Saudi Arabia Facing Uphill Battles

Saudi Crown Prince Mohammed bin Salman’s Vision 2030 scheme was to wean the world’s top crude exporter off oil, but the far-reaching initiative is facing two uphill battles: foreign direct investments and an employment crisis.

According to Business Insider, hit hard by the oil-price collapse, the oil kingdom is now experiencing a plunge in foreign investment, Ameinfo reported.

Nasdaq reported that FDI inflows shrank to $1.4 billion in 2017 from $7.5 billion in 2016, according to figures from the UN Conference on Trade and Development, and which fall in line with data published in recent weeks by the Saudi central bank.

Saudi reforms launched two years ago aim to boost FDI to $18.7 billion by 2020, in order to create and help diversify the economy beyond oil exports.

Also, hundreds of thousands of expatriates have been leaving Saudi Arabia as the economy stagnates and the authorities impose more fees on foreign workers, according to The Week, a UK based family of publications for global news.

According to April figures released by the Directorate General of Passports (Jawazat) in Riyadh, an average of more than 1,500 foreign workers have left the country daily since the Q4 2016.

“Dependents fees for lower-income expatriates, as well as greater efforts to nationalize the workforce, make it less economically opportune for foreign workers,” says John Sfakianakis, director of economic research at the Geneva-based Gulf Research Center, as reported by The Week.

Bloomberg reports that “the number of foreign workers, about one-third of the Saudi population, declined by 6% to 10.2 million in Q1 2018 compared with a year ago, taking the cumulative drop over the five past quarters to about 700,000”.

“Unemployment among Saudis has risen to 12.9%, amounting to 800,000 Saudis, which further emphasizes the struggle to create jobs as the economy recovers from the “worst economic slowdown since the financial crisis in 2009”, Bloomberg said.

Under the National Transformation Plan 2020, a stage-setter for Saudi 2030 vision, Saudi targets an unemployment rate cut to 9%, by generating some 450,000 new private sector openings.

Companies who fail to hire Saudis in what is called Nitaqat or Saudization, are subject to hiked up levies and restricting the sectors in which they can work.

Business Insider said many areas of the retail and service industries are now strictly confined to Saudis.

“The measures are said to be driving the expat exodus, evident in the marked downturn in the rental real estate market and empty shopping malls,” said BI.

“The majority of foreigners in the country are from the Middle East and Asia, many employed in low-paid jobs in the sectors now earmarked for Saudis.”