The Malaysian Insider :: Features
The Malaysian Insider :: Features |
| Saudi labour crackdown promises long-term gain for short-term pain Posted: 20 Nov 2013 06:35 AM PST Saudi Arabia's crackdown on foreign workers has thrown millions of lives into turmoil and caused rioting in cities, but the economy should benefit in the long run as Saudi nationals fill the gaps and cut their dependence on the state. Nearly a million foreigners have left Saudi Arabia since March, when authorities stopped turning a blind eye to visa irregularities they had tolerated for decades, and tens of thousands more have been detained in raids on offices and marketplaces that began this month. Though most of the roughly 10 million foreigners in the kingdom are expected to remain, alongside a Saudi population of 20 million, the crackdown is part of government efforts to nudge more Saudis into jobs, tackling a problem seen by many as one of the biggest challenges facing the world's top oil exporter. A majority of working-age Saudis do not have jobs, and most who do are employed by the state, often in what economists call well-paid sinecures that bloat a flabby bureaucracy. Official unemployment is 12%, but that excludes a larger group of people who are not actively seeking work. Saudi Arabia's ruling family has long used public employment to distribute oil revenues to its people. In an absolute monarchy, it helps the government maintain its legitimacy. In 2011, when Arab Spring protests were challenging the rule of autocrats across the region, King Abdullah announced hundreds of thousands of new government jobs, pay rises and bonuses, unemployment assistance and cheap housing worth US$110 billion (RM349.8 billion). But as the population grows and higher domestic energy use threatens to eat into oil exports, the state's now-bulging coffers will struggle to maintain such a generous wage bill. All previous efforts to raise Saudi private-sector employment through market-friendly reforms and more punitive measures such as "Saudisation" hiring quotas have stumbled on the ready availability of cheap foreign labour. Business owners have complained that Saudis work less hard than foreigners and won't take jobs they see as menial. This time, by cracking down on visa irregularities that allowed companies to cheat the system, and by spending billions of dollars on vocational training for young Saudis, the authorities hope their policies will be more effective. "The likely impact is hard to quantify because there are so many moving parts," said Steffen Hertog, author of "Princes, Brokers and Bureaucrats", a book on Saudi economic policymaking. He and other economists interviewed by Reuters said they expected the tough new policies to improve the kingdom's economy in the long run, despite some disruption now. The government is well placed to weather any short-term costs after years of record budget surpluses that have created foreign currency reserves equal to more than 100% of gross domestic product. Annual real economic growth has averaged 6.3% in the past five years, according to IMF figures. Small unregistered companies - mechanical workshops, cheap restaurants and grocery shops - face the biggest immediate impact, and the kingdom's newspapers have documented the consequences, including drinking water deliveries cancelled, crops not harvested and school classes suspended. But much goes unrecorded. "An element of the labour crackdown will not be captured in the official numbers. Many of these people are not working in the formal economy, so you don't see it in the data," said Paul Gamble, director of Fitch Ratings. Many small businesses are illegally owned and run by foreigners, while a Saudi is paid to put his name to any official paperwork. Hertog said closures would have an effect on daily life in the short term, raising prices of some services, but would not have much impact on the wider economy. More immediate problems are faced in the construction sector, which relies on a plentiful supply of cheap workers. A shortage of workers and a new US$640 (RM2,035) annual fee companies have to pay to hire expatriates have caused delays to many projects, pushed up construction prices and forced some companies out of business, local press has reported. Higher construction costs will be passed on to clients, and delays are causing bottlenecks for businesses attempting to expand, but most big projects in Saudi Arabia are commissioned by state-owned companies. "Forty percent of the medium and small companies have been hit. New tenders are becoming more expensive," said Fahad al-Hammady, chairman of the contractors' committee at the Saudi Chambers of Commerce. Despite the exodus of foreign workers in the past 10 months, second-quarter