Remittance from Saudi Arabia is a gift that keeps on giving. Well, it’s not the kind of gift that Dar proudly received; rather it’s the hard-earned money of Pakistani expats toiling there in sweltering heat. The figure shows that in the last decade, Saudi-origin remittances’ share has doubled in Pakistan’s overall remittances to 30 percent in FY14. These inflows have consistently outgrown and driven Pakistan’s overall remittances during this period.
Pakistan received $4.73 billion in remittances from the Kingdom in FY14-–that’s the highest-ever sum from any single country. About 1.5 million Pakistani workers-–mostly blue-collar-–are estimated to be working there. Many more are immigrating to the holy land every year. Pakistan’s Bureau of Immigration and Overseas Employment data show that 0.27 million Pakistani workers officially went to Saudi Arabia in 2013.
But the stellar growth lately makes one curious. Recall that around this time last year, the Saudi Ministry of Labour’s jobs localisation campaign-–informally dubbed as Saudisation-–had caused a scare. It was feared that Saudi remittances may no longer be durable because of dual blow of migrant crackdown and shift towards local employment. Saudi officials were reported to be strictly enforcing the Nitaqat Law, which required Saudi companies of various sizes to employ certain percentage of Saudi nationals on their payrolls or else face penalties.
A year later, however, the annual growth in remittances has increased over previous year, rather than decreasing. While there is no publicly available data on deportations, the official data reflects the continuing attraction of the Saudi job market-–out of the 0.62 million Pakistanis registered for overseas employment, 43 percent were heading to Saudi Arabia, mostly for blue-collar jobs in construction labour, followed by masonry, carpentry, electrician works, etc.
The crackdown was real and messy, but it has had no negative impact on remittance inflows or immigration so far. What is going on? The Economist Intelligence Unit has a plausible explanation of the general trend. In its country report for Saudi Arabia, the EIU recently highlighted that “average monthly salary of foreigners in the private sector rose by 25% in 2013, to SR1,808 (US$482), while that of Saudis fell by 1%, to SR4,748”.
In an information vacuum, that’s an important revelation that should be cautiously analysed. “Ostensibly the findings are surprising, given that the government has been energetically trying to deter firms from hiring expatriates (including by imposing fines on those firms with a more than 50% foreign workforce) while also seeking to force companies to hire Saudis on higher wages,” the analysis noted.
With one million foreign workers leaving the country in 2013 due to crackdown, the EIU notes that the declining pool of employees must have worked up the wages of the remaining employees. Since most send-offs are presumably among blue-collar workers, the slack could not be covered by a Saudi labour force that has different skill-sets and prefers the better-paying public sector jobs.
This shortage-induced mismatch perhaps explains why Saudis have issued nearly a million new work visas so far this year. But the Saudisation drive has not been all bad for the Saudis. EIU noted the number of Saudi women working in the private sector has surged by 85 percent to 398,538. But the policy hasn’t worked to its maker’s liking yet.
The data reported by the EIU is just one piece of the puzzle. But it shows that the policy hasn’t quite grasped the core issue of the indigenous job market. Locals seemingly prefer handsomely-remunerative and cushy public sector jobs that are not many in number, so they shy away from private sector jobs that are relatively abundant but pay less and demand more. Skill-sets’ matching in the private sector is another issue.
In any case, it now seems that foreign blue-collar workers are not the ones in the way of local people getting private sector jobs. That’s good news for Pakistani remittances, and that perhaps explains why Pakistan’s remittances continue to be robust from the Kingdom.