After imposing a significant expat fees on immigrants, Saudi Arabia is reviewing its fee policy after a mass exodus of foreigners. Initially aimed at boosting national employment rates, the policy, Saudi officials believe resulted in higher costs of living and inflicted economic pain.
Contrary to the belief that the fees would be cancelled altogether, it is expected to be significantly mitigated. A ministerial committee is contemplating modification of the expat policy, and a decision is expected within a few weeks, as reported by Bloomberg.
Saudi Arabia is looking ahead at a future without dependence on oil. Hence, the government’s fiscal needs mandate the existence of a large workforce that would enable companies to hire and grow.
Saudi economy declined by 0.9% last year, which has forced policy makers to facilitate the stimulation of the private economy as Crown Prince Mohammad Bin Salman looks to modernize the economy.
Expat fees was introduced after it felt the need to empower its nationals under its vision 2030 plan, in an attempt to diverse the economy away from oil. ‘Saudization’ of the economy led to the creation of the policy.
The secondary reason for imposition of expat fees was to boost government budget. As oil prices are at a meagre $61 per barrel, Saudi and OPEC are contemplating production cuts in 2019 to elevate oil prices. Saudi Arabia would need oil prices to average $85-87 a barrel this year to balance its state budget, Reuters reported.
This was followed by the imposition of expat fees in July 2017 that led to hundreds of thousands of foreign workers leaving the country. The fee was imposed on an individual at a per unemployed dependent basis, priced at $27 (SAR 100), set to increase a further $27 per year.
Businesses that hired foreigners, were now required to pay charges to the government for hiring foreigners over locals. The government was expecting to raise $6.3bn from the new foreign worker fee in 2018, $11.73bn in 2019, and $17.33bn in 2020.
In a globalized world where integration of economies is essential to a nation’s success, a multicultural economy acts as a catalyst to long-term growth. Creating a sustained economy, free from dependence on oil would require a huge, skilled workforce that can effectively carry the kingdom’s economic burden. The Crown Prince’s ambitious nation building projects would require a robust economic infrastructure in place, aided by a multi-national workforce working towards the attainment of shared objectives of prosperity and growth.
