Saudi Arabia is to allow 10m expatriate workers to change jobs and leave the country without their employers’ permission, as it seeks to modernise its controversial kafala system, diversify the oil-reliant economy and create more jobs for Saudi nationals.

Since the kingdom discovered oil in the 1930s, it has been reliant on foreign labour, from western engineers who helped found the hydrocarbons industry to millions of low-income labourers manning the construction boom triggered by those oil riches.

But to date, overseas workers have been tied to their sponsor, who is responsible for their legal status in a system known regionally as kafala. Rights groups have criticised this system as akin to indentured labour and say it leaves workers vulnerable to abuse.

From March 2021, foreigners, who make up a third of the population, will be able to move jobs and secure exit visas electronically without the prior approval of their employers, the Ministry of Human Resources and Social Development announced on Wednesday.

“This set of reforms will safeguard the rights of both employees and employers in the private sector,” said Sattam Alharbi, a deputy minister. “They will abolish the mobility differences between Saudis and non-Saudis — meaning employers will hire based on capabilities and qualifications.”

Saudi Arabia’s planned reforms come as Gulf states seek to overhaul its labour markets to better suit the knowledge-based, open economy envisioned by the ambitious crown prince, Mohammed bin Salman. The ministry said the reforms would increase competition in the labour market, which would in turn boost wages and public spending.

READ ALSO  Black Friday Shoppers Expected To Spend More Online Than In Stores For First Time
From March 2021, foreigners will be able to move jobs and secure exit visas electronically without the prior approval of their employers © Fayez Nureldine/AFP via Getty

The reforms could also create more jobs for Saudi nationals, particularly the kingdom’s growing population of young people. Unemployment in the kingdom is rising — up from 11.4 per cent in the first quarter to 15.4 per cent in the second quarter — as the economy reels from the impact of the coronavirus pandemic and lower oil prices.

“If this turns out to be a serious reform, it could also play into the Saudisation agenda — part of the appeal for companies in hiring migrants has been the ease of controlling them through the abusive kafala system,” said James Lynch, a director of FairSquare, a London-based human rights organisation. “But there is not much overlap between the jobs migrants do and the work Saudis are qualified and want to do.”

Kafala has long been a stain on the reputations of Gulf states, painting them as exploitative employers of the mainly south Asian communities that build and maintain the peninsula. Domestic workers, who are particularly vulnerable to abuse, are not included in the reforms and some question if the changes go far enough.

“This announcement focuses in on some of the most problematic elements of kafala — the fact that workers can’t leave the country or change jobs without their employers’ permission,” said Mr Lynch. But it is not clear how workers would change jobs and why exit visas would still be required, he added. “The proposed changes could be positive but there is very little detail to make a proper assessment.”

Steffen Hertog, an associate professor at the London School of Economics, said the reforms would improve workers’ bargaining position. But he cautioned that “the relaxation of sponsorship on paper has not changed that much for low-skilled workers in other Gulf countries in practice, so we’ll need to see which complementary reforms there will be, such as information campaigns and crackdowns on abusive employers”.

READ ALSO  Happy Investors Own Deere (NYSE:DE)

Qatar’s hosting of the Fifa World Cup in 2022 brought the gas-rich state’s use of kafala under intense scrutiny as it embarked on a $200bn infrastructure programme for the soccer tournament. In August Qatar, which first pledged to end kafala in 2016, allowed foreigners to change jobs without their sponsors’ permission and set a basic minimum wage for private sector and domestic workers.

Via Financial Times