Kingdom losing ‘billions’ to underground economy

Like in most countries worldwide, unlicensed economic activity such as selling of fruits by ambulant vendors abound in the Kingdom.

Like in most countries worldwide, unlicensed economic activity such as selling of fruits by ambulant vendors abound in the Kingdom.

The Kingdom loses billions every year in revenue because of the underground economy, which includes food produced illegally, experts say.

The term “underground economy” refers to illegal activities that generate income not accounted for in a country’s gross domestic product (GDP), said Saad Al-Buainian, an expert quoted recently in a Middle East publication.

He said that the underground economy accounts for between 20 and 30 percent of countries’ GDP around the world.

“In Saudi Arabia, a minimum level of the international rate can be applied to judge the size of the country’s illicit economy, meaning around SR400 billion ($103.6 billion). Estimates of the underground economy in certain countries may not be accurate, but this gives us a rough indication.”

A source told Arab News that some manufacturers believe that only an expiry date is needed on their products. “However, they should have permits to engage in business.” The source said many of these manufacturers operate from home. They are mostly Asians, South Asians, Afro-Arabs and Africans.

If they deal in a delicacy such as marinated beef, they buy the meat from a market, season it at home, and pack it with an expiry date. They then sell this product to restaurants and supermarkets for mostly SR1 profit.

“The piece of paper inside the package of marinated beef is the only thing that gives the product a semblance of legality. However, it’s illegal because the manufacturer is not licensed to engage in business,” a source said.

In the Saudi capital, various products are sold illegally. These include food such as dried fish, smoked fish, rice cakes, chicharon (grilled chicken skin), kisra (bread made of corn or barley and available in areas where Sudanese nationals live in Riyadh including Obeira, Manfouha and Nassiriya). There are also seats and stools, among other items, sold in this manner.

“If these products are made for personal consumption and sold to friends as a way of spending time productively, then it is all right,” a source said. However, licenses are required if they are sold to restaurants and supermarkets.

They said that manufacturers include housewives and part time workers who want to augment their income.
“This in itself is illegal under local laws. But what is worrying is the way they prepare the food. They’re probably not observing sanitary conditions at their workplaces,” a source said.

The sources said monitoring is nonexistent because the businesses are not registered. Ambulant peddlers and vendors are also part of the underground economy, they said.

“In the commercial district of Batha, there are vendors pushing carts containing plates, forks, spoons and bowls. They operate in strategic locations accessible to customers,” one source said. These vendors also have seats for customers.

Some fry peanuts in front of customers, without regard to sanitation or the authorities. “The practice is unsanitary because the food they are selling is exposed to the elements — airborne dust, heat of the sun, not to mention the cleanliness of the plates they use.”

“These vendors will probably learn their lesson if and when a customer suffers from poisoning after eating the food they sell,” a source said.

There are also ambulant vendors selling other types of food including rice cakes, gruel and noodles. They appear to sell to regular customers. “Since the price is not that much — it ranges from SR7 for noodles to SR12 for marinated meat — a customer is easily convinced,” a source said.

There are also those who position themselves at supermarkets, discreetly telling customers about their products, which include boiled bananas.

“The amount involved is small if it is only one vendor but is considerable if all those involved in the underground economy are included,” a source said.

Experts say the issue of underground economy must be addressed by security agencies, the Ministries of Labor and Commerce, Saudi Arabian Monetary Agency, banks and the business and finance sectors.


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