Saudi Arabia's labor minister said Tuesday that only private sector companies that fail to employ enough Saudi nationals would face restrictions on the renewal of their expatriate employees' work permits, clarifying earlier comments that jolted the business community in the oil-rich country.
Adel Fekyeh was quoted by the pan-Arab daily Al-Hayat on Monday as saying that foreigners who had been in the kingdom for six years would not have their permits renewed _ a move he explained as part of Saudi Arabia's push to boost job opportunities for its citizens.
Late Monday night, the ministry sought to clarify his remarks, saying there was no blanket policy barring the renewal of work permits for long-term expatriate employees and that the restrictions were targeting companies not complying with regulations requiring at least five to 10 percent of their laborers be of Saudi nationality.
"Companies that, after requests by the ministry over long years, do not comply with their obligations will not have work permits renewed," Fekyeh said in an interview with Arabic satellite channel Al-Arabiya.
Saudi labor officials are looking to begin implementing a new incentive program for the private sector. Under the program, companies would be divided into four categories: "excellent" and "green" for those that comply with the nationality quotas, and "yellow" and "red" for those that do not.
The initial remarks sent a ripple of unease through the Saudi business community, which relies heavily on foreign labor in a range of sectors.
"Quotas in general have a mixed impact," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia based Banque Saudi-Fransi. "Even if limiting foreigners to six years of employment becomes the rule for all private entities the dependence on expatriates will not change.
"Labor reform will happen when wage incentives switch from low wages to higher wages and not from limiting foreigners," he said.
Other said the restrictions could undercut the country's economic growth prospects.
"Over the past two decades, Saudi Arabia saw an increase in the proportion of locals in the labor force as a whole and also in the private sector. However, this was accompanied by a fall in worker productivity for most of the 1990s," London-based Capital Economics wrote in a note Tuesday. "If the country is to reach its potential growth rate, then labor productivity needs to improve."
Under the new program, companies in the yellow category would be given a chance to adjust their labor force demographics and secure the work permits they need, while those in the red category would not have permits renewed for their foreign workers, irrespective of how long those employees have been in the country.
Fekyeh said that the government would give companies in violation of the rules three months to correct the labor balance and would face penalties after that period. He added that the new program was "not intended to hurt anyone."
The program comes at a time when Saudi Arabia is working to keep at bay the kind of mass protests that have ravaged other Arab nations, leading to the ouster of the presidents of Tunisia and Egypt while the leaders of Syria, Libya and Yemen are fighting to stay in power.
Economic disparity and soaring unemployment have been major catalysts in the uprisings and Saudi Arabia, which sits atop the world's largest proven reserves of crude but where unemployment is at 10.5 percent, has pledged over $90 billion in programs aimed at boosting services and jobs for its citizens.
In his earlier remarks, Fekyeh said that 90 percent of the private sector's work force was made up of foreigners and that those workers were sending home $26.7 billion per year in remittances.
El-Tablawy contributed from Cairo.