Saudi Arabia’s economic vision explicitly seeks to deploy permanent residency permits as a means of developing the economy, though little is known about the precise growth-inducing channel that policymakers have in mind.
A new study suggests that creating an analogue to the US green card system may bolster innovation, an attractive corollary for the Gulf countries, all of which are seeking to enhance research and development within their economies.
Before exploring this new research, it is worth highlighting the mechanisms that the Saudi government most likely had in mind when it included green cards in Vision 2030. A salient one is the investment channel.
In many countries in the world, including some of the most advanced economies, if a non-citizen, non-resident invests a sufficiently large amount (possibly millions of dollars), they earn permanent residency.
The green card is partially a generic reward for undertaking actions that are beneficial to the local economy, and partially a tailored incentive: a foreign investor will feel far more comfortable injecting capital if they can monitor their investment first hand, reside in the same country, and be afforded access to the same legal protections as those interacting with the investments.
A more subtle - but potentially more important - factor is knowledge transfer. Gulf labour markets make it extremely easy, by global standards, for foreigners to enter the workforce. In the case of high-skilled workers, this represents a potential gold mine for building the talents of locals in the labour market. Working alongside competent foreigners offers nationals the opportunity to absorb their skills and benefit from their experience at an accelerated rate. This is a key reason why almost all global industries working at the cutting edge feature internationally diverse work teams, with Silicon Valley being the standard bearer.
The problem with the Gulf model is that the flexibility cuts both ways: while it is easy for foreigners to secure an opportunity, it is also easy for them to lose one. Their residency is tied to having a job, and contracts are typically capped at two years, which makes them inevitably insecure about their economic situation.
More importantly, from the perspective of knowledge transfer, the Gulf governments have explicit plans to create jobs for nationals at the expense of foreigners. This makes migrant workers constantly look over their shoulder and fear that a competent sub-ordinate citizen is being groomed to succeed them. As a result, foreigners have very little incentive to engage in the “enabling” knowledge transfer that policymakers envisage, and may even have an incentive to undermine it.
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Read more from Omar Al Ubaydli:
Economics 101: Will VAT diversify UAE government revenues?
Economics 101: Is Saudi Arabia right to pursue austerity?
Economics 101: Do wars ever make economic sense?
Economics 101: What lies behind the Arabian Gulf states’ appetite for mega projects?
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In contrast, in the US, green card holders are no less attractive to prospective employers than citizens, meaning that foreigners need not fear signing their own economic death warrant by building the skills of their colleagues. An appreciation of this dynamic may have contributed to the Saudi government’s decision to pave the way for permanent residents.
A recent paper by Shai Bernstein and Timothy McQuade of Stanford University and Richard Townsend of the University of California at San Diego, suggests an additional channel for Gulf policymakers to keep in mind when they consider permanent residency.
Using firm-level data on innovation and employee characteristics, the researchers find that economic insecurity adversely affects innovation. They begin by noting that much of the technological progress realised by companies is the result of bottom-up efforts by innovative workers. However, they also posit that the creativity required for formulating effective, novel ideas also depends upon employees feeling psychologically comfortable.
While pressure is known to improve productivity in many dimensions, at the cutting edge of the technological frontier, under certain circumstances, experts have surmised that low-pressure environments are more conducive to success. This is why top, in-house researchers usually reside in beautiful departments, cordoned off from the hustle and bustle of the organisation’s daily activities.
The paper’s authors found that employees that experienced greater financial turbulence in the wake of the 2008 global financial crisis, reflected in greater shocks to local house prices, made smaller contributions to their company’s innovation, as reflected in both the quantity and quality of patents associated with those employees.
The Gulf governments are currently implementing long-term projects seeking to improve innovation. The results of this study suggest that in so far as the prevailing absence of permanent residency might contribute to a sense of economic insecurity among foreign workers, it might also indirectly impair bottom-up innovation. Recall that in most of the Gulf countries, migrant workers represent over 75 per cent of the workforce, and represent a disproportionately high percentage of the most credentialed components. They will continue to play a critical role in the sort of innovation the governments are striving for; therefore, understanding the underlying factors that make that innovation more likely is pivotal.
Some sources of economic insecurity are beyond the control of the Gulf governments, such as oil price movements or the international financial system. However, in the case of foreigners worrying about their residency should their job circumstances change, giving them green cards definitely falls within the suite of available policies. Given the economic importance of innovation, an experiment is surely warranted.
