Saudi Arabia to cut reliance on foreign workers

Finance Minister says Kingdom has made 'substantial progress' in training and absorbing Saudi professionals and workers in different sectors

"The Kingdom will now be more selective in hiring foreign workers," Finance Minister Ibrahim Al-Assaf.
"The Kingdom will now be more selective in hiring foreign workers," Finance Minister Ibrahim Al-Assaf.

Saudi Arabia has announced plans to reduce its reliance on foreign workers by recruiting only technical workers and monitoring investments closely, according to Arab News.

"The Kingdom will now be more selective in hiring foreign workers," Finance Minister Ibrahim Al-Assaf, said, while giving highlights of the annual budget announced by King Salman bin Abdulaziz, Custodian of the Two Holy Mosques on Monday.

Al-Assaf said that the Kingdom had made substantial progress in training and absorbing qualified Saudi professionals and workers in different sectors.

"Hence, the plan to reduce its reliance on overseas workers is quite logical," he said, while pledging to facilitate implementation and completion all ‘projects in the pipeline like Riyadh Metro and other mega transport projects’.

To this end, he said that the government has announced several measures to meet the financial shortfall caused by the declining oil prices.

Al-Assaf also allayed fears of expatriates and rejected rumors, saying that the Kingdom has no plans to introduce individual income tax in the country. “There is no intention and no plans to impose taxes on the income of expatriates,” he assured.

The Kingdom is home for over 10mn foreign workers.

Countries including India, Pakistan, Indonesia, the Philippines, Sri Lanka, Bangladesh and a few African countries are major suppliers of workforce to the Kingdom. More than 125,000 US, UK and Western expatriates also live and work there.

Saudi Arabia is considering major changes to its high spending, low tax regime after the plunge in world oil prices saw it post a record budget deficit of $98bn.

The Kingdom exports about 7mn barrels of oil a day and those revenues make up around 90% of the government's fiscal revenues, and about 40% of the country's overall GDP.

Prince Abdulaziz bin Salman, Vice Minister of petroleum and mineral resources, recently said that ‘around $200bn of investments in energy have been cancelled this year, with energy companies planning to cut another three to eight percent from their investments next year’.

In a report published recently, the prince said, "This is the first time since the mid-1980s that the oil and gas industry will have cut investment in two consecutive years."

Saudi Arabia does not collect income taxes from foreigners. But, Monday's statement released by the Ministry of Finance suggests that the finance ministry realises that this cannot go on forever.

The statement says the ministry will review current levels of fees and fines, introduce new fees, and complete ‘the necessary arrangements for the application of the value added tax (VAT)... in addition to... additional fees on harmful goods such as tobacco, soft drinks and the likes’.

Another significant category of reforms mentioned in the document is a review of subsidies, including ‘revision of energy, water, and electricity prices gradually over the next five years, in order to achieve efficiency in energy use, conserve natural resources, stop waste and irrational use’.

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Oil & Gas Middle East - September 2020

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