By ANGUS MCDOWALL | REUTERS

DUBAI: A suggestion last month that Saudi Arabia will try to limit how much money expatriate workers send home showed concern about the cost of having foreigners make up nearly a third of the population.

An estimated 9 million foreign workers and their dependents remitted SR26.8 billion ($7.1 billion) out of the country in the second quarter of this year, central bank data shows. That amount was equivalent to 17 percent of Saudi Arabia’s current account surplus at a time of historically high oil revenues.

With the stability of the global financial system threatened by the euro zone debt crisis, and Saudi Arabia keen to use more of its monetary resources domestically under a $130 billion government spending plan announced this year, the outflow of funds may be starting to look uncomfortably large.

The Kingdom, which wants to develop its economy to reduce its reliance on oil revenue, also appears to be waking up to the opportunity cost of having so much economic output produced by foreigners, most of whose money is not spent or invested within the Kingdom.

“The balance of payment considerations are obviously a risk, and they are a structural risk in that if oil prices come down, they would become a challenge,” said Jarmo Kotilaine, chief economist of National Commercial Bank in Jeddah.

“But the Saudi economy has gone through a number of rough patches over the decades without compromising the basic stability of the monetary situation.”

He added, “It’s not an unmanageable problem, but the issue is the opportunity cost of the remittances. Many residents live here for the pure purpose of making as much money as they can and sending as much of it back home to their families as they can. That money isn’t being used to stimulate domestic economic activity.”

Expatriates account for nine out of 10 private-sector jobs in Saudi Arabia. They fill roles that range from domestic service and factory work to management positions in large finance companies.

The value of their remittances has almost doubled in the past five years from an officially recorded SR15.3 billion in the second quarter of 2006. Three economists told Reuters that the true figures for money outflows were probably much higher because they did not include informal transfers.

“In practice, when oil prices are high remittances go up, and when oil prices fall, remittances go down automatically because employment falls and new recruitment falls,” said Khan Zahid, chief economist of Riyad Capital.

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NOTE BY THE EDITORS: Well, there is a reason of course why the expatriate workers in Saudi Arabia and the UAE: No one receives permanent residence permits, not to speak of nationality. Consequently the workers need to save and send the money home. If they could stay they would invest their savings in the country and build their houses here. Immigrant countries such as USA, Australia, Canada have benefited greatly. It is Saudi Arabia’s and UAE’s own choice. If they want to keep the cash they have to keep the immigrants…