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Hajj is cash cow for Saudis

December 8, 2009

This weekend Gulf News reported that the Muslim pilgrimage to Mecca accounts for 7 percent of Saudi Arabia’s gross domestic product.  That’s saying a lot considering Arabia’s massive, oil-enriched GDP.

So today’s post is not about jihad or terrorist financing.  Instead, its about the massive moneymaker that the hajj has become, particularly in terms of zakat payments to the Saudi government.

How does the hajj generate tax revenues for Saudi Arabia?  All the businesses and individuals that cater to the pilgrims (including airports, hotels, retailers, etc) are making income from the hajj.  Saudi Arabia, with its Islamic zakat tax, collects 2½ percent of individual Saudi wealth including anything that was generated from the hajj industry.  Here are the details:

According to a field study, the monetary value of activities related to the Haj and Umrah exceeds $30 billion (Dh110.2 billion).

Unlike the Haj, Umrah can be performed at any time, though it is particularly popular during the fasting month of Ramadan. The figure covers travelling, accommodation and living expenses, as well as cost of animals for sacrifices.

The average cost of sacrificed animals amounts to about $130 per pilgrim. Other expenditures deal with purchases of gifts and spending on telecommunications.

To be sure, the statistics reflect the multiplier effect on the economy, as every riyal spent brings about four additional riyals. Undoubtedly, this is a sizeable amount by virtue of making up around 7 per cent of the kingdom’s gross domestic product…

Four cities in western Saudi Arabia benefit substantially from the Haj, namely Makkah, Madinah, Jeddah and Taif. King Abdul Aziz Airport in Jeddah serves as the gateway to Makkah.

In addition, Saudi tourism authorities encourage wealthy pilgrims to visit other places in the vast kingdom, including tourist sites in the south, which are not too far from the holy places.

The annual Haj in particular serves as a golden opportunity for Saudi businesses to launch new consumer products. Demand tends to be the order of the day during the season, as locals refer to the Haj.

Saudi firms can learn vital information about their products from more than 2 million pilgrims, the majority of whom are foreign nationals. As such, freshly developed Saudi products can be subjected to improvement prior to marketing them in the other five member states comprising the Gulf Cooperation Council (GCC).

In fact, many GCC nationals tend to perform the Haj on a regular basis. In turn, Haj contractors rely on them to generate steady income.

Opportunities

Additionally, the Haj season provides employment opportunities for thousands of Saudi nationals. Some Saudis, including youngsters, engage in simple trading activities such as selling foodstuffs and prayer beads.

The Saudi economy needs to generate more than 160,000 jobs a year to cope with demand.

Yet, other Saudis and foreign residents use their private vehicles to transport pilgrims. Also, some Makkah residents rent their structures to firms arranging for pilgrims to support their living expenses throughout the year…

The article also indicates that many Saudis under-report their hajj wealth in order to avoid the zakat tax.  Muhammad wouldn’t like that.  He forecast that tax deadbeats would “taste the burning” of hell, and that their withheld wealth would become a like a snake that would wrap around their necks and hiss, “I am your wealth.”

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