saudi Arabia's labor market is in sharp focus today following a report of a new policy that could serve as an expat time-bar in the kingdom.
According to Pan-Arab newspaper al-Hayat, Saudi's Labor Minister Adil Fakieh said that the kingdom will not renew the work permits of foreign workers who have spent six years in the country as part of its plan to create jobs for nationals.
Fakieh did not say when the decision would be implemented or whether it would be applied to all foreign workers or to specific jobs.
Such a policy could significantly alter the labor demographics of Saudi Arabia, a country that employs some 8 million foreign workers, 6 million of those in the private sector. Some analysts are interpreting the move as an attempt to push down the Kingdom's unemployment rate, listed at 10.5 percent, according to state figures.
While discussions on labor market reform pre-date the Arab Spring that swept the region earlier this year, the Saudi government has been under increased pressure to create employment to relieve social tensions and head off civil unrest in the Kingdom.
Hattab Al-Anazi, an official spokesman of for the Ministry of Labor, told Arab News “what Labor Minister Mr. Adel Fakieh meant by his statement was that the measure would be applied on those foreigners who work for companies in the yellow category.”
The yellow category clarification is significant as the Ministry begins to implement the “Nitaqat” program, which will classify private companies into three categories - green, yellow and red - depending on the number of Saudis they employ (‘Saudization’). The system will assess the employment of Saudis in private firms and differentiate between companies that have achieved high Saudization rates and those who have been slow to employ Saudis.
Under the program, companies in the red category with a poor Saudization record will be prevented from renewing the work visas of their expatriate workers. Companies in the green category are allowed to select foreign workers from the other two categories and transfer their sponsorship without the approval of their employers. Companies in the yellow category fall somewhere in between and might see an impact.
Most analysts commenting on this issue have said that how this law will impact Saudi Arabia will depend on the details. Those details are still scarce.
The Saudi Labor Minister is expected to make a presentation later today at the Eastern Province Chamber and it’s hoped that he will explain the program more.
One Saudi analyst, who asked to remain anonymous said, “Time frame is important. If we assume that this new law will be implemented this year then we won’t see an impact for another six years. Also, there has been some question on which expats this law will include. At first it was believed it would impact all of them, then it was thought that workers like maids and drivers would be excluded. Another issue to consider is the fact that most of foreign workers are laborers, so would Saudi nationals actually accept such jobs?
“The ultimate objective of this initiative is reducing the unemployment rate, and it is likely to pay off in the long run. However, the impact on corporates would be negative in the short term because hiring Saudis instead of foreign labor will be more expensive.”
While these rules might reduce unemployment and strengthen consumer spending, the tradeoff would be that Saudi could see a negative impact on corporate bottom lines, which could ultimately curb growth in the Kingdom.