LAST Tuesday was a day to remember for many owners of small and medium establishments when they were suddenly hit with, what was described as, a shocking ‘collective bill’ issued by the Ministry of Labor and Social Development. Owners of these establishments described these bills as the last nail in the coffin of their business. The amount imposed is on the number of expat workers working in these establishments. Companies in which expats outnumber Saudis will have to pay SR400 every month for each expat worker, or pay SR300 for each expat worker when the numbers of expats employed by them equal the number of nationals in the firm.

The issue was a subject of a long debate on social media and between economic experts and opinion writers, as they thrashed out the issue threadbare. It was the business owners who sought quick action, for these business owners called on the ministry to waive these ‘collective bill’ fees, or at least allow for payment in installment, which the ministry later did, for they said that otherwise they would be left with no choice but to shut down their businesses and terminate the contracts of both expat workers and Saudis alike.

According to the news, the ‘collective bill’ is the amount difference of licenses issued before 01/01/2018 and its validity extension beyond 01/01/2018. The amount for expatriates who have departed on a final exit visa or transferred their services before Jan. 1, 2018 was not calculated. The Labor Ministry further explained that expat workers on establishments are being calculated from Jan. 1 of this year and the amount does not represent any retrospective calculation, but a precise calculation of the period during which the work permits became effective.

Either way, because of this collective bill, a good percentage of business owners have now begun to see expat workers as a burden. Middle income Saudis, who wanted to venture into the world of business and secure additional income in addition to their salaries in government or private sector, see no use in continuing their business. They hired expat workers in what they saw was a win-win situation, for they make money on the side through this business and the expat workers also earn money and support their families back home.

One small business owner that I spoke to was struck with an SR9,000 collective bill, and his reaction was that it was unfair especially in the current economic situation. He said he couldn’t afford paying it, not to mention that his business does not earn that much of net profit. Another small office business owner was handed a SR15,900 collective bill and the owner is seriously thinking of either closing one branch or shutting down the whole business. Another businessman who I spoke to said he had terminated 32 employees in the past few months but that did not stop him from receiving a whopping SR47,000 collective bill.

Presenting both the sides of this issue, I divulge what those who criticized this ‘collective bill’ said. They stressed that it did not study the conditions of the market and the needs of the small and medium business establishments before these fees were applied. The fees will, for sure, affect the operation of these establishments and force them to either shut down or relocate their business in neighboring countries. One owner, in the service industry, even suggested that with minimal employees he could keep his business afloat, outsource work to have a profitable business, instead of facing these issues.

An economic expert told an Arabic daily that solving the issue of expat workers in the current way is not effective and will damage the national economy. The issue can be solved gradually where the small and medium establishments can adapt to it by time. Shutting down small and medium establishment will increase the number of unemployed Saudis and it will not be a magic solution for expat labor to leave the market. In addition the money spent by expats and their families in the national economy would dry up, affecting many sectors.

Other economic experts on the other hand blamed the small and medium establishments for the large presence of expat workers in the market, which reached to more than 13 million. They blame this number for the rising percentage of unemployment, which reached 77 percent of unemployed university graduates. According to their views, that expat workers in the small and medium establishments are the reason behind the large number of remittance every year, which is damaging to the national economy. Those who support this move and other similar attempts cite the example of previous Saudization failures in the limousine, gold and fruit markets, saying that this move is surgical and it is in the right direction of market reform.

There are merits in the arguments of both, for I believe it is the government prerogative to look after the interests of its nationals, which is happening all over the world, with the countries, despite touting globalization, are putting the interests of their citizens first. There’s a need for market reform such that Saudis get assimilated into the workforce as a priority. And to achieve this without disruption, maybe there’s a middle ground that could be adopted.

The ministry is increasing, through taxes, the cost of expat workers in order to force these establishments to hire qualified Saudis. But again we need to ask the question whether there are Saudis willing to fill the jobs of low paid expats, such as in construction, plumbing, car mechanics and even barbershops? I am sure that very few will turn up for these jobs. Many would prefer office work to these jobs. Here too we should take a middle road. Instead why not use the skilled expat labor to pass on their skills in administration, commercial and production to Saudis before phasing the expats out in a set timeline that would enable all to prepare and plan, especially expats.

The ministry might have taken these steps in the hope that with the increasing cost of expat workers the owners will immediately hire Saudis, not knowing that owners have the option of shutting down the business as a whole, therefore losing an enterprise that was contributing to economy, even if it was little. But again, this shutting could well be an opportunity for others, who will jump in to fill the gap and work by themselves with limited employees. Whatever the direction this ‘collective bill’ will force the owners to take and the economy to flow the one thing it has done is that some owners are already seeing expat workers as a burden.

— The writer can be reached at mahmad@saudigazette.com.sa Twitter: @anajeddawi_eng