The Saudi Arabian government has shut more than 200,000 private firms for flouting expat employment laws in the past year.
The employment laws – termed ‘nitaqat’ – are aimed at replacing millions of expat workers with jobless Saudi Arabians.
Official figures from the Labor Ministry show that the private companies closed due to a government crackdown on employers with workers on the payroll who broke tough residency and working visa laws.
Around 40,000 other private firms also face closure because they have not met their quota for employing Saudis, says the country’s Labor Ministry.
“These companies have around 500,000 expat workers, while Saudi nationals only make up around 8% of their workforce,” said a ministry spokesman.
Yellow zone companies targeted
“To counter this, the government is reducing the amount of time an expat can work for a company breaking the quota rules.”
The government is specifically targeting ‘yellow zone’ companies where less than 10% of workers on the payroll are Saudi nationals.
Expats working for these firms will have their working visas slashed from six to four years in October and to two years from May 2015.
“The aim is to urge private companies to look at their payrolls and take on more Saudis instead of expats,” said the spokesman. “Those that fail to heed the warning face closure.”
Alongside the visa restrictions, the government has also introduced other sanctions against yellow-zone companies, including denying permission for new expat work visas.
Another measure offers a government wage subsidy to firms taking on Saudis.
Sanctions against expat workers
Generally, Saudi private sector firms were often run by expats but owned by Saudis. The ratio between expat wages and pay for Saudis is huge, and many Saudi nationals do not have the skills or experience to work for many of the companies.
However, the government is wary of the Arab Spring uprising spreading to the Gulf States.
Other Gulf countries – especially Oman, Bahrain, Qatar and Kuwait – have taken steps to reduce their reliance on expat workers by opening up the job market to their nationals with varying degrees of success.
The governments view providing jobs for locals will take the sting out of unsettled young graduates who cannot find work.
Expats make up a third of Saudi Arabia’s population of 30 million, and the expat to local ratio is similar or even more in most Gulf State countries.