growth in the non-oil private sector was 4.2%. Meanwhile, the official inflation rate has remained stable. One benefit of having more workers registered should be better economic planning. "It's an audit of the labour market. Until they know who is there and what they're doing, it is difficult to calibrate policy," said Gamble. Transparency is important for implementing labour reforms, in which some sectors such as retail have been targeted for higher rates of Saudi employment. Economists also said private-sector productivity should improve if labour becomes more expensive. "Companies have to be more efficient and less labour oriented, using technology better. It could lead to an output shift in how the economy operates," said John Sfakianakis, chief investment strategist at Masic, a Saudi investment company. The biggest economic advantage of replacing foreign workers with Saudis, however, is raising household income, thereby boosting consumer spending. That is being felt. Muhammad al-Agil, chairman of Jarir Marketing, the biggest listed Saudi retailer, told Reuters last month that rapidly growing sales over the past two years were partly due to the higher number of Saudis with jobs. Instead of money being sent overseas by expatriates, he said, it was now being spent in Saudi shops. In May the Labour Ministry said its new policies had created over 600,000 jobs for Saudis in the previous year, but it is not clear if those jobs are sustainable. In the past some have taken on Saudis in meaningless positions just to meet the quotas. Others have said locals were unqualified or reluctant to take the jobs. Nobody expects Saudis to work as manual labourers on construction sites or as domestic servants, but in recent years a growing number of young Saudis have taken jobs, such as shop assistants, that they may have disdained in the past. Agil said two fifths of his shop-floor employees and 85% of his office workers are Saudis. Higher Saudi employment in the private sector would reduce the burden on the state of efforts to lift living standards with higher government wages and other handouts. "From Fitch's perspective the labour market reform is something we view positively," said Gamble. - Reuters, November 20, 2013. |
| Russian oligarch opens Faberge egg museum Posted: 19 Nov 2013 07:05 PM PST The new Faberge Museum located in the Shuvalov Palace in the city centre put on display nine of the eggs, once given as Easter gifts by the royal family, as well as thousands of jewelled objets d'art from icons to cigar cases. Vekselberg bought the collection of eggs from the estate of the late Malcolm Forbes, the US publisher of Forbes magazine in 2004, vowing to bring them back to Russia. "We started this project more than 10 years ago, and we are happy to present the result to you," Vekselberg said at the opening. The jewelled eggs with enamel and painted details include one given by the last tsar Nicholas II to his mother, Maria Fyodorovna, which is decorated with his portrait as well as that of his heir, Alexei. Another made to celebrate the first anniversary of Nicholas II's coronation has a surprise inside: a model of a tiny gold carriage. Others contain a gold hen and an enamelled rosebud. The 18th-century mansion housing the museum originally belonged to Ivan Shuvalov, a favourite of Tsarina Elizabeth Petrovna. It was used for welcoming international delegations in Soviet days. "The inauguration of this museum is a great event for all of Russia," said Culture Minister Vladimir Medinsky at the opening. "Now we have the chance to see this beautiful and precious collection in Saint Petersburg." He stressed that the museum was entirely privately funded. "Not a single kopeck was spent from the Russian budget." Vekselberg is worth some $15.1 billion (RM 48 billion), making him Russia's fourth richest businessman, according to Forbes magazine, which estimated tbe value of his art collection at $850 million (RM2.7 billion). Court jeweller Peter Carl Faberge made around 50 of the eggs. The family tradition began in 1885 when Tsar Alexander III gave his wife, Maria Fyodorovna, a richly jewelled egg for Easter. The Bolsheviks sold many of the eggs abroad to raise money after the October Revolution. Others were smuggled out by relatives of the last tsar's family, who were shot in 1918. Vekselberg's collection of Faberge objects is rated as one of the world's most valuable. When he bought them, the price was not disclosed, but the collection had previously been valued at $90 million (RM286 million). Each room of the museum was monitored by a security guard at the opening. The museum will open to the public in December. – AFP/Relaxnews, November 20, 2013. |
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