By Reem Shamseddine and Marwa Rashad
RIYADH (Reuters) - Saudi Arabia will take new steps, including jail terms for small business owners and the hiring of 1,000 inspectors, to crack down on foreigners working illegally in the world's top oil exporter, Labour Minister Adel al-Fakieh said.
"We have and will continue to have millions of foreign workers. We have 7.5 million legal foreign workers and we need them," Fakieh told Saudi-owned MBC television this week, according to a transcript posted on the MBC website.
"We will continue to issue visas for others but those who want to come to this country have to respect the law."
Saudi Arabia has been deporting hundreds of thousands of illegal foreign workers as part of labor market reforms designed to reduce unemployment among its own citizens, which is officially estimated at 12.0 percent.
If it persists, the crackdown could have major effects on the Saudi economy, which has for decades relied heavily on foreigners from south and southeast Asia as well as Arab countries in its energy, construction and services industries.
In addition to legal foreign workers, analysts have estimated the number of illegals at 1 or 2 million, conceivably more. The governments of Yemen and India's state of Kerala have expressed concern about a sudden influx of returning workers because of the Saudi crackdown.
Fakieh said about 200,000 foreigners had been deported in recent months, and that 840,000 had left Saudi Arabia - most of them voluntarily - since a quota system for companies to hire local citizens was introduced in late 2011.
As a part of new measures to be implemented from next month, the ministry will set up a toll-free line for the public to report violations, he said. Business owners will be able to check online whether they violate the rules.
The ministry will hire 1,000 more inspectors who will be accompanied by policemen when checking businesses, and firms will face penalties if they harbor illegals, Fakieh added.
"If an owner of a small enterprise conspires with an illegal foreign worker, he will be subject to sanctions," Fakieh said. Possible punishments will include a 100,000 riyal ($26,700) fine for each illegal worker, two years in prison or both.
In the next version of its labor quota system, which will be launched in the next three months, requirements to hire Saudi citizens in the retail sector will be increased, Fakieh said.
Some businesses and schools in Saudi Arabia have reported difficulties operating over the last several weeks as some expatriate workers have stayed at home to avoid inspectors checking their work permits.
But so far, there is no clear sign that the Saudi economy as a whole has suffered, with the stock market and business sentiment surveys remaining strong. In early April, King Abdullah ordered that migrant workers breaking regulations be given a grace period of up to three months to sort out their papers.
Fakieh said his ministry's policies over the past 18 months had put some 600,000 Saudi citizens into private sector jobs, though he added that because of staff turnover, about 400,000 now remained employed in those jobs.
A cut in the number of foreign workers in Saudi Arabia could benefit the economy by reducing the flow of billions of dollars of earnings being remitted abroad every year. It could also pressure companies into raising wages for workers among the country's roughly 19 million local citizens, analysts say.
Another major step that could reduce foreign labor would be to lift the country's ban on women driving. Saudi Arabian billionaire Prince AlWaleed bin Talal threw his support behind that reform this week, saying it would make economic sense by dispensing with at least 500,000 foreign drivers. But there is no clear sign that the government, conservative in many social issues, will take that step.
($1 = 3.7502 Saudi riyals)
(Additional reporting by Mahmoud Habboush; Writing by Martin Dokoupil; Editing by Andrew Torchia)