Saudi Arabia considers plan to restrain expat remittances

Akbar Ponani | Nov 26, 2011, 07.05PM IST

JEDDAH (SAUDI ARABIA): Saudi Arabia is seriously thinking of imposing some kind of curbs on the huge amount flowing out through expatriate employees in the country. It may suggest a limit in foreign workers’ remittance out of the country in which they constitute nearly one third of population. Concern over expats’ remittance arose especially after the central bank data had disclosed that the amount transferred outside the country in the second quarter of the current year was $7.1bn which is equivalent to 17 percent of Saudi Arabia’s current account surplus at a time of historically high oil revenues.
Saudi Arabia is keen to use more of its monetary resources domestically under a $130bn government spending plan announced this year. It also wants to develop its economy reducing its reliance on oil revenue. As some observers have remarked – “the Saudi economy has gone through a number of rough patches over the decades without compromising the basic stability of the monetary situation.”Expatriates account for nine out of 10 private-sector jobs in Saudi Arabia, the world’s top oil exporter. They fill roles that range from domestic service and factory work to management positions in large finance companies. Almost all residents work here purely for purpose of making as much money as they can and sending as much of it back home to their families. This means their income isn’t being utilized in the strengthening of the economy of the country of their residence.

Most of the money is remitted by lower-paid workers, mostly from south and southeast Asia, who frequently carry cash with them on trips home rather than making formal bank transfers. Higher-paid workers tend to spend more of their income inside Saudi Arabia because they are more likely to bring their families with them, but they often have their salaries paid directly into foreign bank accounts.

Labour minister Adel al-Fakieh said in an Oct 22 television interview that the labour ministry was “preparing a monitoring programme aimed at reducing the huge quantity of transfers of foreign workers”. However, in the real world, it would be difficult to develop practical measures to limit remittances, partly because money can be taken out of the kingdom in many different ways.

At the same time, foreign workers are needed to keep the economy running. “Foreign workers are producing more than they consume, making a net contribution to the economy. The only way to avoid this is to have Saudi workers instead of foreigners”, said an economist in the capital city of Riyadh.

Economists also point to a perception among private companies that a substantial proportion of Saudis are unwilling to work hard, lack the skills to replace foreign workers and are protected by a legal framework that makes them hard to sack.

( Source:

http://timesofindia.indiatimes.com/nri/middle-east-news/Saudi-Arabia-considers-plan-to-restrain-expat-remittances/articleshow/10883262.cms)

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