Complex Made Simple

3 big ways Saudi women will contribute to the economy now

A 2013 International Monetary Fund (IMF) report said the MENAP region could have gained $1 trillion in cumulative output (equivalent to doubling average real GDP growth during the past decade) if female labor force participation had been raised enough to narrow the gender gap from triple to double the average for other emerging market and developing countries during that period.

Saudi Arabia has started working recently in this direction by making a few decisions that would create a greater role for women in the society and economic life in the kingdom.

3 historic moves

The years of protests from feminists in Saudi Arabia who have fought for an end to the guardianship system reaped good results this year when King Salman issued an order allowing women to benefit from government services such as education and healthcare without needing their male guardian’s consent.

This was considered by many as a first step towards allowing more freedom for women in the country.

Moreover, the Mayor of Saudi Arabia’s Eastern Province, Fahd Bin Mohammed Al-Jubair, appointed a woman as Assistant Mayor of Al-Khobar municipality on September 25.

The Saudi Gazette quoted Al-Jubair as saying that the municipality needed the female element, with the rapid growth of malls and supermarkets, where women are working.

“Ghamdi’s appointment is within the municipality’s endeavors to develop the civic work and within the need to give women leading positions in the municipal work especially after they have become members of the municipal councils,” he said.

Moreover, Saudi’s recent decision to end the driving ban for women is one step forward towards reaching this goal which also goes in parallel with achieving Vision 2030 formulated by Crown Prince Mohamed Bin Salman.

Drive for growth

According to CNN Money, ending the driving ban should bring broad economic benefits, and help the government meet its target of generating 65 per cent of GDP from the private sector.

This step aims to lift the employment rate of women from 22 per cent presently to 30 per cent, according to CNN Money, which adds that Saudi overall unemployment currently stands at 12.7 per cent.

Such initiatives throw open doors for many more Saudi women to contribute to the country’s economy and growth.

What do economists have to say?

“The relatively high unemployment rate in Saudi means that if anything, the entry of potentially thousands of women into the work force will add to labour market imbalances and the government will accelerate the program to replace foreign workers with Saudis,” said Farouk Soussa, chief Middle East economist at Citigroup Inc.

“Rather than increasing growth prospects by increasing labor input in the economy, the benefit will come from improving the skill levels and competitiveness of the Saudi labor market, albeit at the cost of adding to oversupply issues in that market,” he added.

Soussa noted that eliminating the driving ban will also help women get rid of their reliance on drivers giving them greater access to the retail sector.

“The most important near-term impact will be from a reduction in Saudi women’s reliance on drivers. This will not only mean greater access to the economy, including the retail sector, but will also mean a reduction in a large component of highly unproductive foreign labor – drivers. This, in turn, will mean a decline in outward remittances and more money ‘staying home’ to circulate in the economy,” he said.

Dima Jardaneh, head of Middle East and North Africa research at Standard Chartered in Dubai, says: “A key impact of eliminating the ban would be a boost to household consumption, including from the potential purchase of a second vehicle for some households and the easier mobility of women.”

“Independent mobility for women would definitely ease their entry and participation into the workforce, particularly as they would not have to secure a mode of transport to come to work. This would also reduce the cost of employment for women particularly if they do not have a private means of transport,” she added.

She also noted: “Even so, given the low participation of Saudi women in the workforce, a meaningful change in this would require a host of other structural measures, such as a change in social norms and readiness of work places to accommodate female employees.”

Big impact

Meanwhile, Alia Moubayed, director of Geo-economics and Strategy at the International Institute for Strategic Studies, believes that allowing women greater access to the workforce and higher earning potential will have far reaching impacts.

“Women tend to invest a large proportion of their household income in the education of their children and more earning among Saudi women would raise school enrollment for girls, which is a critical factor helping to reduce poverty and lifting standard of living,’’ she said.