Saudi shops closing down ahead of Saudization deadline

Published:  6 Sep at 6 PM
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As Saudi retail outlets shut down due to the Saudization deadline next Tuesday, how will the kingdom’s expat professional community be affected?

By 11th of September a huge number of retail stores and service providers in Saudi Arabia must be able to prove that 70 per cent of their employees are Saudi nationals. Retail sectors affected include motorbike and automobile supplies, men’s, women’s and children’s clothing, office and home furnishing and household goods. Already, stores unable to meet the strict Saudization requirements are closing down rather than facing inspections and fines. In November, the ruling will apply to outlets selling eyeglasses, electrical electronic appliances and watches and, by January 7, retailers of medical equipment, builders’ supplies, carpets and rugs, spare parts for cars and confectionery will be forced to comply or go out of business.

The new moves follow an already enforced ban on foreign labour in car rental offices, outlets selling specific female items and those selling jewellery and gold. Over 200 inspectors have been receiving training and will be on the streets by 11th September. According to reports, the rush for Saudization of the retail trade at this level was intended to free up jobs for Saudi youth, but there’s little sign to date of said youth being interested in taking on relatively poorly paid, often low-skilled positions formerly filled by foreign labour.

Tens of thousands of expats are losing their jobs, with no guarantee the workforce will stay at its required level. Given that expat workers are normally paid more than their local equivalents and remit amounts to their families overseas, revenues for SME retail businesses are still likely to fall and costs will certainly increase with higher prices as a result. Expat professionals living in the kingdom now seem to be considered liable for the full costs of reform, but the closing of local retail outlets and rising prices in general will have an effect on those not drawing huge salaries.

The impact on the economy is likely to be minimal as Saudi households are responsible for 75 per cent of consumption, but the lack of convenience after local stores close down will still be felt, especially by expats attempting to live within their means. It’s also expected that outlets in Saudi’s massive shopping malls may close, as the vast majority of staff are foreign workers.
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