Labour costs soar in Saudi Arabia after migrant exodus

November 9, 2013

Labour_costs

Riyadh, Nov 9: Saudis have begun complaining of surging labour costs following the exodus of a million foreign workers, although economists insist there will be long-term planning benefits from fully regulating the market.

Professionals in the kingdom, both Saudi and expatriate, say the freelance tradesmen who used to queue for odd jobs in public squares have virtually disappeared since police patrols began the strict enforcement of tough labour laws this week, rounding up thousands of illegals for deportation.

They have been forced to turn instead to authorised service companies, which charge double the rate or more to hire out electricians or plumbers.

“I had great difficulty finding a carpenter even at a higher price,” complained primary school teacher Majed Hasan.

“I have been told that freelance carpenters have disappeared. I went to a services company and was told that they can provide me with a carpenter for 150 riyals ($40) — double what I used to pay.”

From Monday, the authorities began rounding up thousands of illegal foreign workers following the expiry of a final amnesty for them to regularise their work status in the kingdom.

Those considered illegal range from overstaying visitors and pilgrims who seek jobs, to shop assistants and day labourers working for someone other than their official sponsor, a requirement in Saudi Arabia as in most other Gulf states.

Nearly a million migrants — Bangladeshis, Filipinos, Indians, Nepalis, Pakistanis and Yemenis among them — took advantage of the amnesty to leave the country.

Another roughly four million regularised their situation by finding employers to sponsor them but in so doing virtually emptied the market of cheap freelance labour.

“I usually find a plumber quickly. This time, I’ve roamed three areas and I couldn’t find a single one,” complained Mahmud Badr, an Egyptian doctor who lives in the kingdom’s commercial capital Jeddah. He said he was shocked by “how service workers vanished, after they were so easy to find” queueing in public squares for the chance to earn a few dollars.

Companies employing low-paid foreigners have to pay for a permit to recruit their staff, in addition to recurring fees for annual residency permits, making their charges far higher than those of freelance illegals.

“It has been so difficult to find a worker since the crackdown began,” complained Saudi Abu Maher, as he haggled with an electrician about the price to fix his satellite television receiver.

“If you find one, it is tough to agree a deal because he asks for a high price... The cost of labour has doubled over the past two days.”

But Saudi economists insist that the short-term hit to the pockets of professionals will be outweighed by the longer-term benefits in terms of more efficient planning of the Arab world’s largest economy.

“This will have a negative impact in the short term, but it will positively affect the economy in the medium and long term,” said Fawaz Al Alami, a onetime head of the Saudi team that negotiated the kingdom’s accession to the World Trade Organisation in 2005.

“Most of the departing workforce represent an oversupply in the market,” he said.

“Had the market needed these workers, their status would have been regularised.”

Economist Ihsan Bu Hulaiga said the existence of the large pool of illegal workers had long been an obstacle to efficient planning.

“The flushing out of illegals will ... help in controlling the grey economy,” Bu Hulaiga told Saudi daily Arab News.

“Once illegal expats are sent back home, we can enumerate the total strength of the legal workforce in the kingdom, what they do and which cities they are based in. This will be relevant to analyse and formulate business policies for the future.”

Expatriates account for a full nine million of the oil-rich kingdom’s 27-million-population.

The lure of work, even in low-paid jobs as domestics or construction workers, has made it a magnet for migrants from Asia as well as poorer countries in the Arab world.

But despite it huge oil wealth, Saudi Arabia has an unemployment rate of more than 12.5 per cent among its citizen population, a figure the government has long sought to cut.

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News Network
March 11,2020

Mar 11: Energy giant Saudi Aramco on Wednesday said it plans to raise its crude production capacity by one million barrels per day to 13 million bpd as a price war with Russia intensifies.

"Saudi Aramco announces that it received a directive from the ministry of energy to increase its maximum sustainable capacity from 12 million bpd to 13 million bpd," the company said in a statement to the Saudi Stock Exchange.

The decision comes a day after the world's top exporter, Saudi Arabia, decided to hike production by at least 2.5 million bpd to a record 12.3 million from April.

The Saudi moves come after the collapse of an oil production reduction agreement between OPEC and non-OPEC producers, including Russia.

The deal proposed by Saudi Arabia called for additional output cuts of 1.5 million bpd to cope with the severe economic impact of the coronavirus which has sharply reduced world demand for crude.

Boosting production capacity normally takes a long time and requires billions of dollars of investment.

Several years ago, the kingdom had shelved plans to boost its crude production capacity beyond 12 million bpd after demand for OPEC oil declined in the face of stiff competition from North American shale oil and other sources.

Russia on Tuesday said it was open to renewing cooperation with the OPEC cartel even as its kingpin Saudi Arabia escalated a price war with Moscow by announcing it would flood markets with new supplies.

The oil price war broke out after OPEC and a group of non-member countries dominated by Russia -- the world's second largest producer -- on Friday failed to agree on production cuts.

Saudi Arabia responded by announcing unilateral price cuts. This prompted the oil price to plummet and fuelled huge falls on stock markets around the world on Monday.

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News Network
May 5,2020

Dubai, May 5: A Saudi ministerial decision issued on Monday allows companies in the private sector to reduce salaries by 40 per cent and allows termination of contracts owing to the economic hardships resulting from the COVID-19 pandemic, according to daily newspaper Al Sharq Awsat.

The new decision was still not published by the cabinet according to the newspaper.

The decision which the newspaper saw a copy of was signed by Saudi Ministry of Human Resources and Social Development to regulate the labour contract in the current period, allows employers to reduce the employees salaries by 40 percent of the actual effective wage for a period of 6 months, in proportion to the hours of work and allowing the termination of employee contract after 6 months of the COVID-19 circumstances.

The new decision has also included a provision in which the employer would be allowed to cut wages even he or she benefits from the subsidy provided by the goverment, such as those for helping pay workers wages or exemption from government fees.

The decision also stressed that employers are not allowed to terminate any employee, unless three conditions are met.

1.            First the passing of six months since the measures of salary cut has been taken

2.            Reducing pay, annual leave and exceptional leave were all used

3.            Company proves that its facing financial troubles due to the circumstances.

The memo, which goes into affect as soon as its published in the government’s official newspaper, ensures that the employee will receive his/her salary if on annual leave within the period of 6 months.

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News Network
April 26,2020

Dubai, Apr 26: Saudi Arabia reported 1223 new cases of coronavirus, bringing the total number of infections in the country to 17522, the Ministry of Health announced on Sunday (April 26).

Meanwhile, the ministry reported 142 recoveries today, with total recoveries in the kingdom at 2357. There are 115 cases in intensive care.

The ministry also confirmed 3 deaths, bringing the total number of deaths in the kingdom to 139.

Saudi King Salman Bin Abdul Aziz has ordered the partial lifting of a curfew imposed due to the new coronavirus across the country while keeping a 24-hour lockdown in the holy city of Mecca, the Saudi news agency SPA reported Sunday. The partial lifting of the restriction started Sunday from 9am until 5pm and will continue until May 14, the agency added.

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