Wednesday, Jun 15, 2011
Gulf News
Dubai: Saudi Arabias latest drive to force companies to hire more nationals could stall the recovery of the private sector in the kingdom, a report has claimed.
The report, by Banque Saudi Fransi, says that plans to refuse expatriate work permits to companies that do not have enough local employees could force smaller firms out of business.
It also warns that companies may only hire Saudi nationals to fulfil quotas and not to perform worthwhile roles, adding to Saudi Arabias employment problem, under which around 10 per cent of nationals are unemployed.
The initial shock of Nitaqat, if enforced with vigour, could lead numerous smaller businesses to shut down, shake already feeble foreign investor confidence in the economy, and further stall the private sectors recovery, the report claims.
It further adds that this is a significant risk in a country which already lacks growth in the private sector.
Private sector growth rates have lagged in recent years well below the 6 per cent minimum we believe is necessary to stimulate enough job creation for a population that is nearing 28 million, the bank says.
At the same time, the Banque Saudi Fransi report finds that in the medium to long term, the initiative will prove effective in persuading companies to hire more Saudis, and help the government meet its target of 1.12 million new jobs for Saudi nationals by 2014.
Nitaqat has the potential to introduce much-needed adjustments to wages and efficiency in the private sector, so long as it is supplemented with high-quality training programmes at Saudi schools and within companies, it says.
We expect the programme will succeed at improving Saudi participation in the private sector.
It will also help to reduce the reliance of Saudi nationals on jobs in the public sector, where wages are higher and hours more flexible.
The private sector must evolve into Saudi Arabias main engine for job creation in order to relieve the burden from the state, which has frenetically created jobs for citizens to quell unemployment, the report says.
Saudi Arabia is second only to Iraq in terms of youth unemployment in the region, and has higher joblessness rates than Tunisia, Jordan, Egypt and Lebanon. In 2009, some 27.4 per cent of Saudis under the age of 30 were without work, including 39.3 per cent of those aged 20-24.
By Orlando Crowcroft, Business News Editor
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