How does the residency debate impact potential future GCC growth?

General Electric, the largest US blue chip firm, has just announced that it is to double its workforce in Saudi Arabia from over 800 now to 1,600 by 2013.

Since 2005, the target share of Saudi employment for any private company in KSA has been at 75%, but despite various efforts to replace foreign workers with nationals in line with the government's Saudization initiatives, the Kingdom will not be able to achieve its ambitious goals (to become the world's sixth largest economy by 2050, among others) without the constant influx of foreign workers.

In order to trim the number of expats, which stand for about a quarter of the total population of 28m, Riyadh decided not renew residence visas for low-qualified workers who have already stayed for six years in the country. The UAE, where 90% of the 5.1m inhabitants are expats, goes a similar way. The UAE cabinet instructed selected labour markets to set quotas for the qualifications required for a number of jobs, such as construction workers.

The new trend of setting restrictions does not only apply to the colour of an expat's collar. According to unnamed government officials, applicants from the Arab countries of Yemen, Iraq and from Iran have been facing difficulties in obtaining residence visas for GCC countries. On May 21st Kuwait officially banned visa issuance to nationals from Iraq, Syrian, Iran, Afghanistan and Pakistan due to "political instability" in these countries. In Dubai, the Shari'ah court recently stopped giving foreign marriage candidates its blessing if the bride or the groom does not have a valid residency visa. Confusion over the status of residence visas seems to be the only constancy.

Global visa procedures

This confusion weighs on the GCC's economic development. Not only does it leave companies in uncertainty about their recruitment policies, it also keeps expats away from investing largescale. "Why should I, as an expat worker, buy a house in Dubai if I will be never become a national?" one British expat complains.

A number of European Union (EU) countries have solved the issue by implementing the Schengen scheme, named after a city in Luxembourg. An Emirati national, for example, who works in Germany on a Schengen residence visa is free to travel to any of the 15+ "Schengen states", including to non-EU member Switzerland (note: the UK does not abide fully to the Schengen agreement). At the same time, most EU countries follow a restrictive policy to asylum seekers and political refugees.

According to US economist and director of the Earth Institute Jeffrey D. Sachs, "in history regions and cities with access to a seacoast were the first which became wealthy." These port cities were Beirut, Genoa, Hamburg, Lisbon, Rotterdam or Rio de Janeiro. Some of these places still reap the benefits from their roles as well-connected trade hubs. In addition to that - and this is a key lesson the GCC states can learn - they were mostly open to foreigners and immigrants, attracting wealth and knowhow from all over the world.

Today, the Asian port mega-cities of Hong Kong and Singapore benefit from granting permanent residency status to highly-qualified expats. In Singapore, foreigners are even offered passports after some five years of residency. The same applies to Switzerland (after a minimum stay of eight to ten years) and foreigners in the EU who are married to an EU national, as long as they both reside in his or her country of origin.

The GCC states share one common goal, to become one of the leading economic blocs in the world. Basically the preconditions are good: as home of two thirds of the global oil reserves, constant capital flows are guaranteed. And Saudi Arabia is just at the beginning of exploration for metals and minerals in the mountains and deserts of its Western region.

"While KSA is mostly associated with oil, the Kingdom has the potential to become a second Australia in relation to metals and minerals, and this is a reason to remain bullish for KSA's future," says Jason Peers, CEO of his own founded Jasper Group of Companies and member of the Saudi British Joint Business Council. Exploring such metals and minerals will require more foreign expats... and a transparent visa residency scheme, not only in the Kingdom but in the entire Arab peninsula.