Saudi Arabia To Limit Expat Visas

With unemployment in Saudi Arabia at 10.5% and as high as 40% among young people, the government is planning on limiting Expat visas to 6 years as part of a scheme to get more companies hiring locals.

London, UK (Pryce Warner International) June 3rd, 2011 – The new Nitaqat system means companies operating out of Saudi Arabia will be classified as either red, yellow or green. The six-year rule will only apply to those companies that fall into the yellow and red category.

Companies will be respectively classified red, yellow or green depending on their compliance with a new rule that stipulates companies must hire a certain proportion of local workers.

Only companies with a green rating will be able to hire foreign workers while those who do not meet the criteria and therefore fall into the yellow category, will have their employees' contracts limited to six years. Companies with a red rating will not be able to hire foreign workers and present workers will not have their visas renewed.

The new law will apply from the 7th of September, giving companies roughly three months to ensure they are in compliance.

According to the government this is a measure to try and reduce unemployment, which is particularly effecting young people and women. At present approximately 8m of the total 27m population are Expats, 6m of whom are working in the private sector. This accounts for 90% of the sector’s workforce. With almost half a million unemployed and so many jobs taken up by foreign workers, many Saudi’s are praising the move as a means of supporting the local community and reducing the amount of money being remitted out of the country.

Some claim that the new law will lead to a period of adjustment and instability in the Saudi economy as companies re-adjust. There also exists the possibility that this will raise the cost of running businesses in Saudi Arabia and lead to higher inflation and a loss of international competitiveness. This is because businesses may have to offer higher salaries to attract locals to jobs that are typically filled by cheaper foreign workers. Other analysts claim that this will raise the cost of hiring foreign workers and therefore may particular hurt small, independent businesses.

David Harra, a Senior Market & Investment Analyst with Pryce Warner International, specialists in International Financial Services for Expats commented: “Considering the rate of local unemployment and the proportion of foreign workers in the private sectors, it is unsurprising that the Saudi government is pushing companies to hire locals in greater numbers. Considering the time until this law comes into force it seems likely that most large companies will not be affected as they have the resources to adjust their employment policies in the next few months. For this reason, many existing Expats perhaps do not need to fear for their job security or visa status. Expats form a vital part of the Saudi economy and hopefully this law will find a way to create jobs for locals without damaging the overall economy or risking the job security of foreign workers. However, there exists the possibility that some companies may restructure in order to comply with the law or that others are not able to adequately re-structure in time. For this reason it would be wise for individuals to ensure that all their financial and employment matters are highly secure by September seventh should the worst happen.”

Pryce Warner International Group provide International Asset & Investment Management, Independent Financial Advice & QROPS Overseas Pensions.

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By: Aneil Fatania
Financial Editor
Pryce Warner International Group
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