Saudi mulls plan to curb $7.1bn in expat remittances

By Reuters
  • Thursday, 24 November 2011 8:13 AM
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Nearly a third of Saudi Arabia's population is comprised of expat workers

Nearly a third of Saudi Arabia's population is comprised of expat workers

Saudi Arabia's suggestion last month that it will try to limit how much money expatriate workers send home showed concern about the cost of having foreigners make up nearly a third of the population.

An estimated nine million foreign workers and their dependents remitted SR26.8bn ($7.1bn) out of the country in the second quarter of this year, central bank data shows. That amount was equivalent to 17 percent of Saudi Arabia's current account surplus at a time of historically high oil revenues.

With the stability of the global financial system threatened by the euro zone debt crisis, and Saudi Arabia keen to use more of its monetary resources domestically under a $130bn government spending plan announced this year, the outflow of funds may be starting to look uncomfortably large.

Saudi Arabia, which wants to develop its economy to reduce its reliance on oil revenue, also appears to be waking up to the opportunity cost of having so much economic output produced by foreigners, most of whose money is not spent or invested within the kingdom.

"The balance of payment considerations are obviously a risk, and they are a structural risk in that if oil prices come down, they would become a challenge," said Jarmo Kotilaine, chief economist of National Commercial Bank in Jeddah.

"But the Saudi economy has gone through a number of rough patches over the decades without compromising the basic stability of the monetary situation."

He added, "It's not an unmanageable problem, but the issue is the opportunity cost of the remittances. Many residents live here for the pure purpose of making as much money as they can and sending as much of it back home to their families as they can. That money isn't being used to stimulate domestic economic activity."

Expatriates account for nine out of 10 private-sector jobs in Saudi Arabia, the world's top oil exporter. They fill roles that range from domestic service and factory work to management positions in large finance companies.

The value of their remittances has almost doubled in the past five years from an officially recorded SR15.3bn in the second quarter of 2006. Three economists said the true figures for money outflows were probably much higher because they did not include informal transfers.

"In practice, when oil prices are high remittances go up, and when oil prices fall, remittances go down automatically because employment falls and new recruitment falls," said Khan Zahid, chief economist of Riyad Capital.

Labour Minister Adel al-Fakieh said in an Oct 22 television interview that the Labour Ministry was "preparing a monitoring programme aimed at reducing the huge quantity of transfers of foreign workers".

He did not elaborate, and economists said it would be difficult to develop practical measures to limit remittances, partly because money can be taken out of the kingdom in many different ways.

Most of the money is thought to be remitted by lower-paid workers, most from South and Southeast Asia, who frequently carry cash with them on trips home rather than making formal bank transfers.

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Please post responsibly. Commenter Rules

Posted by: Jamal Wednesday, 14 December 2011 8:19 AM[UAE] - UK

Here is a simple example. I was 2 when my parents moved to KSA and my dad has been there for over 30 years now. Everyone knows most of the expats do business but not under their own name. So my dad also have a business but under a sponsors name and he wish to invest and settle down in KSA but unfortunately he cannot, the government don't want to give any chance to him to invest in the country so he don't. My dad sent me to UK in 1998 and now I am a British Citizen in just 10 years, look at the difference. Now I run a company in London employee over 10 people and pay taxes and bought few houses too. The point is I wanted to do this in KSA but I couldn't because they didn't give me any rights. I know 100 or 1000 of people who wish to do the same in KSA but they will never let them and they will never progress.

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Posted by: Doctor Saturday, 10 December 2011 2:56 PM[UAE] - UAE

The Gulf cannot afford a transfer open door policy anymore. Some restrictions would need to apply that should not inconvenience the expats and should also take care of the Gulf economies, some regulations must be implemented to prevent hemorrhaging profusely.

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Posted by: Muhammed Rashidh Wednesday, 30 November 2011 6:11 PM[UAE] - U.A.E

Well they say that these employs work just to send money back home to their what else do they expect.
when they make it ever hard for these lower level employees to attain family visas or in the other there are not any kind of investment that these employees can do legally. which will motivate them to retain the money in the saudi economy.

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Posted by: Asif Khan Sunday, 27 November 2011 7:11 PM[UAE] - British

It is very sad that expats have been squeezed due to some of the very limited people benefits, I agree with Mr. Taha Ahmed in addition to this rather then to place boundaries on expats it would be better to develop more opportunities for Saudis and expats by developing more educational institutes to bring the saudi people in the market and work hard on the industries to develop more job opportunities for locals.
Make some relief for expats in family visa restrictions and local resources like allow to buy properties and business freedom. You will see the expat will never send his money outside. We have to see the win win situation which can be beneficial for both parties. Provide nationalities for those who are born in KSA give them a rights, then you will see the growth of KSA. There is huge potential in KSA it is the matter of people how they are going to handle it.

Posted by: Asmar Wednesday, 30 November 2011 6:12 PM[UAE] - Saudi Arabia

Why Asif Khan? Dont you have a country of your own instead of asking to be the citizen of a foreign country, you should know by now that the Gulf is not the place for immigration even if you were born here. I suggest Canada or Australia.

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Posted by: mubeen Sunday, 27 November 2011 9:01 AM[UAE] - india

Why they forget that Expats are sending EARNED money & not a STOLEN money...

Posted by: Bugle Monday, 28 November 2011 9:18 AM[UAE] - UK

@saif what a statement to make!! Do you actually know how the global economy works?? So you think people should leave their homes and families come to your country and work to earn money give it back to you and let their childern and family starve and go back empty handed? I believe in the not too distant past people from the gulf used to travel to india, East Africa, Syria ect to trade and work aswell. Dont't forget your past.

Posted by: earner Sunday, 27 November 2011 5:43 PM[UAE] - UAE,India

@ saif This was already expressed by someoene earlier.
The money that you say belongs to Gulf actually comes from the coffres of the countries that buy oil. Or do you think that the gulf states dig up money besides Oil?
So going by your logic, why should the money that flows into Gulf from other countries not find its way back to these countries?

Posted by: Saif Sunday, 27 November 2011 4:31 PM[UAE] - UAE

You earned it from where Mubeen? From the Gulf of course, therefore it must remain HERE in the Gulf where it belongs not in foreign coffers.

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