Saudi Arabia’s businesses, most notably contracting firms, have expressed their reservations about the Labor Ministry’s recent decision to levy a fee of SR 2,400 a year on private companies for every expatriate worker if they employ more foreigners than Saudis.
“The ministry’s decision has caught us off-guard,” said Abdullah Al-Mubti, president of the Council of Saudi Chambers. “We’ll prepare a study on this matter and present it to Labor Minister Adel Fakeih on Saturday,” he told Al-Eqtisadiah business daily.
Al-Mubti said a number of business sectors that employ a large number of expatriates had expressed their reservations about the ministry’s decision. “About 90 percent of workers in the contracting sector are foreigners,” Al-Mubti said, and urged the ministry to encourage Saudis to work with contracting companies.
“The minimum number of Saudi workers in a contracting firm has been fixed by the Cabinet at five percent, which has since been increased to seven percent by the ministry. But we don’t get adequate number of Saudis to work with us. If that is the case, how can they increase the percentage to 50 and impose a fee on us?” asked Raed Al-Oqaili, deputy chairman of the Contractors Committee at Jeddah Chamber of Commerce and Industry.
He said the ministry’s decision would have a negative impact on the national economy. “About 90 percent of some one million workers in the contracting sector are foreigners. Because most Saudis are not willing to do jobs offered by contracting companies as they have to work under difficult conditions.”
The contracting firms have already Saudized the jobs of drivers, maintenance workers and security personnel to 100 percent. “This decision is going to affect all contracting companies in the Kingdom as there is no company that has equal number of Saudis and foreign workers,” said Al-Oqaili.
“We are not against Saudization. The problem is we are not getting enough Saudis to work with us. The cost of employment will definitely affect the cost of a project as the contractor calculates the cost on the basis of his expenditures,” he said, and estimated the increase in project costs at 25 percent.
Al-Oqaili said the ministry has not yet responded favorably to the contractors’ demand to supply more Saudis to work for them.
Abdullah Ridwan, chairman of the contractors committee at JCCI, said the ministry’s decision would affect the work of contractors and delay projects. He wondered why the ministry adopted such a decision without looking into its consequences.
Meanwhile, a number of investors in the contracting and cleaning sectors in the Eastern Province, said the ministry’s decision would lead to the closure of many companies. They said losses incurred by these companies would run into SR 5 billion.
“Companies that employ more than 1,000 workers face closure or have to leave the market or change their activities,” said Nasser Al-Hajri, chairman of Nasser Al-Hajri Group and a member of Asharqia Chamber, while commenting on the decision.
A big contracting company in the province said it would suffer an annual loss of more than SR 60 million if the decision was executed.
Khaled Al-Abdul Kareem, CEO of Al-Abdul Kareem Holding Co., said the ministry took the decision without consulting companies working in the field or conducting necessary studies. He advised the ministry to postpone the decision to mid-2013 in order to enable affected companies to deal with the situation.
Hattab Al-Anazi, spokesman of the ministry, said there is no plan to postpone implementation of the decision that came into effect yesterday. He said the ministry would charge the fee from firms while issuing or renewing the work permit of their foreign workers. The number of workers will be calculated on the basis of data provided by the National Information Center.
“The aim of this decision is to increase the competitive advantage of local workers by reducing the gap between the cost of expatriate labor and local labor,” Al-Anazi said. At present Saudis constitute only 14 percent of total workers in the private sector.