Expats in Saudi Arabia prefer to send money home rather than spend it locally. Only 1/3 even have savings accounts.
Expats send an extraordinary amount of money out of Saudi Arabia each year–the equivalent of USD 7.1 billion in the second quarter of 2010 alone. As a result, the country may try to limit the amount of money expats can send home.
Take data from a recent kippreport.com survey. It found 74% of expats in Saudi Arabia and the UAE have a savings account in their country of origin, but only 33% abroad. The stat points to a crucial theme: expats at all income levels send more money home than they spend locally.
As Jarmo Kotilaine, Chief Economist of National Commercial Bank, recently told Al-Arabiya News:
The issue is the opportunity cost of the remittances. Many residents live here for the pure purpose of making as much money as they can and sending as much of it back home to their families as they can. That money isn’t being used to stimulate domestic economic activity.
For Saudi Arabia the scale of the problem is immense. According to Al-Arabiya, expats hold 90% of the private sector jobs in Saudi Arabia, and the value of their remittances has doubled over the last five years. Many wealthy expats have salaries deposited directly into foreign banks. Unemployment for Saudis, meanwhile, stands at 10%.
In October the Saudi Labor Ministry announced two strategies for dealing with the problem: 1) capping the number of foreign workers at 20% of the total population, and 2) a monitoring program aimed at limiting the value of foreign transfers.
To date the government has released few details regarding the monitoring program. But it’s probably safe to assume it’s a study of the feasibility of limiting expat transfers. If such a policy goes into effect, it will force expats to save, invest and spend locally. That won’t sit well with expats, few of whom plan to spend a lifetime living and working in Saudi Arabia.
The good news is that implementing expat quotas and transfer limits will take time. Deserved or not, Saudi workers have a reputation for laziness and a sense of entitlement. In some cases they lack the job skills and education required for skilled positions in companies, in others they simply refuse to accept jobs they feel are beneath them.
At the end of the day most Saudi companies simply prefer hiring foreigners. Any policy making life difficult for those valuable employees is going to irk them, too, meaning they will lobby hard for delays.
Bottom line: transfer limits are coming in Saudi Arabia, though it could be several years yet.
I literally jumped out of my chair and danced after reaidng this!