Riyadh facing pressure on delayed workers salaries

08 March 2016

Foreign governments have asked government and construction companies to pay delayed salaries of thousands of workers

Foreign governments are pressing authorities in Riyadh and executives in the contracting industry to ensure thousands of construction workers get paid delayed salaries.

Riyadh has ordered a freeze on the award of new projects and has withheld payments to contracting firms as it struggles to plug the anticipated $86bn budget deficit this year. Riyadh is running an austerity campaign which includes cutting down on infrastructure spending as it tries to cope with shrinking oil revenues and a slow down in economy.

Delay in payments from the government has created serious cash flow issues for construction companies, especially, those who rely heavily on multi-billion dollar state contracting for business. In order to cut cost and manage cash reserves, some of the contracting firms have delayed paying wages to thousands of their foreign workers. Workers have not been paid for months at some of the companies.

Countries taking up the cause of the unpaid works include the Philippines, France and Bangladesh, according to news agency Reuters.

In Manila, Labour Secretary Rosalinda Baldoz told Reuters that the Philippines embassy in Riyadh was contacting Saudi authorities to resolve the issue and officials from the Philippines are meeting with the workers, employers.

In recent weeks, the French ambassador to Riyadh sent a letter to the chief executive of Saudi Oger, one of the country’s biggest builders with about 38,000 employees, asking it to resolve the cases of French staff who had not been paid for four months, the new services quoted a diplomatic source as saying.

Bangladeshi diplomats said they had contacted major Saudi construction firms to discuss wages that had gone unpaid for over two months.

All private sector companies were obliged to pay salaries on time and that it would impose sanctions against firms, which were late, the Saudi Labour Ministry said in a statement to Reuters, without elaborating, or commenting on individual cases.

An executive at Oger said his company, like others, had been affected for several months “by the current circumstances which resulted in some delays in fulfilling our commitments to our employees”.

Oger has adopted a recovery plan which will enable it to resume payments from March, the executive said, without giving financial details.

About 10 million people, largely from south Asia, Southeast Asia and other parts of the Middle East, work in Saudi Arabia, most of them employed in low-paid jobs.

At some companies, including Saudi Binladin Group and Oger, hundreds of unpaid foreign workers have halted work and took to streets to demand their wages.

Unnamed industry executives have also told Reuters they had been informed by authorities that the government intends to pay its debts by the end of this month. Others, however, were sceptical, saying such undertakings had been made and broken repeatedly in recent months.

MEED on 3 March reported that Riyadh is preparing to pay the SR180bn ($48bn) it owes to contracting firms in the kingdom this year, in a bid to ease pressure on the construction sector.

These payments constitute a major part of the total amount Riyadh has withheld since last year, according to two Riyadh-based bankers familiar with the matter. The government still has an estimated $10bn backlog on top of the payments due to be released in 2016, said one of the bankers, who asked not to be named as the information has not been made public.

“Nothing has been released as yet, but everything is agreed on who will get how much,” the banker said. “Payments will be released gradually, starting March.”

The government has laid down a schedule and it has already been conveyed to the major contractors, the banker said adding that there are no haircuts involved and that the contractors will be paid in full by the government. However, there is no clarity about when Riyadh plans to clear the remaining backlog.

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