I HAVE received many requests from my expat friends to highlight the issue of the fees to be imposed on expats from the first half of this year. Many are worried how the imposition of the fees would impact them and their stay in the Kingdom. Some argued that it would be difficult to pay the hefty fees with the poor salaries they receive. Others questioned whether their companies would bear the cost or share some of it. The vast majority, however, told me that they are facing uncertain times and are considering leaving the Kingdom as an option when they feel they cannot bear these new fees. Others said that as it would be costly to keep their family with them, they would have to send them back home while living as forced bachelors.
According to news reports published recently, expatriates would have to pay SR100 from next July per dependent per month. In January 2018, companies in which expats outnumber Saudis will have to pay SR400 every month for each expat worker. The companies will have to pay SR300 for each expat worker when the numbers of expats employed by them are equal to the number of nationals in the firm.
The fees will then exponentially increase annually with the monthly fees on expats for each of their dependents rising to SR200. The fees on expats outnumbering the Saudis will be increased to SR600 per month from January 2019 while firms with equal number of expats and nationals will need to pay SR500. The fees on dependents will be hiked to SR300 per dependent per month the next year. At the start of 2020, the fees for expatriates outnumbering Saudis will be increased to SR800 monthly and to SR700 for expatriates who are in equal number to Saudi workers in a company. The monthly fees on the dependents will be raised to SR400 per head from mid 2020.
I am not going to discuss these fees, as it is a decision taken by the country and it should be respected. It is within the government’s right to do what it deems fit and to come up with any law that will fall in the interest of its economy and people.
But the plethora of queries from my expat friends got me thinking. With the imposition of these fees, we have been told, that a windfall awaits from the projected revenues from these fees. In theory the projection makes sound economics, but in reality, following the levying of the fees, will the number of the expatriates remain the same? I would like to ask here is how many of these expat workers will leave the Kingdom? My prediction, which could be right or wrong, is that not many of them will stay or in the worst-case scenario, will send their families back home and soldier on.
In such an event how will the Saudi businesses or industry cope? Will there be a knock-on effect of the reduction of commercial activity on the economy? Will not the consumer feel the pinch of the possible hike in the prices of goods and services? We also need to stress one thing here that the amount of money that was spent on the family when the expats were in the Kingdom would end up being transferred back home, and therefore we will lose a major block of spending power.
If we assume that companies will bear the expenses of the fees, or at least half of it, then the prices of services or products will increase with the consumer ending up paying the difference, for such is the result in countries that resort to heavy taxation. We have seen it when prices of gasoline increased, prices of products and services increased and the hike was passed on to us. If the expat ends up paying the entire amount of the fees on his family, then leaving might be a better choice for him. Let us stop here and think for a moment and try to answer this question candidly. Are we ready to fill the vacuum that would be suddenly caused by the expatriates leaving?
What will happen when many of the skilled workers close down shop and leave? Do we have Saudis ready to replace them? If I needed a plumber, would I find one? If I need an electrician, are there Saudis ready? I am not trying to put anyone down here or accuse my fellow countrymen, I am just being realistic and asking a question that needs to be answered. Do we have enough people to cover the gap in these professions at least? And even if we have, they are sure to charge more as prices always increase when there is scarcity of skilled workers.
Small and medium companies in Saudi Arabia rely the most on expat workers. With these fees, it is expected that many of them will lay off most of their expat employees. One entrepreneur friend of mine said he’s planning to reduce the number of his employees gradually because of these fees and the economic crunch. Such moves are definitely going to hurt the economy. Most of these companies will not feel happy when they see a percentage of their profit cut. For it is the bottom-line that they see foremost, and to secure it they will add on the extras to the end consumers. At the end of the day it would be the citizen who will indirectly be impacted.
Already signs of the expected effect are slowly being seen. The ‘for rent’ signs are coming up in many buildings with some expatriates taking preemptive action by sending their families back home. A huge chunk of money will disappear if many decide to leave the country. We have to understand that these expats are paying Iqama fees to the government, paying phone bills to Saudi companies, paying house rent to a Saudi landlord, buying food from groceries from shops owned by Saudis, depositing their money in Saudi banks. They are getting treatment from Saudi hospitals and teaching their children in private schools owned by Saudis. They are a whole economy that needs to be considered.
The writer can be reached at email@example.com