Omar Al-Ubaydli (@omareconomics) is a researcher at Derasat, Bahrain
Company%20Profile
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
A timeline of the Historical Dictionary of the Arabic Language
- 2018: Formal work begins
- November 2021: First 17 volumes launched
- November 2022: Additional 19 volumes released
- October 2023: Another 31 volumes released
- November 2024: All 127 volumes completed
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
COMPANY%20PROFILE
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Abu Dhabi Equestrian Club race card
5pm: Abu Dhabi Fillies Classic (PA) Prestige; Dh110,000; 1,400m
5.30pm: Abu Dhabi Colts Classic (PA) Prestige; Dh110,000; 1,400m
6pm: Maiden (PA); Dh80,000; 1,600m
6.30pm: Abu Dhabi Championship (PA) Listed; Dh180,000; 1,600m
7pm: Wathba Stallions Cup (PA) Handicap; Dh70,000; 2,200m
7.30pm: Handicap (PA); Dh100,000; 2,400m
The specs
Engine: 6.2-litre V8
Transmission: ten-speed
Power: 420bhp
Torque: 624Nm
Price: Dh325,125
On sale: Now
Farasan Boat: 128km Away from Anchorage
Director: Mowaffaq Alobaid
Stars: Abdulaziz Almadhi, Mohammed Al Akkasi, Ali Al Suhaibani
Rating: 4/5
About Tenderd
Started: May 2018
Founder: Arjun Mohan
Based: Dubai
Size: 23 employees
Funding: Raised $5.8m in a seed fund round in December 2018. Backers include Y Combinator, Beco Capital, Venturesouq, Paul Graham, Peter Thiel, Paul Buchheit, Justin Mateen, Matt Mickiewicz, SOMA, Dynamo and Global Founders Capital
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
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The%20specs
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UAE - India ties
The UAE is India’s third-largest trade partner after the US and China
Annual bilateral trade between India and the UAE has crossed US$ 60 billion
The UAE is the fourth-largest exporter of crude oil for India
Indians comprise the largest community with 3.3 million residents in the UAE
Indian Prime Minister Narendra Modi first visited the UAE in August 2015
His visit on August 23-24 will be the third in four years
Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, visited India in February 2016
Sheikh Mohamed was the chief guest at India’s Republic Day celebrations in January 2017
Modi will visit Bahrain on August 24-25
Episode list:
Ep1: A recovery like no other- the unevenness of the economic recovery
Ep2: PCR and jobs - the future of work - new trends and challenges
Ep3: The recovery and global trade disruptions - globalisation post-pandemic
Ep4: Inflation- services and goods - debt risks
Ep5: Travel and tourism
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APPLE IPAD MINI (A17 PRO)
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Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
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Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Ticket prices
- Golden circle - Dh995
- Floor Standing - Dh495
- Lower Bowl Platinum - Dh95
- Lower Bowl premium - Dh795
- Lower Bowl Plus - Dh695
- Lower Bowl Standard- Dh595
- Upper Bowl Premium - Dh395
- Upper Bowl standard - Dh295
COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
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US households add $601bn of debt in 2019
American households borrowed another $601 billion (Dh2.2bn) in 2019, the largest yearly gain since 2007, just before the global financial crisis, according to February data from the New York Federal Reserve Bank.
Fuelled by rising mortgage debt as homebuyers continued to take advantage of low interest rates, the increase last year brought total household debt to a record high, surpassing the previous peak reached in 2008 just before the market crash, according to the report.
Following the 22nd straight quarter of growth, American household debt swelled to $14.15 trillion by the end of 2019, the New York Fed said in its quarterly report.
In the final three months of the year, new home loans jumped to their highest volume since the fourth quarter of 2005, while credit cards and auto loans also added to the increase.
The bad debt load is taking its toll on some households, and the New York Fed warned that more and more credit card borrowers — particularly young people — were falling behind on their payments.
"Younger borrowers, who are disproportionately likely to have credit cards and student loans as their primary form of debt, struggle more than others with on-time repayment," New York Fed researchers said.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
What is double taxation?
- Americans living abroad file taxes with the Internal Revenue Service, which can cost hundreds of dollars to complete even though about 60 per cent do not owe taxes, according to the Taxpayer Advocate Service
- Those obligations apply to millions of Americans residing overseas – estimates range from 3.9 million to 5.5 million – including so-called "accidental Americans" who are unaware they hold dual citizenship
- The double taxation policy has been a contentious issue for decades, with many overseas Americans feeling that it punishes them for pursuing opportunities abroad
- Unlike most countries, the US follows a citizenship-based taxation system, meaning that Americans must file taxes annually, even if they do not earn any income in the US.
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
