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Economists divided over benefits of Saudi scheme to support the jobless

The country's Grand Mufti, Sheikh Abdulaziz Al-Asheikh, said he has not yet reviewed Sanid and would do so in due course.

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A government scheme that would require Saudi employees to pay a small contribution from their monthly wages in order to support jobless nationals has been criticized.

Saudis believe the “Sanid” (pronounced Saa-nid) system is pointless and the deductions will only go straight to the government coffers, Sabq daily reported.

The country's Grand Mufti, Sheikh Abdulaziz Al-Asheikh, said he has not yet reviewed Sanid and would do so in due course.

Two prominent Saudi economists had contradicting views of the scheme.

Rashid Al-Fozan said Sanid is a type of social insurance and has a cooperative goal.

It is not a collection fund or investment scheme, he said.

“The system aims to protect Saudis against unemployment in case they leave their jobs and provides them with a monthly salary until they can find jobs,” he said.

He noted Sanid requires employees to pay 1 percent of the monthly salary while their employers will match that contribution.

He said the system would provide financial security to workers who lose their jobs.

He believed Sanid would contribute to the Saudization process in the private sector through increased job security.

However, Abdulhamid Al-Amri believed the system would contribute to an increase in private sector dismissals involving Saudi employees.

He said: “The system serves the goals of businessmen, which is very clear from the fact that we have not seen any of them objecting to the system simply because it has allowed them a further excuse to dismiss Saudi employees.”

Al-Amri believed that businesses would try to avoid paying the additional 1 percent and offer lower salaries to Saudis to offset their contributions, in addition to encouraging more businesses to employ nationals to sit at home in exchange for a minimal salary, a process known as fake Saudization.

He noted the system will burden small and medium size businesses and will result in the closure of many of them.

He said: “Sanid, in addition to the Nitaqat system and the increased labor charges for foreign employees, will complete a deadly triangle.

“This requires an immediate directive to suspend all Ministry of Labor programs that have a negative affect on the national economy.”

The assistant governor of the General Organization for Social Insurance (GOSI) has previously stated that sanctions will be imposed on businesses that do not comply with Sanid’s requirements.

“A fine of SR10,000 will be imposed and that fine can double in case a business repeats the violation,” Abdulaziz Al-Habadan said.

He noted that government and military employees are not included in the system, which will launch in September.

Al-Habadan added the system is a form of cooperative insurance that aims to provide protection against unemployment and covers around 150,000 Saudi employees in the private sector.

"Similar systems are applied in most developed countries and the required 2 percent contribution is less than what other countries are asking for, even Gulf states,” he said.

This article was first published in Saudi Gazette on Monday, Aug. 18, 2014.