Good times over for expats in Saudi Arabia

Riyadh, Saudi Arabia | AFP | 

Seventeen years after first setting foot in Saudi Arabia, Dominic Steck shipped his two cats and returned to Germany with his wife and school-age children, who hardly know their homeland.

As Saudi Arabia steps up efforts to employ more of its own people, and with economic growth slowing, the ranks of well-paid white-collar expatriates like Steck are thinning.

For them, the good times are over.

Steck said that to reduce costs, his employers “sent the Westerners” away.

“I have to admit, they will save a lot,” he told AFP with a chuckle.

Cost-cutting, financial problems and a drive to employ more Saudis have all led to a noticeable reduction in expatriate employment as the Arab world’s largest economy adjusts to lower crude prices.

Saudi Arabia, which exports more oil than any other country, since last year has pursued its “Vision 2030” economic diversification effort to broaden its investment and business base, while placing more Saudis in the private sector.

The drop in global oil prices by about half since 2014 left the kingdom with a huge budget deficit and billions of dollars in debt to private firms, chiefly in the construction business.

Saudi Binladin Group alone laid off around 70,000 expats from poorer countries, but the impact of slower economic growth has gone further and left many Western expatriates also saying goodbye.

Latest official figures showed almost nine million foreigners employed in the kingdom but that was before the worst of the economic pain struck, sending home expats like Steck.

“People are leaving because there’s not enough business for their contract to be renewed,” said a foreign manager in the consumer electronics sector whose business is down 10 percent.

“Everybody’s margins are seriously under pressure. There’s not a business out there that’s really doing well,” he said, declining to be named.

More pain is expected come July when the government plans to impose a levy on foreign workers with dependents.

The fee will start at 100 riyals ($27) a month, rising to 400 riyals monthly by 2020, according to a government document seen by Bloomberg News.

– ‘So expensive’ –

The electronics manager said his company will make its nearly 300 expatriates, largely Indians, Pakistanis and Filipinos, pay these charges themselves.

With most of them earning less than 10,000 riyals monthly, this will encourage them to either send their families home or quit — creating space for hiring Saudis, he said.

According to the document seen by Bloomberg News, the government will also raise monthly fees paid by employers who hire more foreign workers than Saudis as part of a programme to encourage local hiring.

Abdulrahman al-Zamil, chairman of Saudi Arabia’s Zamil Group which employs thousands of foreigners, said the government will continue to increase such fees if necessary “because they need to be fair to the country” and ensure jobs for locals.

The new levies add to rising costs including water and electricity bills as the government cuts subsidies, noted a foreign diplomat.

“The cost of doing business is so expensive,” he said, speaking on condition of anonymity.

Western expatriates, often more highly paid than their Asian or Arab counterparts, said they could afford the new family levies, but admit that the lucrative packages that drew them to the kingdom are becoming harder for companies to maintain.

These include housing allowances worth thousands of dollars each month, family flights home and, in many cases, international school fees.

There is no income tax in the kingdom although it plans to introduce taxes on some consumer items this year.

– ‘Not as lucrative’ –

“Budgets are getting tighter and I don’t think it’s as lucrative as maybe it was” for expats, said an Australian engineer, lured to the kingdom with his family, partly out of a sense of adventure but also because of the financial benefits.

Three years later, he is going home, with his firm still “owed a lot of money” by its Saudi contractor.

“I’ve actually been made redundant but I was going to leave anyway,” the engineer, who also declined to be named, said.

Dozens of expatriates of various nationalities had already been let go by his firm and others will follow, he said.

The Australian leaves with mixed feelings, having made friends and enjoyed his expatriate housing compound complete with a swimming pool and other diversions hard to come by in Riyadh, where alcohol is banned and there are no public cinemas or theatres.

A foreign fund manager with several years in the kingdom said the good times are over for expensive Western labour.

“In 10 years I don’t think there will be expats, because they have to get the Saudis to work,” he said.

The foreign diplomat said the departing workers were often replaced by less expensive hires including Portuguese, Greeks and, increasingly, Arab nationals.

Steck, who flew home in early February, had planned to stay another year.

He was the last of several Western managers let go by his firm.

The company, a subsidiary of a German multinational working for a major local telecommunication firm, had been under-bid by China’s Huawei.

With a company car, the house and school fees all paid for, he had hoped for a final boost to his savings.

“Leaving, I’m happy, (but) not for my salary in the future,” he said.