Saudi Arabia: Binladin job losses rise to 89,000

The number of job losses at the Binladin construction firm in Saudi Arabia has now reached 89,000, according to company sources cited by al-Watan newspaper.

Some 77,000 expatriate workers have been dismissed and issued with exit visas – an increase on the 50,000 figure reported at the weekend. In addition, 12,000 out of 17,000 Saudi employees are facing dismissal. Altogether, this amounts to just over 40% of its total workforce inside the kingdom.

The company, which was founded by Osama bin Laden's father and is the biggest construction firm in Saudi Arabia, has been heavily dependent on government contracts. It is now facing severe cash-flow problems, largely because of the government's own financial difficulties resulting from low oil prices and exacerbated by the hugely expensive war in Yemen.

In March, Reuters reported that the Saudi finance ministry had cut advance payments to firms doing state building work, that it was awarding fewer contracts and that its payments to companies for work already done have slowed. 

The Binladin company is also excluded from new contract work for the government – at least temporarily – as a result of the tragedy last September when a crane which had not been properly stabilised toppled on to the Grand Mosque in Mecca during a storm, killing more than 100 people.

Bloomberg quotes Talha Nazar, head of research at Aljazira Capital Co as saying that Saudi Binladin "may not get the preferential treatment it had in the past and may have to be limited to contracts from [the] private sector in the future". Nazar suggests that without new government contracts the company's financial problems could rebound on the banks.

Bloomberg adds:

Saudi Binladin stopped work on one of its biggest projects, the King Abdullah Financial District in the capital, Riyadh, after what it described as delayed payments. The project’s owner threatened to cancel the company’s contracts and award the work to other builders within weeks if Binladin doesn’t return to the site. The district’s chief executive officer and project manager Waleed Aleisa said the owners have made payments in accordance with completed work.

Binladin employees have been protesting outside the company's premises in Mecca and Jeddah for weeks, complaining about non-payment of wages. Many claim they have received no wages for several months and have got into debt as a result. A riot broke out in Mecca on Saturday when angry workers burned seven of the company's buses.

The company is widely reported to have given workers the option of resigning (with two months' wages as severance pay) or hanging on for the full amount they are owed (plus two months' severance money). 

The Saudi Gazette suggests Saudi employees are opting to wait for their money (presumably relying on support from their families in the meantime). The position of expatriate workers is more difficult, however. If they stay in the kingdom awaiting the delayed payments they are likely to get into debt (if they are not in debt already); if they leave the kingdom with two months' severance pay their fear is that they will never receive the rest of what they are owed.

However, the Saudi Gazette quotes a Labour Ministry official in Mecca as saying that "the ministry will make sure that all the expatriate workers who were given final exit visas receive their emoluments before they leave the kingdom".

According to the Saudi Gazette, the Binladin company's monthly wages bill is 414 million riyals (about $110 million).

YouTube video of the burning buses in Mecca

Last month, in an interview with Bloomberg, Prince Mohammed bin Salman was asked about delayed payments to government contractors. The prince, who is in charge of the Saudi economy, replied: 

There’s no doubt this issue will be dealt with. What causes this commotion is that we were trying to avoid a bigger danger. We tried to compile all decrees over the last few years and we found that ministries could commit to more than $1 trillion based on these decrees. 

There were also decisions approved six years ago and to this day, no contractual agreements were made by these entities. However, these entities still had the power to sign on more than $1 trillion. If passed, this would have been a catastrophe. So we froze them in 2015 and abolished three quarters of them that had no contractual commitment. 

The remaining quarter are things that have contractual agreements and things that we need to move forward on. We’ve started to restructure the process of handling them which is what caused this confusion in the past. But no doubt we are committed to any contractual agreements made by the Saudi government. But there was a grave danger and we were able to avert it.

The prince added: "A number of companies have already been paid and the rest is on the way."

Another firm in trouble is Saudi Oger, the kingdom's second-largest construction company, which is chaired by Saad Hariri, the Lebanese politician. 

In March it was reported that Saudi Oger had been unable to pay its 38,000 employees for four months and unconfirmed reports now say the company is on the point of sacking 20,000 workers.

Commenting on this in the Bloomberg interview, Prince Mohammed drew a distinction between the situation at Binladin and that at Saudi Oger:

The problem with Saudi Oger is different to one we have here in Saudi. We have paid them many instalments, but they have debt in and out of Saudi. So as soon as money is transferred to their bank accounts, the bank withdraws it. 

Saudi Oger can’t cover their own labour costs. That’s not our problem, that’s Saudi Oger’s. The contract between us and Saudi Oger, we will honour it. But if the bank withdraws our instalments and Saudi Oger can’t pay a thing to its own contractors and workers, that’s their own problem. They can take them to court.

Posted by Brian Whitaker
Tuesday, 3 May 2016