Thursday, June 13, 2013

Expatriates and challenges

‘People who are looking to own a first home by living in a second home’ is my definition for gulf expatriates. In 70 and 80s millions of expatriates were brave enough to go to gulf countries in search for a decent life. Today, these left over millions, especially in Saudi Arabia are questioning their bravery, in fact, wondering was it worth! Often this group looks so naïve and foolish in front their own cousins who have built better job career, businesses and life in their countries against multiple odds.

It is not a major worry for people who migrated in end of nineties or early two thousands, because these particular groups have the advantage of age in addition to better professional educational qualification to find jobs in their home country or elsewhere. They are also not far away from the social and business environments of their home countries. They can relatively mingle with existing social circumstances and relocate with certain ease.

The question remains more disquieting to Indians since the economical growth in India is relatively strong and progressive. India’s economical growth is phenomenal and opportunities are plenty, provided we understand the ground reality which includes bureaucratic functionalities, business and social environments. Unfortunately, the people who spent more than twenty years in Saudi Arabia are more confused and disturbed with recent developments. Their knowledge, efficiency, energy, expertise and money are all drained in Saudi Arabia by building the second home and believed it is permanent. These expatriates groups might be living on false comforts, yet their contribution to Saudi Arabia GDP growth is worth to analyze.

From year 1970 to 2012, Saudi Arabia averaged around 5% of GDP growth. Oil remains the highest percentage of 46 and service sector with 36%. Within the service sector, government sectors are contributes 13%; and wholesale, retail, hotels and restaurants constitutes around 8%. Manufacturing constitutes around 10%. Expatriate population is mostly in service and manufacturing industries. Expatriates contribution to Saudi Arabia’s GDP growth is between 18 to 20% and is not a small figure to ignore.

Saudi Arabia’s expatriate population is around 6.5 millions though recently these figures escalated to 7.5 as mentioned in some newspapers. Assuming that the total numbers are 7.5 millions, for better or worse, this population is part of national GDP of Saudi Arabia. Expatriate population actively contributes the GDP growth in services, real estate and manufacturing segments.

Out of 7.5 millions expatriates, four millions are drawing a salary of less than SR. 1000 and other two millions are drawing less than SR. 500 per month (Refer Saudi Gazette dated May 5, 2013). Remaining 1.5 million expatriates are earning average salary of SR. 7,500 per month and falls under the category from lower management to senior management including professionals. The first category would get salary worth of SR. 48 billion annually, and the second category receives SR. 6 billion. All these three categories are earning around 160 billion Saudi Riyals annually and how much they would remit to their home countries is anybody’s analysis. However, in year 2012, India received around SR. 90 billion from Indians living in Saudi Arabia. Nevertheless, my analysis and this article is about their contribution back to the country they work.

The first two categories are essentially construction and domestic workers. Though domestic workers, the second category are not major contributor to national GDP, the construction industry brings a major contribution to the country’s GDP growth through cheap labour on par with third world countries. This is the essential manpower segment to Saudi Arabia’s construction and infrastructure developments and in fact is not an obstacle to Saudiazation process since Saudis will not take up these works. While these four million strong manpower are providing cheap labour which keeps the construction expenditures on relatively par with other world countries, this manpower also fetches average 28 billion Saudi Riyals back to national coffers through identity cards and exit re-entry visa charges. Now with the introduction of SR. 2,400 levy on each expatriate, Saudi government would get another 96 billion Saudi Riyals on annual basis. It is to be noted that this first category earns salary worth of SR. 48 billion on annual basis, yet through them the country benefits SR. 124 billion Saudi Riyals as part of GDP growth within government service segments.

Third category is the major worry for Saudi Arabia since they draw close to 112 billion Saudi Riyals as salary which can be gradually replaced with Saudis to utilize the amount within Kingdom. Certain entrepreneur group from this particular category is also active in SME with their investments under Saudi national’s license and earns unspecified amount which is again transferred to their home or other countries.

However, what is their contribution in GDP growth? Let us look at some analysis: This group lives with their families and spend almost 40% of their salary on housing, clothes, schools and food expenditures which is around 45 billion Saudi Riyals. Government also levying 36 billion Saudi Riyals as identity card fee from this group. This segment is also active with travels outside the country on yearly basis and spent on air tickets and other luxury products while shopping. They spent close to 30 billion Saudi Riyals on tickets, luxury goods, electronics and gifts. The health insurance segment would also benefit with around 15 billion Saudi Riyals from this category.

Hence, there is around SR. 300 billion worth of economical rotation is happening around 7.5 million expatriate populations. Is this a boon or bane to Saudi Arabia?

Meanwhile, the present unemployment ratio of 5.6% will likely grow more since the 60% of population is under 30 years age. The competency of level of these graduates is not reducing the gap in job market. The country had so far experienced and enjoyed competency of hired human capabilities from all over the world though it is not a permanent solution. Saudi Arabia needs to develop their ingenious human resources to replace multinationals. It may looks a huge task, but achievable if Saudi Arabia focuses on developing different level of competencies among their population. To prevent economical drainage and protect national interest, any countries need to focus on developing competitive human resources at least in four categories. The first one is the capitalists who can invest their money and provides muscle power. The second category is entrepreneurs who can utilize the capitals and put the competency of economies for mutual and country benefits. Third category is talent engine that pulls both capital and entrepreneurs towards economical progress and finally the menial labourers. Nation cannot focus on only few human capabilities. Europe is an example. Their manpower capability is limited to few categories and depends on foreign manpower to fill their necessities. With aging population, they are planning to add up to 10 million more expatriate populations from Asia, especially India. European and Asian, particularly Indian governments are formalizing new recruitment policies to benefit both nations. Allowing European and western universities to open their campus in India is part of this grand plan to prepare the competitive manpower to help Europe to recover their economy.

Therefore, Saudi Arabia required a strong exit plan for present expatriates by focusing on their human resources policy. Saudi Arabia would never be independent by depending on foreign manpower unless the manpower is allowed to settle in KSA which is impossible. While Saudi Arabia is pushing and pulling private sector to train and utilize Saudi manpower, government shall require adding soft skills development programs in their curriculum from elementary level to university. Government should also encourage the leading business houses to establish their own training and recruitment institutes to replenish their man power requirements. Airlines, banks, telecom, hotels, tourism, transport, automobile and construction companies are all require to from their union and establish training institutes by partial funding programs in association with government to train Saudi manpower.

Similarly, expatriates also require having their own exit plan. Expatriates so far have taken the advantage of natural kind tendency of Saudis and involved in many business activities against government regulations, thus made them to feel that living in Saudi Arabia is permanent. They all shaken up now with implementation of strict labour inspection and subsequent grace period. It is hard to change the habit with prevailing mindset, but highly necessary to benefit both Saudi Arabia and expatriates.

Meanwhile, absorbing the return of a million more expatriates in India is not at all a difficult proposition considering the strong economical growth of around 7% with numerous business and employment opportunities. Indians must believe that they will be better off in India than gulf because, the world economical shift have already happened. Asia will be the new economical threshold with China and India as prime movers. Unfortunately, community groups and association are doing little to educate the expatriates about opportunities in India, perhaps, the leaders of such associations should think positive by arranging seminars and events.

Migration is part of human progress and looking for a first home through a second home will never end as long as the human race is exists in this universe. Nearly one billion people, means one out of seven is migrating internally crossing borders in our universe. Yet, regulations and principles are essential part of human progress. By ignoring human principles and countries regulations, groups or individuals cannot achieve any progress, no matter how strong they are.