Drake & Scull International’s cost to employ staff in Saudi Arabia has doubled since the government began a clampdown on illegal workers, says the company’s chief executive.
Almost a million foreign workers are believed to have departed the kingdom between March and November last year after authorities began enforcing work permit rules. The total number of foreign workers was estimated at 9 million before the action.
DSI has 12,000 staff on corporate visas in the kingdom, helping to reduce the impact of the new rules. But the law effects the company when it requires extra staff from the local labour market for certain jobs.
Saudi Arabia represents about half of the order book and revenues of the Dubai-listed company.
“From a government side, I can understand why they’re doing it but from the point of view of contractors it is making it very difficult to meet schedule based on the fact that labour laws are prevalent,” said Khaldoun Tabari, chief executive and vice chairman of the company, on the sidelines yesterday of a gathering in Dubai of the Beirut Institute, a think tank. “It increased our labour cost. Some contractors do not have workers [on corporate visa] so it affected them more. For the few people we got [from the local market], the rates went from Dh12 to Dh13 an hour to Dh23 to Dh24 an hour.”
The Saudi legislation is the latest move by the government aimed at seeking to cut unemployment among its local population. The jobless rate runs at 10.5 per cent officially, but the data does not include the huge numbers of locals not counted in the labour market.
But the Dubai-listed DSI said it was still focused on trying to win new contracts, with potential tenders in the pipeline relating to hospitals and other civil infrastructure schemes. About 10 per cent of the company’s staff in the kingdom are Saudi.
“We have been there for a long time and we will continue to do so,” he said. “The work in Saudi Arabia is tremendous and we anticipate the same in the coming four or five years.”
DSI, a mechanical, electrical and plumbing specialist, announced last month that it would not be recommending a dividend for last year. Coming on the same day it announced a 61 per cent rise in net profit last year, the news sparked a sell off in its stock.
Mr Tabari defended the decision.
“We have come out of the financial crisis,” he said. “This is the second year and we are still trying to balance out things on the balance sheet, and we don’t see a need to put a strain on our balance sheet. I can see a dividend next year, but I don’t see one for last year.”
The company's share price has more than doubled in the past year on the Dubai Financial Market. Yesterday shares dropped by 3.4 per cent to Dh1.68 each.
tarnold@thenational.ae
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