Contractors in Saudi Arabia could lose as much as $1.8bn a year following the Ministry of Labour’s decision to increase the cost of foreign labour, a contracting committee has warned.

A report in Arab News said that discussions, workshops and meetings were taking place between the ministry and chambers of commerce as contractors looked at options for obtaining reimbursements for their current contracts.

Earlier this year, the Ministry of Labour increased the annual amount paid by contractors for each foreign worker to SR2,400. Contractors have protested that this decision could have multiple ramifications to their industries.

The contracting committee of the Abha chamber said that the ministry’s decision would worsen the problem of casual labour, as more workers would defect from their sponsors, so as to find work in regions with higher wages.

The committee warned that smaller contractors were considering halting all works till the situation was resolved.

Furthermore, contractors have said that irregular employment would work out to be more expensive in the long term than the fees paid for an expat worker. They added that the decision would impact a number of sectors, and would not solve the issue of Saudisation.

Small and medium sized enterprises and subcontractors could be driven out of business, it warned.

As the Ministry of Labour has not responded to the contractors’ worries, the committee said that it is in the process of submitting a report to the Royal Court, explaining the damages it sees being inflicted on local businesses.

However, it stressed that companies should follow the legal procedures in place and cooperate with the Ministry for the time being.