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
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
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
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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