Saudi slice of Asia at risk as king aims jobs at locals

from The Daily Star (Lebanon)..

By Glen Carey | Bloomberg

July 3, 2013

In the Battah district in the heart of Riyadh, immigrants have recreated a slice of home, buying and selling clothes, food and movies from a dozen mostly Asian countries. It’s a way of life that may be under threat. King Abdullah’s drive to replace foreign workers with Saudis has begun to transform the Arab world’s biggest economy. Since its oil industry took off in the 1970s, Saudi Arabia has relied on migrants for tasks from building pipelines to fixing cars and packing grocery bags. They make up more than half the 11.3 million workforce, and now many are being urged to leave.

“I can’t give you a percentage but I can tell you that business is down,” said Mohammad Fahem, manager of the New Sri Lankan Restaurant in Battah, as he stood behind the cash box watching a depleted clientele enjoy chili crab and dhal. “Many people have left the country.’

The king made reducing unemployment in the world’s top oil exporter a priority after the popular unrest that began in 2011 toppled or threatened leaders across the Middle East. He unveiled a $130 billion social-spending plan, and this year the government is taking steps to ensure the jobs it creates go to Saudis. It has tightened labor regulations on expatriates while offering an amnesty that allows the millions working here illegally to formalize their status or go home.

“The government is serious about getting Saudis into the workplace,” John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment company, said in a phone interview. “There are real structural changes happening in the labor market.”

Foreigners often entered the kingdom under the sponsorship of one person or company then changed jobs without official approval. Many were stranded in the country, unable to leave without the consent of their original employer, who often retained their passports. Foreign workers without legal visas may represent 30 percent of the total, Cairo-based investment bank EFG Hermes Holding SAE said in May.

The jobless rate for Saudi workers is about 12 percent, according to official figures.

The government said in March it would penalize Saudis who allowed employees to work for someone else. Weeks later, Abdullah ordered a three-month grace period so migrants could correct their status or leave the country without any restrictions. About 1.6 million people applied under the plan as the July 3 deadline approached, according to the Saudi Press Agency.

The clampdown could hurt countries from Egypt to the Philippines that rely on Saudi Arabia’s economy to prop up their own with money sent from abroad. Neighboring Yemen, whose economy is significantly bolstered by remittances, has already warned the measures could destabilize its fragile government.

Saudi Arabia is the third-biggest global provider of worker remittances after the U.S. and Switzerland, sending $28.5 billion in 2011, according to World Bank data.

Egypt, the Arab world’s most populous country, received $14.3 billion in remittances in 2011, representing 6 percent of its gross domestic product, according to the World Bank. For the Philippines, it’s 10 percent. In Yemen, pushed to the brink of a civil war in 2011, remittances account for 4 percent.

In Battah, Filipinos sell fish in narrow backstreets next to Yemeni-run fruit stalls, while Indians and Bangladeshis sell garments and buy the latest subcontinental movies.

On Olaya Street, in another part of the capital, many of the Asian men who once hawked pirated computer software are gone. Jashim Uddin, a 31 year-old Bangladeshi, is still there, working in a shop selling computer parts. He says he still hasn’t resolved his working status

“Twenty or 30 guys have already left,” he said. “They didn’t have their work permits. I expect more will go.”

Meanwhile, young Saudis – women as well as men – are increasingly visible in jobs that used to be the preserve of migrants. At the Lulu supermarket chain in Riyadh, Saudi men bag groceries and scan items. Women work at checkout counters in family-only sections at branches of Carrefour SA, the French retail chain.

With the cost of living rising, many families need to have more than one person earning a salary, Sfakianakis said. Women “need to contribute to a family’s income far more today than a decade ago,” he said. Also, under the government’s jobs-for-locals drive, “retail chains are being compelled to hire more Saudis with higher salaries than before.”

The kingdom’s $657 billion economy grew 6.8 percent in 2012 and will expand 4.4 percent this year, according to the International Monetary Fund forecast. Inflation is forecast to average 4.2 percent this year in a Bloomberg survey.

It’s important for Saudi Arabia’s public finances that as the local workforce expands, private companies take a growing share of it, said Fahad al-Turki, head of research at Jadwa Investment Co. This year’s budget provides for a record $219 billion in spending, including on new state jobs.

“The government can afford the wage bill in the short to medium term,” the researcher said in a phone interview. “But in the long term it will be difficult.”

Preparing Saudis for private-sector jobs is one of the tasks of the Technical and Vocational Training Corp., which teaches 110,000 Saudis a year.

It has “gotten a lot of requests from different companies,” spokesman Fahad Alotaibi said in a phone interview. “There is a need in the market for our graduates.”

This month, Al-Hidada, a construction company, hired 500 graduates from the program, and the local BMW distributor, Mohammad Yousuf Naghi Motors, took 200 for its car workshops, Alotaibi said.

As more of these jobs go to Saudis, crowds are gathering outside embassies and consulates as foreign nationals line up for the paperwork required to leave the country.

The wait erupted into a riot at the Indonesian Consulate in Jeddah on June 9, leaving one woman dead.

The Indian Embassy in Riyadh has “urged our community to avail the concessions announced by the Saudi authorities” and is working on a “24/7 basis” to process them, spokesman Surinder Bhagat said in an emailed response to questions.

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