Saudi Arabia Releases $1 Billion to Help Laid-Off Migrant Workers

Saudi Arabia Releases $1 Billion to Help Laid-Off Migrant Workers

Saudi Binladin Group is said to get money owed by government so it could cover unpaid back wages

Indian workers in a hotel in New Delhi on Sept. 29, after they were repatriated by the Indian government from Saudi Arabia. They left India for Saudi Arabia with big dreams, but returned with harrowing tales after an oil slump threw the economy into turmoil, leaving thousands of migrant laborers stranded. PHOTO: MONEY SHARMA/AGENCE FRANCE-PRESSE/GETTY IMAGES

By NICOLAS PARASIE in Dubai and SUMMER SAID in Riyadh

Updated Oct. 2, 2016 8:39 p.m. ET

1 COMMENTS

Saudi Arabia has released about $1 billion in money owed to its biggest construction firm as part of government efforts to contain simmering labor unrest aggravated by low crude-oil prices.

The family-owned Saudi Binladin Group, the giant involved in such flagship projects as the Holy Mosque expansion in Mecca and Riyadh’s financial district, was paid between $800 million and $1.1 billion in September so it could honor unpaid wages, according to two people familiar with the matter.

The government payments, not disclosed at the time, were intended to give the mostly migrant workforce—tens of thousands of idled laborers—enough money to afford to leave the kingdom, these people say. Precise figures on the number affected or the total owed weren’t available. Payments began slowing more than a year ago as government oil revenue dwindled.

A spokesman for Saudi Binladin confirmed the payments were made but declined to give more details.

Another major construction company here, Saudi Oger, owned by a Lebanese family, is on the verge of bankruptcy, unable to pay thousands of current and laid-off workers, two bankers familiar with the matter said. It couldn’t be determined whether Saudi Oger, which is owed billions of dollars, also received government payments recently. The company didn’t respond to requests to comment.

The ministries of labor and finance and the Saudi government didn’t respond to several requests to comment.

The industry’s troubles are rippling through the sector, hitting subcontractors and smaller companies. The government’s shrinking oil revenue has led to massive layoffs and rare signs of labor unrest.

In addition, other countries that have sent large numbers of workers to Saudi Arabia have been hurt. The World Bank blamed slower growth forecasts for several South Asian countries partly on lower remittances from Gulf countries, including Saudi Arabia, due to lower oil prices.

Saudi Binladin Group has dismissed more than 70,000 people in the past year, out of a workforce of more than 200,000, mostly from Asia and other Arab countries. Unpaid or out-of-work laborers have staged sporadic protests, including setting fire to company buses earlier this year in Mecca.

The group has also overhauled its management, bringing in seasoned executives to deal with the cash crunch resulting from a dramatic scaling back of government spending, according to bankers and officials briefed on the matter.

One of the people briefed on the September payment said it doesn’t resolve all of the group’s problems. “This is a Band-Aid, this is not the final solution, it’s only the start of what [the Saudi government] should have done a long time ago.”

Meanwhile, conditions in the camps where many migrant workers live have drastically deteriorated in recent months, with some even running out of food.

In an embarrassment to the wealthy Saudi regime, the Indian government about two months ago distributed food to some laid-off Saudi Oger workers from India, stranded because they can’t afford a ticket home. “To have planes full of food coming from India,” said a Saudi-based banker, “that was really unacceptable.”

Saudi Arabia has been trying to boost the price of oil, which fell below $30 a barrel this year for the first time in a decade amid a supply glut, from over $100 just two years ago.

Saudi negotiators and other members of the Organization of the Petroleum Exporting Countries agreed Wednesday that they need to reduce crude output, a shift for the often-fractious group, but deferred until November the fraught task of determining how much each would have to cut.

At the same time, Saudi Arabia is seeking to reduce its oil dependence mainly by opening up to foreign investors and stimulating the private sector. The government also is reining in spending and raising taxes to fill a gaping $98 billion budget hole it reported last year.

In the latest deficit-cutting measure, Saudi Arabia said last week that it is reducing the salaries of the country’s top officials and scaling back perks for all government employees. King Salman ordered a 20% salary cut for ministers and a reduction in allowances for members of the Shura Council, the country’s highest consultative body, according to the state news agency.

The kingdom is also reassessing plans for construction projects worth tens of billions of dollars. The value of new construction contracts in Saudi Arabia fell by 59% year-over-year in the first half of 2016, according to analysts at National Commercial Bank, which they said was mainly due to the government scaling down its investments in public infrastructure.

Fewer megaprojects mean far fewer construction jobs.

As layoffs mount, labor disputes are piling up in Saudi courts. The plight of foreign workers involved in such cases is complicated by the sponsorship system known as kafala under which they need permission from their ex-employer to leave the country.

In the past few months, Egyptian engineer Ahmed Moustafa has been spending most of his days in the sweltering Saudi capital running among various ministries and departments. He stopped receiving a salary from his employer, another distressed Saudi construction company, also almost a year ago. But he hasn’t been able to obtain an exit visa to get home.

“We spent days queuing at the labor ministry where we got nowhere,” Mr. Moustafa said. “We went to the Egyptian embassy and we were turned away,” he said. The interior ministry advised him to go back to the labor ministry.

Write to Nicolas Parasie at nicolas.parasie@wsj.com and Summer Said at summer.said@wsj.com

http://www.wsj.com/articles/saudi-arabia-releases-1-billion-to-help-laid-off-migrant-workers-1475449190

kcontents