Here’s how letting women drive could boost the Saudi economy

It won't just be men behind the steering wheels in Saudi Arabia anymore. In a historic move on Tuesday, King Salman issued a royal decree allowing women to obtain driver's licenses. The King ordered government agencies to prepare reports for the process within 30 days, and to implement the decision by June 2018. 

Many Bedouin women are known to drive in desert areas, but due to the ban they never made it to the bigger cities. Tuesday’s decision, which has been long-awaited by many Saudi women, is expected to have some positive impact on several sectors of the Kingdom’s economy.

Although the move alone cannot have a drastic impact, it is a catalyst that will help make the Kingdom’s economy healthier, Mazen Al Sudairi, head of research at Riyadh-based Al Rajhi Capital told Argaam.

Overall, output by the Saudi individual will increase in the coming years, and so will the efficiency. The socioeconomic benefits of the move will have a ripple effect on several sectors of the economy, particularly the retail sector.

“This will affect the macro economy from a positive point of view,” he said. “There will be more borrowing to buy automobiles. The insurance sector will also surge. Basket of consumption will also change. Instead of paying salary for a driver, for example, families will now use that money to consume more in the retail sector.”

Women will be able to commute to work and stores more easily to buy what they want and need. They will no longer be forced to wait for their drivers, brothers, or fathers to drive them to work or to malls. In recent years, Saudi Arabia has accommodated the ban on women driving with ride-hailing services such as Careem and Uber.

Last year, billionaire businessman Prince Alwaleed bin Talal said that families in the Kingdom could save up to SAR 3,800 paid to expat drivers every month if women were allowed to drive.

He added that around one million drivers in the kingdom, who are expat workers, send about SAR 30 billion in remittances every year to their home countries. 

Since the number of expat drivers across the Kingdom is expected to decline, spending in other sectors, such as food and agricultural could see a drop, Al Sudairi added. Many of these expat workers, along with their families, may be forced to head back to their home countries, as the job pool will no longer be able to accommodate them.

With the International Monetary Fund (IMF) projecting the Saudi economy’s growth at just 0.1 percent this year, the Kingdom also faces an unemployment rate of about 13 percent (as of Q1 2017). Women constitute a significant number of jobseekers in the Kingdom, with official data showing a 33 percent unemployment rate for Saudi women in Q1 2017.

Men currently account for 65 percent of the Kingdom’s workforce, while many women have hesitated to accept certain jobs due to the driving ban. Allowing them to legally drive across the country will open the door to more job opportunities, said Graham Griffiths, analyst at consultancy Control Risks.

“The ban [on women driving] has been a significant factor limiting women’s economic opportunities due to the cost and logistical burdens it imposes on women and their families trying to arrange transportation,” he told Argaam.

As women represent the most highly educated segment of the Saudi workforce, their increased participation in the labor force will have a positive impact on the country’s economy, he added.

For years, the ban on women driving has created a negative image for international businesses or foreign investors wishing to operate in the Kingdom. That is another obstacle that will be lifted for Saudi Arabia, as it aims to attract foreign investors and diversify its economy away from oil through its National Transformation Program and Vision 2030. 

Write to Reem Abdellatif at reem.a@argaam.com 

Jerusha Sequeira contributed to this article