RT... The Kingdom is struggling with weak GDP growth, higher fees and taxes, and an economy that is unable to pay the dues to its workers, leaving thousands of workers from South Asia with an uncertain future.
When a nation is unable to provide food to its migrant workers, it says a lot about their financial condition.
The oil price crash has forced the oil-rich Kingdom to introduce austerity measures, and delay payments to already cash-strapped contractors.
“It looks like austerity has hit hard and more than we had anticipated, halting construction projects and stopping hiring,” said Jason Tuvey, Middle East economist at Capital Economics, reports the Financial Times.
During the financial crisis in 2009, the government paid companies to help them tide over the cash crunch, however, this time, the finance ministry has cut advance payments from 20 percent to 5 percent, as reported by the al-Hayat newspaper.
"Money is not being paid at the top level," said one banker to the industry. "This has been going on since October, and it is hard to know how long it will go on for,” reported Reuters back in February of this year.
The stranded Indian and Pakistani workers are evidence that things aren’t any better now than they were in February.
Who is the Hardest Hit?
Construction laborers from India and Pakistan are most affected by the Kingdom’s hardships. This group of workers are left without a job, and without basic amenities such as insurance coverage, food, shelter and medical facilities—a situation that has improved after respective consulates stepped in to offer their own citizens aid.
Why Can’t They Go Home?
The laborers haven’t been paid many months of overdue salary and benefits, and most are not sure how and when their dues will be paid to them—if ever. Under the Saudi system, the employer’s approval is needed to obtain the visas, which has left many stranded.
After having toiled for years, the workers also do not want to return home empty-handed, without taking what is rightfully theirs—in essence, workers are left to wonder whether they should cut bait or double down and try to ride it out. R
“They don’t give us any answers about our salaries,” said Mohammed Salahaldeen, a duct fabricator from Bangladesh, as he stood in a labor camp in Riyadh set up by the Saudi Oger construction company in better days. “After they pay me my salary and benefits, I will go,” reports the Financial Post.
Everything is Just Fine
In a meeting between the India’s junior foreign minister and the Saudi labor minister, Mufrej al-Haqbani, in Riyadh, the Saudi government has agreed to help the workers get their dues.
“Things are not as bad as they have been shown and projected,” the minister said in joint remarks with Mr. Haqbani after their meeting. “Things are very fine. We are in constant touch with all the officials and the various departments of the Kingdom of Saudi Arabia.”
Even other foreign governments are in touch with the both the Saudi government and the construction companies to ensure payment to their workers.
Saudi’s Empty Pockets
Setting aside the Kingdom’s positive outlook, until the Saudi economy reduces its reliance on oil, the situation is likely to get worse before it gets any better. With oil prices reeling close to $42 a barrel, the Saudi economy is likely to run out of cash, according to the International Monetary Fund, as shown in the chart below.
“All oil exporters will need to adjust to the new low oil price,” the IMF warned, reports the Independent. “All” in this case, includes, probably most importantly, Saudi Arabia.
Meanwhile, Saudi Arabia continues its record oil production, reaching 10.67 million barrels per day, up about 120,000 bpd on the prior month—with no signs of slowing. Although this will allow Saudi Arabia to hold onto its marketshare, which they can hardly be blamed for trying to cling to, it will no doubt add to the supply glut, and certainly will not bode well for oil prices in the short term.
And if oil prices continue to languish near today’s lows, it will be years before Saudi Arabia can regain its erstwhile glory.
Originally appeared at OilPrice.com
Poster Comment:
John Tosh I agree. Saudi Arabia signed a deal with the CIA to crush the price of Petroleum and in the process destroy the economies of Russia, Nigeria and Venezuela. They only succeeded in destroying Venezuela. Now Saudi Arabia may be paying the price. Wait until the discontent gets to the sleazy fat oil sheiks who produce nothing and expect to consume everything while abusing the hired help! +8 Tatarewicz /John Tosh • Saudis dropped their oil price and consequently world price to protect market share when Israel and Turkey were buying Syrian rebel oil at half price and marketing it. Russian bombing stopped the trade in stolen oil so the price has been inching upwards, price rise being held back somewhat by Iraqi and Iranian production.
Hayekian/ John Tosh • Venezuela was being destroyed from inside out before the prices fell. It's socialism, pure and simple, having wasted all their oil wealth during the commodity boom (no reinvestment but vote buying schemes AKA "welfare", and all the evils of socialism taking a toll on the productive capacity of most of their people), got stuck with nothing.
Under freedom, low oil prices would mean only that the state would have less pocket money for their petty projects, while the people at large would still go around doing their stuff. Private oil companies would go broke, true (leaving space and resources for more productive and efficient enterprises) but not everybody else.
helen • Twin Evil of the World - the United States and Saudi Arabia. Both support and finance international terrorism.
When both of them are nuked, then only then can the World start exploring peace and harmony on this earth.
The peoples of the World welcome the complete and total nuclear obliteration of both the international terrorists - United States and Saudi Arabia!
Tatarewicz/ helen • But US and SA are supporting terrorism to enhance Israel's security by having Arabs fight among themselves rather than joining Palestinians to recapture lands stolen by the Khazarian mob; US because the Israeli lobby, its Sayanim "army" and Jew corporate media make sure Israel-supporting Democrats and Republicans are elected to Congress. Saudis started out as a band of treacherous Iraqi Jews so just helping out another part of the same Tribe; part of Jewish culture: to always look after their own.
Nuking "twin evil" will not end Israeli-instigated terrorism; Shylocks will just get Brits and Europeans to carry on with it while they keep stealing more land from Palestinians.