Saudi: Could reduced 2019 fees stop the expat mass exodus?
Following significant fees on expats meant to boost national employment rates and non-oil income, Saudi is now reviewing its fee policy, a report by Bloomberg revealed on Sunday.
Can expats expect to catch a break soon?
A possibility of lessened fees?
Speaking to four people familiar with the matter, Bloomberg discovered some insightful details.
“Saudi Arabia is reviewing its policy of imposing fees on expatriate workers after rising costs inflicted economic pain and contributed to an exodus of foreigners,” Bloomberg said following a conversation with the four officials.
“While it’s unlikely the fees will be cancelled altogether, a ministerial committee is looking at modifying or restructuring them, one of the people said,” the outlet continued. “A decision is expected within weeks, two of the people said.”
They all spoke on condition of anonymity because the information isn’t public yet, Bloomberg explained.
According to the report, the aim of the review is to reconcile the government’s fiscal needs with the ability of the private sector to hire and grow, one of the people said.
“After the kingdom’s economy contracted 0.9% last year, officials are keen to stimulate the private sector, which has had difficulty adapting to some of the crown prince’s rapid policy changes,” the outlet explained.
2017 was tough for expats
Saudi Arabia has highlighted the importance of its nationals (under ‘Saudization’) to its Vision 2030 plan, in an effort to diversify its economy away from oil revenue. This led to the creation of expat fees.
Another reason was to boost the government’s budget. With Brent crude currently floating at $61 per barrel, Saudi and OPEC have had to propose cuts in 2019 to elevate oil prices to a satisfactory level.
According to an IMF official, Saudi Arabia would need oil prices to average $85-$87 a barrel this year to balance its state budget, Reuters reported.
So, what followed was a slew of fees in July 2017 that have led to hundreds of thousands of expats leaving the country. Among those were monthly fees placed on expats per unemployed dependent, priced at $27 (SAR 100), set to increase a further $27 per year.
Businesses were also impacted, now required to pay charges to the government for hiring foreigners over locals.
“As of January 2018, businesses that do not have a majority of nationals in their workforce are required to pay $160 (SAR 600) per month per expat worker (or $133/SAR500 where the numbers are equal), rising to $213/SAR 800 (or $186/SAR700) in 2020,” Roman Weidlich, director at Willis Towers Watson’s Rewards Line of Business (CEEMEA), said.
Earlier this year, official sources revealed that the monthly fee on businesses could increase to SAR500-600 ($133-160) per worker in 2019 and then SAR700-800 ($187-$213) per worker in 2020.
The government was expecting to raise $6.3bn from the new foreign worker fee in 2018, $11.73bn in 2019, and $17.33bn in 2020, Okaz reported in December 2017.