Remittances made by expatriate workers in the region has currently ignited a huge debate. There are two views on this issue: the first one is granting more procedural facilities for remittance transactions and reducing remittance fees, whilst the other calls for imposing a transfer fee on each financial transaction and the amounts transferred abroad to reduce their annual value.
Gulf Cooperation Council (GCC) is one of the largest sources of foreign remittances in the world, exceeding 8.2 per cent of GDP at current prices.
Saudi Arabia ranks as the second largest country after the United States in the volume of foreign remittances and the first in the region with remittances amounting to $38.9 billion, followed by the UAE at $32.7 billion, Kuwait at $15.3 billion and then the other GCC countries.
As for the Sultanate, the Central Bank of Oman’s annual report for 2017 indicates that the value of international remittances made by expats from Oman in 2016 amounted to RO 3.952 billion ($10.2 billion), which is a huge amount.
Some wonder whether these amounts are clean or include dirty money collected from illegal occupations and law-violating financial and commercial transactions, an issue that should be followed up by their sponsors.
As some countries in the region are introducing a new system of fees to diversify their sources of income and increase the annual revenue, including new taxes, service charges and fuel prices, experts expect a slight decline in the value of such remittances, as these measures have a direct impact that cannot be assessed in the current period.
Experts in the region believe that precautionary measures to rationalise spending as a result of lower oil prices and job resettlement policies will reduce remittance flows to East and South Asia. They also think that new duties, taxes and financial burdens on labour will lead to a decline in the value of their remittances and thus their savings, whether in the region or in their home countries.
The new fees and taxes, analysts believe, will create an environment that expels expat labourers with lack of skills arriving to the region, increasing the burden yet providing more employment opportunities for GCC nationals and boosting their savings whilst reducing pressure on the balance of payments for GCC States.
The inflows of expatriates in the region are linked to the growth of local economies, which are directly affected by changes in global oil prices.
Experts expect that improvement in oil prices will lead to re-enhancing the presence expatriate labour in line with the expansion of investment spending on development projects upon the increase in oil revenues.
In general, the International Monetary Fund (IMF) has warned in a report that the imposition of taxes on foreign remittances by foreigners in GCC States, which account for more than 90 per cent of the total private sector workforce, involves many disadvantages.
The region needs to launch new initiatives to benefit from the labour savings and create practical solutions to invest some of this money in projects that benefit both parties by providing them with viable investment opportunities instead of diverting them abroad, while at the same time creating jobs for citizens through projects that can be established through such funds.
Haider Al Lawati