A look into the SR120 billion initiative to support the private sector amid the COVID-19 crisis.
The global outbreak of Coronavirus happened gradually, but somehow also suddenly. For a few weeks, it seemed like no one was prepared to face the real implications of the novel virus, and quickly, businesses began to close down and activity dwindled until whole countries announced full-day lockdowns. The times came with mass uncertainty and concern; it is perhaps an exaggeration to say such sentiments excluded the Kingdom of Saudi Arabia, but it is safe to say the Kingdom was not wasting time. Today’s great, government-wide initiatives to overcome the Coronavirus challenge stem from Saudi Arabia’s commitment to an already-written plan. Indeed the Kingdom is accustomed to long-term goal setting and immediate action; the Vision 2030 details a ten-year plan to diversify Saudi Arabia’s economy from oil dependence, and had recorded impressive levels of success less than five years on. While the new decade brought in good stats for the Kingdom, it also came with a global challenge that is currently seeing economic titans and nations of great power suffering, but not Saudi Arabia.
To mitigate impact and limit negative aftermath, the Kingdom focused more than half of its stimulus package to the private sector, a booming limb and a key focus point of the Saudivision. First response included a series of assignments for several Saudi Arabian authorities with an emphasis on relieving the pressure of SME’s and private sector organizations who had to send their employees home. Luckily, the Kingdom had invested in an endless list of digitized platforms, so work from home became just work. The focus areas were most prominently Human Resources Development, taxes, SME support and regulatory flexibility across all platforms.
Multiple ministerial committees have issued instructions to study the impact of the novel Coronavirus as well as the opportunities to mitigate it whether it is through support, motivation or other methods. The Council of Ministers headed the hierarchy and was followed by a secondary committee consisting of authorities related to Energy, Trade and logistic services. Decisions started outpouring from the organizational structures on an almost daily basis.
Why support the private sector?
The private sector was always a target for the Saudivision. The goal, even pre-COVID-19 was to improve the attractiveness of investment culture in the Kingdom. Supporting the private sector mitigates economic slowness and spins the gears of a healthy economy. The Kingdom, in response, dropped a SR70 billion stimulus package and delegated resources across its most critically-threatened sectors following a PEST analysis and a comparative study of what other nations have implemented to ease tensions caused by the virus outbreak.
Social Insurances administered by the General Organization for Social Insurance (GOSI)
GOSI offered Saudi nationals compensations for the months of May, June and July effective as of the month of May. The compensation equaled 60% of the salary registered at the organization itself. Beneficiaries must meet conditions including being already registered at SANED, the unemployment branch of GOSI. For organizations with more than five Saudi nationals employed, 70% of those employees are covered. For those with less than five nationals, all receive compensations.
Human Resources Development administered by the Ministry of HR and Social Development
The support of HR and social development included a massive push to private sector employees and included training, employment and job seekers’ aid from the HR Development Fund. The Fund is investing SR5.3 billion and offering remote working tools and training. Its initiative aims to support private sector employees whose employment began as of June 1, 2019, and it includes 30% of a qualified employee’s salary will be paid during the first and second year of employment (24 months) if their salary range was SR4000 to SR15000. In that case, 50% or a maximum of SR3000 is compensated, whichever is lower. An extra 10% is contributed to women who work, handicapped employees and employees in small towns and villages.
The Ministry of HR and Social Development is offering exemptions for workers with expired visas, extending those visas for three months. As for employers who invested in corporate immigration visas whose passport holders were supposed to arrive within the quarantine period, the Ministry is offering refunds and three-month extensions. Suspensions due to penalties are lifted for the time being, allowing for more flexibility. Ajeer portal offers an exchange of workers with less regard to usual regulations; private sector employers affected by the virus can now allow their workers to transfer to other private sector organizations under high demand given the current situation.
Taxes administered by The General Authority of Zakat and Tax
The General Authority of Tax and Zakat is offering extensions and regulatory flexibility to relieve the private sector. Its initiative includes postponements related to VAT and selective goods tax for the period of 3 months, as well as the postponement of Zakat reports submissions and respective payments.
SME Support administered by SAMA
The Saudi Arabian Monetary Authority is offering a SR50 billion stimulus package, mostly benefiting financial institutions and SME’s. A SR30 billion program is launched to postpone payments. The package is pumped into the financial sector to enable it to postpone outstanding payments by small and medium size enterprises. The second program is worth SR13.2 billion and aims to facilitate financing of SME’s through loans for their owners. The third and final program is worth SR6 billion and focuses on granting exemptions from cost funding guarantees for SME’s.