Saudi Arabia is reviewing its policy of imposing fees on expats after huge exodus of expats over the last year and a half, according to reports.
According to Bloomberg, the fees are unlikely to be cancelled altogether but a ministerial committee is looking to modify or restructure them. A decision is expected within weeks, which is designed to match the government’s fiscal needs with the abilities of the private sector.
The kingdom saw more than half a million foreign workers leave the workforce in the first half of the year following the introduction of new fees, taxes and restrictions on employment in some sectors.
Announced in 2016 as part of a drive to increase non-oil government revenue — a key goal of Crown Prince Mohammed bin Salman’s economic transformation plan — the fees have been unpopular with business owners in a country accustomed to cheaper foreign labor.
Partly as a result, hundreds of thousands of foreigners have left the kingdom, hitting the already-struggling economy but failing to make much of a dent in Saudi unemployment. The aim of the review is to reconcile the government’s fiscal needs with the ability of the private sector to hire and grow, one of the people said.
The Labor Ministry and the government’s Center for International Communication didn’t immediately respond to requests for comment.
After the kingdom’s economy contracted 0.9 percent last year, officials are keen to stimulate the private sector, which has had difficulty adapting to some of the crown prince’s rapid policy changes.
A Bloomberg survey of analysts showed gross domestic product is expected to expand 2.2 percent this year, still modest compared to growth rates before the oil-price rout of 2014 spurred Prince Mohammed’s overhaul plan, dubbed “Vision 2030.”
Two types of so-called expat fees are currently in force. The first, charged for each familial dependent of a foreign worker, was implemented in July 2017. It started at 100 riyals ($27) a month per dependent and is scheduled to increase by 100 riyals each year. The second kind of fee was introduced in January and is borne by businesses that employ foreigners, partly to encourage them to hire Saudis.
As the charges came into effect, many expats decided to send their families home or left altogether. That’s affected a wide range of the businesses that served them, from restaurants to telecommunication companies.
Meanwhile, despite the departures, Saudi unemployment has inched up to 12.9 percent, its highest level in more than a decade.
Source Credit: Business Week Middle East