Cancellation of the financial levy for industrial workers in Saudi Arabia: Details and impact
In a pivotal strategic move that underscores the Kingdom of Saudi Arabia's commitment to its economic transformation plans, the Cabinet has decided to abolish the fees levied on expatriate workers in licensed industrial establishments. This decision reflects the ongoing support and keen interest shown by His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince and Prime Minister, in the industrial sector, with the aim of removing obstacles for investors and transforming the Kingdom into a leading global industrial power.
Historical background: From temporary exemption to sustainability
This decision did not come out of thin air, but rather as the culmination of a well-considered phase of government support that began in 2019. The state had borne the financial burden for several years through successive, time-bound exemption periods. The aim of this phase was to test the impact of this support on the sector's growth. Today, the transition from "temporary exemption" to "permanent cancellation" sends a crucial message of reassurance to both local and international investors. It ensures the stability of legislation, provides a clear vision for the future of the business environment, and puts an end to the uncertainty that accompanied exemption renewal periods.
Economic dimensions and objectives of Vision 2030
The industrial sector is a cornerstone of diversifying national income sources away from oil, a key objective of Saudi Vision 2030, specifically the National Industrial Development and Logistics Program (NIDLP). This initiative aims directly to reduce operating costs (OpEx) for factories, thereby enhancing their price competitiveness in international markets and supporting the access of Saudi non-oil exports to new markets.
Eliminating the financial compensation will help to encourage industrial establishments, especially small and medium-sized ones, to direct their financial surpluses towards investment in development and expansion, and to adopt Fourth Industrial Revolution technologies and automation, which will raise the efficiency and quality of production.
Regional and international influence and attracting investment
Regionally and internationally, this decision enhances the Kingdom's attractiveness as a preferred investment destination for global companies seeking a stimulating, stable, and cost-effective regulatory environment compared to neighboring markets. The reduction in labor costs will attract foreign direct investment (FDI) across various manufacturing sectors, supporting global supply chains and strengthening Saudi Arabia's position as a global logistics and industrial hub connecting three continents.
The language of numbers: qualitative leaps and tangible achievements
This strategic move builds on tangible successes achieved during previous exemption years (from 2019 to 2024), during which the sector witnessed rapid growth reflecting the effectiveness of government support. Official data indicates the following leaps:
- Number of factories: It increased from 8,822 factories to more than 12,000 industrial facilities.
- Investment volume: jumped by 35% to reach 1.22 trillion riyals compared to 908 billion riyals.
- Employment and localization: Jobs in the sector grew by 74% to reach 847,000 employees, with the localization rate rising to 31%, which refutes fears that supporting expatriate labor may harm job localization, and has proven the opposite through business expansion and the creation of quality jobs for Saudis.
- GDP and exports: Industrial GDP recorded an increase of 56%, exceeding the 501 billion riyal mark, and the value of non-oil exports rose to 217 billion riyals.
Through these enablers, the Kingdom aspires to triple its industrial GDP to reach 895 billion riyals by 2035, and to offer huge investment opportunities exceeding one trillion riyals in value, thus establishing a solid and sustainable economy.
