Newspapers in Saudi Arabia are reporting that the kingdom's largest construction firm, the Saudi Binladin Group, has axed 50,000 employees – thought to be about a quarter of its workforce.

The move comes just days after the king's favourite son, Prince Mohammed by Salman, announced ambitious plans to make the economy less dependent on oil.

Along with other construction firms in the kingdom, the Binladin group has been facing severe cash-flow problems for several months, leaving tens of thousands of workers – mostly expatriates from poorer countries – without pay.

This, in turn, is mainly a knock-on effect from the Saudi government's own financial difficulties resulting from low oil prices (though it has also been spending vast amounts on the war in Yemen). In a report last month, Reuters news agency explained:

The finance ministry has cut advance payments to firms doing state building work, the government has awarded fewer contracts, and its payments to companies for work already done have slowed.

In absolute terms, the state does not lack money to pay its debts; it still has nearly $600 billion in overseas assets. But austerity controls imposed on government departments have slowed approvals for payments and their disbursement.

The government has not disclosed a figure for the amount of money it owes the companies, but industry executives estimated privately that it could total hundreds of millions of dollars; one executive suggested at least several billion dollars.

The Binladin group has also been out of favour with the Saudi authorities since last September when one of its cranes which had not been properly stabilised during a storm toppled on to the Grand Mosque in Mecca, killing more than 100 people.

In November there were reports that the company was planning to cut 15,000 jobs and earlier this month the Wall Street Journal reported changes in senior management, inlcuding the appointment of Klaus Froehlich, from the banking firm Morgan Stanley, as chief financial officer.

According to the Saudi Gazette, dismissed expatriate workers have been given the option of receiving an immediate exit visa or staying in the kingdom until their wages have been paid. The paper says some have gone unpaid for six months and have had to take out loans to pay rent and school fees for their children. 

Many are reluctant to leave without their money and some doubt they will receive it in full. The paper adds:

An official source in the company said it is in the process of paying one month’s salary to 15,000 expatriate and Saudi workers and engineers. Several workers were not convinced by this measure and described it as a painkiller.

Another firm in trouble is Saudi Oger – chaired by Saad Hariri, the Lebanese politician. In March it was reported that Saudi Oger, the kingdom's second-largest construction business, had been unable to pay its 38,000 employees for four months. 

Unconfirmed reports in Lebanon now say the company is on the point of sacking 20,000 workers – many of them Lebanese from Sidon, a political stronghold of the Hariri family.

Saad Hariri: struggling to pay thousands of employees in Saudi Arabia 

   
Posted by Brian Whitaker
Saturday, 30 April 2016