Saudi Arabia Invites Foreign Investors, But Bids Foreign Workers Goodbye

In a bid to attract more number of overseas investors, Saudi Arabia's Capital Market Authority announced relaxation of restrictions on foreign investments in the country's securities markets, effective from 4 September 2016. As per new reforms, an asset manager holding global assets of at least USD 1bn will be eligible to be a foreign institutional investor in the Kingdom. Presently, the minimum required asset value is USD 5bn. Saudi Arabia was initially planning to introduce these relaxations by middle-2017. But concern over the economy's declining revenues and foreign reserves, falling GDP, unemployment of migrant workers, and weakening production capacity pushed the kingdom to take immediate corrective steps. Saudi Arabia has been facing economic crisis for quite some time because of low oil prices and extreme competition from other oil exporting countries. The country's stock market had opened its doors for Foreign Direct Investments in June 2015. However, it failed to attract a significant number of overseas investors. Currently, only 1.03% of the total market (worth USD 390bn) is being held by foreign investors. 

‘Yes’ to Foreign Investors. ‘No’ to Foreign Workers.

Meanwhile, the Saudi government's Vision 2030 aims to fill the private sector with 4.1mn Saudis by 2030. This means employment opportunities for overseas workers will slump. The Kingdom produces 300,000 graduates annually, but Saudis account for just 16% of the total human resource in the private sector. The total number of workers in Saudi Arabia is expected to be around 6.4mn, with 1.6mn in the private sector and 4.2mn in the public. Most of these workers are foreign nationals.

Recently, thousands of foreign labourers were stuck jobless in the Kingdom because of oil crisis' impact on the construction industry. Saudi Arabia is taking efforts to settle the problems of these stranded workers and send them back to their country. 

Saudi Arabia Takes Major Steps to Pull Revenues from Non-Oil Sectors

In a bid to treat the “oil illness” (a 2 year long crisis of low oil prices) and its aftermath, the Saudi Arabian government has hiked visa charges, fines, taxes, and other government fees sharply. The move is part of the government’s action plan which focuses on increasing revenues from non-oil sectors. It targets non-oil income of 530bn riyals by 2020, up from the current 163.5bn riyals.

Know more about the hike:

• The new policy has increased the cost of six-month visas for foreign nationals to USD 800, a six-fold increase. The hike in visa fees will be effective from October 2016.  With this move, it will be an expensive affair for Saudi employers to hire foreign employees and hence, they will be left with the option of employing Saudi graduates. This supports the government’s plan of filling private sector organisations with Saudi nationals.  
• Annual tax of up to 2,300 riyals will be payable by foreign residents.
• Fines for traffic violations including “tafheet” (which means illegally racing, drifting and spinning cars at high speeds on highways) have been raised. Drivers caught for the first time will be charged USD 5,332. 
• Billboard advertisement fees have been increased three times.
• Energy and utilities charges in Riyadh have already been raised.

Other government measures include:

• Plans to cut expenditure on public sector wages by 5%.
• Plans to draw more revenues by means of indirect taxes including value-added tax.

Recently, Saudi Arabia sliced oil prices for exports in Europe and Asia due to competitive pressure from Iran, Iraq and Russia. However, the country is optimistic about its future economic stability, thanks to the new Asian customers it has earned. Also, Saudi Arabian oil company Saudi Aramco is set to continue with its drilling and IPO process.