Saudi Arabia: Expat Exodus Hurting Saudis as country is Totally Economically and Military Dependent on Foreigners

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There were talks that Saudi Crown Prince would get arrested at G.20 meeting in Argentina due to his involvement of in the killing of Journalist.  Whilst President Trump have been pushing for letting the Saudis get away with it, congress have been more reluctant. Senator Lindsey Graham been on the forefront pushing for harsh response to the Saudis.  Making it clear U.S. has all the leverage. In a recent interview with Fox New he said;

“They give us 9 percent of our oil imports. We need them a lot less than they need us,” Graham countered. “I don’t buy this idea you’ve got to hook up to a murderous regime, a thug like MBS, to protect America from Iran. Quite the opposite. I think by hooking up with him we hurt our ability to govern the region.”

“Let me put it this way — I want to be very blunt with you,” Graham told host Maria Bartiromo on “Sunday Morning Futures” “If it weren’t for the United States they’d be speaking Farsi in about a week in Saudi Arabia.”

This has in general been a theme for Saudi Arabia. For all its wealth, it has shown lower ability to actually getting anything done by itself and is totally dependent on U.S. and others. This dependence extends to the Saudi economy as well. Saudi Arabia decided in 2016 to impose taxes on expat dependents as part of Crown Prince MbS drive of Saudisation of the economy. Bloomberg writes;

Announced in 2016 as part of a drive to increase non-oil government revenue — a key goal of Crown Prince Mohammed bin Salman’s economic transformation plan — the fees have been unpopular with business owners in a country accustomed to cheaper foreign labor. Partly as a result, hundreds of thousands of foreigners have left the kingdom, hitting the already-struggling economy but failing to make much of a dent in Saudi unemployment.

As of earlier this year over 800,000 expats had left the country. Now the country contemplates of removing or reducing the “fee/tax” as the economy falters. Bloomberg continues;

While it’s unlikely the fees will be canceled altogether, a ministerial committee is looking at modifying or restructuring them, one of the people said. A decision is expected within weeks, two of the people said.

All this comes back of the fact Saudisation is not working. The working age population in Saudi Arabia have in essence no desire to with work jobs equivalent to their skill levels. Business Insider reports;    

Many companies are reported to be circumventing the policy’s local employee quota requirement by hiring Saudis and paying them small salaries for what are in effect bogus jobs — a process termed “fake Saudisation.

“Employers say young Saudi men and women are lazy and are not interested in working and accuse Saudi youth of preferring to stay at home rather than to take a low-paying job that does not befit the social status of a Saudi job seeker,” Bassnawi said, adding that fake Saudisation “could create a generation of young men and women who are not interested in finding a job and who prefer to get paid for doing nothing.”

Saudi Arabia is in a difficult situation. Their disastrous war in Yemen costs about $200m/daily.  Recent oil declines hit the Saudi economy harder than any other country. With its total dependence on foreigners on every facet of its society there is risk continues low oil prices and a lack of economic development in the country will lead to disaster. Maybe the only way Saudis might get some leeway is that there is a War in the Middle East.

 

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