Artificial intelligence to help Saudi Arabia tackle the shadow economy

The Saudi commerce minister Majid Al Qasabi has announced that the country is looking into cutting-edge technologies, including artificial intelligence, in order to combat shadow economy businesses. The Kingdom is taking the issue very seriously and considers it the biggest problem in the non-oil sector. One of the new initiatives includes setting up an anti-cover-up committee, comprising 20 entities, to fight the shadow economy as well as toughen and modernize the sanctions and the system.

Those caught engaging in the informal economy are going to face harsher penalties which include spending up to five years in prison, or an increased fine (currently SR1 million) of up to SR5 million. Artificial intelligence is meant to “modernize the types of oversight by analyzing data, following up on funds, and monitoring workers and economic movement through artificial intelligence,” Arab News reports.

IZA World of Labor contributor Dominik Enste has analyzed the role of the shadow economy during the Covid-19 pandemic. In his latest opinion piece he writes that “the shadow economy should not be seen as solely an economic problem, to be resolved by attacking the symptoms through higher fines and tougher controls. A country-specific analysis of causes and consequences is necessary to develop policy measures appropriate to each country’s level of development and the state of the Covid-19 crisis.”

Al Qasabi, who is also the acting minister of media, described the shadow economy as “the cancer that ravages the Kingdom's economy.” In the country, some of the informal economy practices include enabling a non-Saudi to work for himself independently whilst “using the cover of a Saudi party but without abiding by the existing rules set out by the government.”

Read Dominik Enste’s opinion piece The shadow economy and the Covid-19 pandemic crisis.