The labor market in Saudi Arabia is being watched closely after reports of a policy change that could result in expat workers running out of time in the Kingdom.
News media al-Hayat reported that statements by the Minister of Labor Adil Fakieh indicated that the work permits for foreign workers will not be renewed once they have been in the nation for six years. This move is part of a job creation drive aimed at nationals.
Fakieh made no mention of the date of implementation for this policy. He also did not state if it will apply to all expat workers or only certain jobs in Saudi Arabia.
This policy will have a significant impact on the demographics of the Saudi Arabian workforce. There are around 8 million foreign workers in the Kingdom, with about 6 million working in private industry. Some analysts are seeing this move as an effort to bring down the Saudi unemployment rate, which stands at 10.5 percent based on government figures.
Even though discussions surrounding the labor market were happening before the springtime that saw the Arab region covered in unrest, the government of the Kingdom has been experiencing rising pressures to open up employment, relieving some of the tensions and heading off unrest with Saudi Arabia.
Official spokesman for the Labor Ministry, Hattab Al-Anazi spoke to Arab News and stated that the Minister of Labor’s statements were meant to indicate that these measures will apply to expats working for businesses in the yellow category.
Clarification of the yellow category is important as the Labor Ministry starts implementation of “Nitaqat,” a classification program that contains three colored categories – yellow, red and green. Businesses are classified based on the number of nationals in their employment. This system will assess the Saudization of private companies and will then separate those firms with high levels of Saudi employment and those who still have low levels.
Within this program businesses with a red classification (low Saudization record) will not be allowed to renew the work visas for expat workers. Green classified firms will be able to hire expats from the other two classifications, transferring those sponsorships without needing approval from the employer. Businesses classified as yellow are in between red and green and could see an impact from the program.
Many commenting about this issue are stating that the impact can only be predicted once the details are known. The Saudi government continues to hold back on details.
The Minister of Labor in the Kingdom is scheduled to make a presentation at the Eastern Province Chamber, hopefully explaining the program in further detail.
An anonymous Saudi analyst stated that the time frame will be a key point. Assuming that the law sees implementation in 2011, the impact is not likely to be seen for a period of six-years. Further, it is not clear what expats will be covered under the new law. At first assumptions were that all expats would be impacted, then some thought that drivers and maids may be excluded. Another point that this analyst brought up was the fact that many expat workers are laborers. the question of whether Saudi nationals would actually take on such jobs remains.
Ultimately, this initiative is aiming to reduce the unemployment rate and that will be the long term result. However in the mean time corporates may feel negative effects due to the fact that Saudi nationals are more expensive to hire than foreign workers.
Although this program could decrease the rate of unemployment and produce stronger consumer spending, it may also produce negative effects on corporates, reducing their bottom line and curbing growth within Saudi Arabia.Paul Holdsworth, Staff Writer, Gulf Jobs Market News