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Saudi employment quotas threaten 2 million jobs

Thursday, March 28, 2013

Saudi employment quotas threaten 2 million jobs

Millions of foreign nationals move to the Middle East to pursue new employment opportunities. The consistent strength of the regional economy and the resilience of its exports, most notably oil, have resulted in favorable recruitment prospects for many multinational organizations, some of which employ significant numbers of international workers. While expatriates are a significant driver of economic growth in the Middle East, many regional governments recently voted to introduce quotas designed to increase employment opportunities for native workers. According to Arabian Business, so-called "Saudization" targets in Saudi Arabia could place up to 2 million expatriate jobs at risk across the country.

A race against time
The news source reports that Saudi Arabia's Saudization initiative, known as Nitaqat, was introduced in 2011. Under the program, small- to mid-size businesses in Saudi Arabia are legally compelled to hire at least one Saudi national. Failure to comply with this stipulation can result in severe penalties for the company, and at present, more than 250,000 businesses are considered to be in the "red category," with mere days to go before the compliance deadline.

Organizations who fail to meet the Nitaqat policy guidelines by the cutoff date could be forced to rescind the work permits of foreign nationals, resulting in the potential loss of 2 million expatriate jobs in Saudi Arabia alone. Aside from placing the livelihoods of millions of expats at risk, the measure could have serious ramifications for the nation's economy.

"Whereas a quota system is hard to enforce where no one can comply due to skill shortages in the labor market, a system that creates a 'race' to Saudization will drive the changes that are needed in that labor market over the long run," read a report by Saudi law firm DLA Piper, as quoted by International Adviser. "A real economic incentive has been created to become a market leader in this area." 

Much progress has been made toward meeting the Nitaqat quotas. The news source reports that the number of companies in the red category has fallen from approximately 340,000 firms earlier this year. However, The situation remains serious for firms facing punitive measures, as not only will many expatriates lose their work permits, they will also be forcibly deported from Saudi Arabia. For individuals who purchased property after moving out of furnished extended stay apartments and temporary housing, this could threaten their professional and financial future.

A growing trend
Saudi Arabia is not the only Middle Eastern nation taking steps to limit the number of expatriates in its workforce. According to the Kuwait Times, the country's National Assembly recently voted to substantially downsize the number of foreign nationals working in the public sector. At present, almost 30 percent of Kuwaiti government positions are held by expatriates. Under new proposals, this figure would be reduced to 20 percent, resulting in the loss of thousands of expatriate jobs in Kuwait.

Following a recent report, the country's National Assembly voted to replace approximately 30,000 expatriates working in the public sector with Kuwaiti citizens. Currently, there are approximately 2.6 million expatriates living and working in Kuwait, compared to just 1.2 million nationals.

In addition, eight members of Kuwait's independent political party called for the abolishment of subsidies intended to reduce fuel and utility bills for expatriates. The proposals were not extended to Kuwaiti nationals. Should this resolution become law, expatriates living and working in Kuwait could see a "twentyfold" increase in their monthly electricity bills, according to the news source.

Whether these developments will transpire remains to be seen. However, there can be little doubt that numerous states across the Middle East are taking action to level the playing field for native citizens and reduce their dependency on expatriate professionals.