KSA – a possible stimulus that might help economic growth in the region ? The KSA private sector has been reliant on expatriate workers for many years. Up until 2018 they accounted for 80% of the workforce. The government is pushing for Saudization to decrease the high level of unemployment among locals. However, they reported that in 2017, 1.2m expatriates left the KSA workforce and is continuing to decline. A major concern has been that the number of nationals in the workforce has not increased but declined. With the oil sector contracting rather than growing, it has weakened its contribution to the economy. The government is trying to diversify its economy away from oil reliance. It needs to push ahead with its reforms and investments into alternative sectors to push employment for KSA nationals. A positive was their $7.4bn budget surplus in the first quarter of 2019.
The government has announced a $53bn stimulus for economic diversification which has been allocated for export promotion, SME’s and investment in technology as part of the Vison 2030 programme.
Expatriate fee a barrier to local businesses? When introduced in 2017 the fee was 100 SR ($27) a month for each worker. This was raised to 400 SR ($108) a month per worker in 2018. For 2019 the fee was raised to 600 SR ($162) per worker per month. For 2020 it was scheduled to be increased to 800 SR ($216) a month.
The government is expected to have raised $11.73bn from the expatriate fee in 2019 and with the scheduled increase, forecasts suggest that the government could have collected $17.33bn in 2020.
With the introduction of the expatriate fee many companies have struggled to employ nationals for low skilled work but equally have struggled to pay the fee for their expatriate workers. Seeing the challenge for many companies the Shoura council had called on the relevant authorities to consider keeping the 2020 fees at the same level as 2019. In September the government cancelled expatriate fees for all companies in the industrial sector for five years and cancelled the 2020 planned increases for all other sectors.
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