How much will Saudi Arabia save by allowing women to drive?

26th September 2017 will be written in golden words in the history of Saudi Arabia as King Salman issued a Royal decree to allow women to drive in Saudi Arabia that day. It is a very positive step which will bring many social and financial changes in Saudi Arabia.

I really appreciate the step taken by King Salman not in the support of the women but in the support of the Saudi internal business condition. I believe that the reason behind this historic change is financial rather social. It is a very positive step to counter the current financial crisis in Saudi Arabia.

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Although the Royal decree has been issued to allow women to drive in Saudi Arabia, Saudi Arabia still has to go a long distance to actually start issuing driving licenses to women. We believe that there are 7 Steps needed to start issuing driving licenses to women in Saudi Arabia.

1-More Saudi Working Women: Analysts are expecting that at least 100% more women will enter the workforce of Saudi Arabia. It means that 200,000 jobs of expatriates are in danger. If an expatriate earns SR 4,000 per month on average, it means that SR 800 million per month will be added to the incomes of Saudis i.e. SR 9.6 billion a year.

2-No More Domestic Drivers: There are around 1.4 million domestic drivers in Saudi Arabia. At least 60% of these drivers will be terminated as women would love to drive themselves. An average driver draws a salary of SR 1,500 per month. Terminating 800,000 drivers will save SR 1.2 billion per month and SR 14.4 billion a year.

The cost to renew iqama is SR 500 for a domestic worker. Cutting off the job of 800,000 drivers will save not less than SR 400 million to the Saudi families.

Saudi families have to provide these drivers a separate room and incur other expenses on them e.g electricity, water etc. If we assume that the cost of these expenses is SR 500 per month, Saudi Arabia will be saving around SR 400 million per month and SR 4.8 billion a year.

While they are living in Saudi Arabia, they also need a return ticket to their home country. On average the domestic driver visits his home country once in every two years. If this is the case and an average return ticket costs SR 2,500 per person. Saudi homes will be saving SR 1 billion on return tickets. Overall, Saudi people will be saving around SR 20.6 billion a year by terminating these expat drivers.

3-Reduction in Foreign Remittance: Foreign remittance is a huge burden on the shoulders of the Saudi Economy. As we have stated earlier, Saudi women will be earning SR 9.6 billion a year which goes directly to the pockets of expatriate employees. By terminating the domestic drivers, they will not have to pay SR 14.4 billion to expat drivers.

In this way, around SR 24 billion will be going to the pockets of Saudi people from expatriates. Let’s say if an expatriate remit 60% of this money back to his home country, there will be a reduction of SR 14.4 billion (9.5% of SR 152 billion for the year 2016) from the annual foreign remittance.

4- Value Added Tax: The total population of Saudis is around 20 million out of which around 9.5 million are women. 35% of the Saudi population is below 18 years old and 5% is above 60 years old. This 40% Saudi women population will be least interested in driving the cars at this point in time.

If only 30% of the interested women population of the country buys a new car, it makes a figure of 1.7 million new cars on the roads. If 1.7 million women buy a new car at an average final sale price of SR 90,000 (Price for Toyota Camry). An amount of SR 7.7 billion will be collected by the government in terms of value-added tax.

5-Healthcare Expenses: These domestic workers are allowed to take the same healthcare from the government hospitals which is allowed for Saudi citizens. If Saudi government spends SR 200 per month to a domestic worker, it means a saving of SR 1.92 billion to the Saudi government.

6-Subsidies: Both Saudis and expatriates living in Saudi Arabia are enjoying a subsidized price of water and electricity. On average, Saudi Arabia is giving a subsidy of SR 50 per month per resident. If 1 million expatriates leave the Kingdom, the government will be saving around SR 600 million a year.

Overall, it is a saving of around SR 40 billion a year to the people of Saudi Arabia and Saudi government. In short, there are many reasons to believe that Saudi Economy will recover by allowing women to drive.

How much is SR 40 billion? Let me give you an example, Saudi Arabia raised around $9 billion by issuing Islamic Bonds in April 2017 i.e. around SR 34 billion. They did not have to borrow this money had they implemented this step last year.

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