The Nitaqat (classification) law being implemented by the Kingdom of Saudi Arabia makes it mandatory for Saudi Companies to reserve 10 per cent of jobs for Saudi nationals. Saudi Arabia has very strong socio-economic reasons to justify such a policy. Unlike other gulf countries Saudi Arabia itself has large number of unemployed citizens. According to recent estimates the unemployment rate among Saudi nationals has reached 12 per cent. It is also reported that more than 6.5 million non-Saudis are working in the private sector of the Kingdom compared to 7,00,000 Saudis. In 2012 there were 3,40,000 firms in the Kingdom that did not employ any Saudi. Of late there is a growing feeling of resentment among the citizens of Saudi Arabia resulting from the labour market competition they face from expatriate workforce. The Nitaqat law is aimed at eliminating unemployment and localising jobs in the Kingdom.
Nitaqat seeks to replace the 1994 scheme of Saudization which required 30 per cent of the jobs to be reserved for Saudi citizens. Saudization scheme failed due to the inherent loopholes in the system and the targeted 30 per cent localisation of jobs could not be achieved.
The new law, Nitaqat, divides the Saudi labour market into 41 activities and each activity into 5 sizes (Giant, Large, Medium, Small and Very Small) to have in total 205 categories. Nitaqat classifies establishments into ranges (Excellent, Green, Yellow and Red) based on the ratio of the citizens working in the establishment. The Excellent and Green range, which are the ranges with the highest localisation ratios, will be rewarded with incentives.
The new law proposes to deal firmly with the Red range, the range characterised by the lowest localisation ratio. More time is given to the Yellow range to improve their positions, it being the medium range.
The most recent additions to the Nitaqat law that an expatriate worker should work only under his sponsor and the worker is not meant to perform any job other than the one mentioned on his job card have raised much panic among the expatriate workers. More over the Saudi government has increased the fee for renewing labour cards (iqamas) to SAR2, 500 from SAR100. The strict implementation of the Nitaqat law recently has raised much concern in Kerala. Majority of the Indian migrant labour in Saudi Arabia are from Kerala. In 2011, some 5,70,000 Keralites were working in Saudi Arabia. Though the impact of Nitaqat would be on less than 3 per cent of this migrant population remittances by them were consistently contributing to the economy of the state, especially to the northern districts of Malappuram, Kozhikode, Kannur and Kasargode. The inflow of remittance payments from Saudi Arabia has considerably raised living standards in these districts. Saudi Arabia continues to be the most desired destination among the low and semi-skilled Keralites.
The strict adherence to the Nitaqat regulations will result in immediate job losses and reduced job opportunities. Many small scale shops and establishments in Saudi Arabia are run by Keralites under licences in the names of Saudi nationals. Now all such shops and establishments must have 10 per cent of their employees from among Saudi nationals who should be paid at least 3 times more salary than their expatriate counterparts. It is almost impossible now to run companies on the licences given to Saudi nationals. Strict actions are being taken against benami businesses. Most shops run by Keralites are already closed.
The impact of the crackdown on illegal foreign workers in Saudi Arabia will have serious consequences for Kerala’s economy. The sudden exodus of the unemployed could trigger off economic crisis and social unrest in the state. The sudden fall in remittances from Saudi Arabia may lead to a ripple effect on interlinked sectors like real estate, construction, transport, etc. The problems will be much more if other gulf nations too emulate the Saudi policy.
The job losses and reduced job opportunities are expected to aggravate in the coming days since Saudi labour ministry has reconsidered the liberal sponsorship rules that are prevailing. Under the Inspection Intelligent Scheme (IIS) inspection of company premises and residences of free visa holders are being intensified. Most raids at labour camps are unannounced. The government also issued an order that iqama (labour card) violators will be arrested in raids.
On an emergency basis both the central and state governments must plan out strong rehabilitation packages for the unemployed Saudi returnees. The assistance offered for safe return and sponsoring the air fares of the returnees are all short term relief measures by the Government of India. The most recent announcement by the Saudi administration that Nitaqat inspections will be temporarily stopped for 3 months to allow illegal immigrants to legalise their stay in Saudi Arabia is to be viewed only as a temporary relief. Ryadh governor’s recent order of deferring the process of catching illegal migrants in Riyadh also provides some temporary relief to the illegal migrants. Given the proven strictness of the Saudi administration, the statements made by Kerala ministers that the expatriates need not panic and that the issue could be bilaterally solved by dialogue with Saudi authorities are not providing much hope to expatriates.
According to leading immigration trend analysts in Kerala the Saudi crackdown on illegal migrants should be viewed as a blessing in disguise since it is going to open up more opportunities for the legal migrants from the state. There is no need for the legal immigrant worker to panic. The Nitaqat effect is not just on Indians.Lakhs of illegal migrants in Saudi Arabia are from countries like Pakistan, Bangladesh, Philippines, Egypt, etc. Kerala can grab this opportunity by providing the needed skills to the future migrants and allowing them to migrate legally. Kerala must focus on more employment opportunities for its labour force. The government should also undertake massive investments in infrastructure and industrial development to boost up employment opportunities.
The author is professor of economics at Christ University, Bangalore