Makkah

THE Kingdom’s economic reform and transformation programs will definitely change society's spending. There is an increase in energy and fuel prices in addition to imposition of value added tax (VAT), hike in prices of soft drinks and tobacco and increase in some service fees.

The indirect impact of taxes on expatriates and their families, increase in shop and municipal fees and lifting of subsidy received by gas, fuel and electricity companies will also change the spending behavior of people as well as their use of energy and gas.

I have used the word dynamo in the headline of this article to denote those groups of society whose monthly income ranges between SR20,000 and SR50,000. These people will not benefit from subsidy because of increase in fuel and electricity prices and will be affected by rising fees and taxes.

The dynamo category includes doctors, university professors and corporate managers as well as husbands and wives earning a combined income of SR20,000 and more. They are not among the wealthy, who will not be affected by changes, and will not be considered among middle and low income groups, who receive some kind of government financial support.

Members of the dynamo group represent major customers of private schools, restaurants, cafes, travel and tourism, communication devices and computer systems. They are also important clients of different types of cars, dental clinics, cosmetic clubs and the like.

The dynamo group is the main driving force of the national economy as it spends heavily on various economic sectors in the country including housing, transportation, energy, education, communications, furniture and other necessities and accessories of life.

A Saudi executive or an employee who receives a salary of SR36,000 in the private sector is equal to 17 Saudi workers who get a salary of SR3,000 each. The family of a Saudi who is a member in the dynamo group will be able to make increased spending and accelerate economic growth.

The impact on the salaries of the dynamo group will affect various economic sectors as a result of cautious spending by the members. For example, some of them will stop sending their sons and daughters to private schools. This will cause a reverse migration to public schools and increase government spending on education and negatively affect private schools and investors in the sector.

Even if the state subsidizes housing programs for low-income groups, the dynamo category will have a negative impact on real estate and construction sectors as well as on tourism and Umrah. Revenues of hotels and resorts in Makkah, Jeddah, Taif, Abha and Baha will also decline considerably.

The dynamo category leaves its negative impact not only on the private sector but also on the public sector. There are 20,000 Saudi doctors in the government sector and about 40,000 faculty members in public universities. The category also includes every government employee or military officer having a monthly income of more than SR20,000 as well as owners of small successful institutions.

Any fall in spending by the dynamo group will have a negative impact on different businesses in the country. Cutting of spending means decrease in the purchasing power, which results in shrinking the number of stores, thus reducing job opportunities for Saudis.

Members of the dynamo category spend huge amount of money compared to the group of highly rich people because of the big difference between their numbers. They also spend a lot of money compared to low-income groups in purchasing goods and services.

Saudi Arabia has intensified its campaign to nationalize jobs. This is a significant move in the right direction. It has already Saudized mobile phone maintenance jobs. By the middle of next year, the government intends to Saudize car rentals and vendors within malls.

Efforts are also underway to raise the percentage of Saudi engineers at private companies and increase the number of Saudi workers in industries. These moves will certainly increase the number of Saudis in the private sector but the purchasing power of these workers will be weak due to low salaries.