Changes may have dramatic impact on Saudi Arabia’s labor market and 10.5 million foreign workers
Saudi Arabia will remove several controversial restrictions on foreign workers as part of a labor policy overhaul that officials hope will attract foreign talent and reduce unemployment among citizens.
Non-Saudis will no longer need their employer’s permission to change jobs, travel abroad or leave the country permanently, according to Sattam Alharbi, deputy minister at the Ministry of Human Resources and Social Development.
“Runaway” reports that employers can file a complaint against foreign workers who stop reporting for work – effectively rendering them fugitives – will be abolished and replaced with a procedure to terminate their contract, Alharbi said in an interview on Wednesday.
The new rules will come into effect on March 14 and will apply to all foreign workers in the private sector, regardless of their salary, he said.
The changes could have a dramatic impact on Saudi Arabia’s labor market and the lives of the 10.5 million foreign workers who make up around a third of the kingdom’s population.
The current system of “kafala” or “sponsorship” – used for expatriates in Arab Gulf countries for decades – has been criticized by human rights groups as a form of indentured servitude. Economists say it also strengthens the practice of companies hiring cheaper and more easily exploitable foreign workers, even as unemployment in Arabia rises.
“These changes are not small changes – it’s huge,” Alharbi said, explaining that the government had been working on the overhaul for two years. “We aim to increase the inclusion of Saudis, attract talent, improve working conditions, make Saudi Arabia’s labor market more dynamic and productive.
Foreign workers who dominate the private sector are tied to a job sponsor they need permission to change jobs, leave the country on vacation or even replace a lost ID.
Most Saudi employees work for the government, which tends to pay more and offer greater benefits than private companies.
Foreign workers who dominate the private sector are tied to a job sponsor they need permission to change jobs, leave the country on vacation or even replace a lost ID.
Under the new rules, they will still be required to pay for an “exit and return visa” to travel abroad, but will be able to apply for it themselves through the government “Absher” system, without their employer’s consent. . They can also use Absher to request a sponsorship transfer to another employer.
By increasing labor mobility, the changes will force companies to raise wages and improve working conditions in order to retain and compete with staff, said Farouk Soussa, economist at Goldman Sachs Group Inc.
“While this will initially lead to higher costs for employers, the end result will be increased productivity and a greater willingness on the part of the Saudis to work in the private sector,” Soussa said.
The new policies will in turn make the Saudis more attractive to private employers who prefer to hire foreigners over whom they currently have greater control, Alharbi said.
This is particularly urgent after the economic crisis caused by the pandemic pushed citizen unemployment to 15.4% in the second quarter, the highest on record.
“Reducing labor market rigidities will likely prove useful as the economy recovers from the twin shock of low oil prices and Covid-19,” said Carla Slim, an economist at Standard Chartered Bank.
The impact of the new rules will depend on how they are implemented, however, and several neighboring countries have taken steps to reform the kafala without ending it entirely. The changes announced Wednesday will not apply to Saudi Arabia’s 3.7 million domestic workers, for example – a category of foreigners among the most vulnerable to abuse.
The separate regulations that govern domestic workers are also under review, Alharbi said.
The comprehensive overhaul could give Saudi Arabia a boost in public relations as it prepares to host the Group of 20 industrialized economies summit this month. It could also help Crown Prince Mohammed bin Salman’s efforts to make the kingdom more attractive to highly skilled foreigners who flock to places like Singapore and Dubai – as part of his ‘Vision 2030’ economic transformation agenda.
However, the vast majority of foreign residents have blue collar jobs: building houses, cleaning streets, pumping gasoline and waiting tables. Millions of people come from countries like Pakistan, India and Egypt to earn more than they can at home, making the kingdom the third largest source of remittances in the world.
Improving their conditions is a politically sensitive issue as nationalism and xenophobia increase, and some Saudis say expats are pushing them out of the workforce.
Human rights groups said the changes announced on Wednesday were important, while calling for further reforms.
Employers will still have power over workers because of their ability to issue and renew residence permits, according to Rothna Begum, senior researcher on women’s rights at Human Rights Watch.
“This is not a total abolition of the system,” she said.
(Except for the title, this story was not edited by GalacticGaming staff and is posted from a syndicated feed.)
