Saudi Arabia's policy of Saudization of jobs, which has beenseriously pursued by the government during the last 10 years, appears to have started showing a measure of distinct success in recent years. What is striking is the fact that the broad spectrum of the private sector enterprises, though initially was lukewarm towards the new labor policy, has not only accepted the inevitable but shown a deep commitment to this national cause. Any change in the traditional working methods of course involves some sacrifices and the business community by and large has willingly made the needed sacrifices.
Saudi Arabia's policy of Saudization of jobs, which has been seriously pursued by the government during the last 10 years, appears to have started showing a measure of distinct success in recent years. What is striking is the fact that the broad spectrum of the private sector enterprises, though initially was lukewarm towards the new labor policy, has not only accepted the inevitable but shown a deep commitment to this national cause. Any change in the traditional working methods of course involves some sacrifices and the business community by and large has willingly made the needed sacrifices. The carrot-andstick labor policy of the Government has encouraged these private sector efforts. Today, there is urgent need for keeping up this mutual dialogue between the authorities and the private sector, especially in the context of the Saudi entry into WTO, the recent Government decision to allow women to enter the labor market freely and the onset of the renewed era of oil boom.
Saudi Arabia will be facing a new economic scenario from 2006 onwards, following its entry into WTO. Cost reduction, improvement in labor productivity and healthy competition in professions will now have to come from each enterprise. It is significant that WTO members have been persuaded by the Saudi Government to accept the principle of Saudization of jobs in the private sector. An agreement has been reached between WTO and Saudi Government allowing up to 75 percent Saudization in foreign companies investing in Saudi Arabia.
Here is a big challenge and an opportunity. It was ten years ago - 1995 to the precise - that the first concerted effort was launched to open out employment opportunities to Saudis by imposing quantitative restrictions on recruitment of foreign labor. The Council of Ministers Decree No. 50 issued in 1995 envisaged a ban on employment of foreigners if a Saudi worker is available for the same job. Firstly, private sector firms employing 20 or more workers have been asked to increase the share of Saudis in their staff by 5 percent each year. Recent legislations have brought into the net smaller units also. Establishments with less than 10 employees are required to employ at least one Saudi, to start with. Those with 20 or more employees are required to employ 30 percent of Saudis. Large contracting companies' quota has been limited to 10 percent.
Secondly, certain labor-intensive types of occupations are exclusively reserved for Saudis. Thirdly, severe restrictions on visas for foreign workers have been imposed. The Labor Ministry has now imposed some new guidelines for domestic servants and drivers, which will come into force from the beginning of December 2005.
Since this segment accounts for a large number of foreign manpower (despite its low priority in economic terms), plugging loopholes here is certainly advisable. These and other institutional measures constitute the core of the Saudization policy. In the Government sector, the Saudization drive has been a distinct success. In 2004, the total labor force in the Government sector numbered 763,265, of which Saudis accounted for as much as 90 percent. This compares with about 80 percent ten years ago.
The private sector has a different story to tell. In the wake of the oil boom of the mid-1970s, local labor was not available to carry out the massive infrastructure projects and hence there was a large inflow of skilled and unskilled labor, other supporting staff and professionals. Eventually, the diversification of the productive sectors has taken place with relatively cheap imported labor and professionals.
Meanwhile, the speedy population growth and the spread of education in Saudi Arabia have swelled the ranks of job-seekers. As ill-luck would have it, there has, however, been a mismatch between the private sector needs of human resources and the acquired skills of the locally available youth.
Share of Saudis Improves
As a result, the share of Saudis in the total labor force in the private sector at best has remained marginal for the last 25 to 30 years. Slowly, but steadily, the situation has been changing. The share of Saudis in the private sector labor force showed a modest increase from 11.5 percent in 2003 to 11.6 percent in 2004. At the same time, the share of non-Saudis has gone down from 88.5 percent to 88.4 percent (Table 1&2). This has happened despite the fact that most of the increase in labor demand in 2004 took place in the construction field where skilled personnel are not locally available in an adequate measure.
In absolute terms, the number of Saudi youths recruited by the private sector aggregated well over 100,000 in 2004, with the total number of Saudis employed in this sector touching a record of 691,093 (Table 3). The total labor force (including expatriates) in the private sector is estimated at about 6 million. This is the estimate of the Labor Ministry, quoted in the latest SAMA annual report. These figures, it may be mentioned in passing, are not strictly comparable to earlier labor force data since apparently these have been revised and rationalized this time.
In all the professions in the private sector, the share of Saudi employees has increased in recent years. In the service jobs segment, the number of Saudis employed rose by 30,000 to 201,559 in 2004, compared to the previous year. Saudis in clerical jobs increased by 21,000 to 140,902, sales jobs by 12,000 to 60,716 and auxiliary basic engineering jobs by over 11,000 to 94,179. (Table 4). Though these are modest achievements, they are pointers to the changing times and the local attitudes towards relatively low-paid jobs seem to be turning more and more realistic. The Saudization drive has thus succeeded , though more remains to be done. The new trend is certainly a welcome change and has been bought about because of new methods of training and vocational guidance given to the local youth.
Corporate Level Incentives
Some of the leading companies have their own training programs and elaborate facilities are provided by them in pursuance of the Saudization policy. The annual reports of companies mention specifically about what they are doing in this direction, including short-term induction programs, training facilities and liberal monetary and other rewards. No wonder, such companies are given various types of incentives and assistance by the authorities.
The Labor Ministry, for instance, recently rewarded 30 companies for meeting their specified Saudization quotas by agreeing to issue them foreign work visas. According to Labor Minister, Dr. Ghazi Al Gosaibi, the Ministry has provided around 28,110 work visas to 30 private companies for adhering to their Saudization quotas.
The top 10 companies in this list are:
1. United Contractors Company (3,000 visas granted for employing 500 Saudis).
2. Southern Cement Company (1,240 visas granted for complying with a 10 percent Saudization).
3. Qasim Cement Company (1,200 visas granted for complying with a 10 percent Saudization).
4. Madinah Cement Company (1,000 visas granted for complying with a 10 percent Saudization).
5. Jama Al Musheikih Company (650 visas granted for employing 30 Saudis).
6. Brass Metal Foundry (490 visas granted for complying with a 10 percent Saudization).
7. Al Hashimiya Company (453 visas granted for employing 40 Saudis).
8. Ahmad Al Marfi Contracting (260 visas granted for complying with a 10 percent Saudization).
9. Al Nasban Group for Contracting (360 visas granted for complying with a 10 percent Saudization).
10. Saad Specialist Hospital, Al Khobar (2,206 visas granted for complying with specified Saudization target).
Population Growth and Unemployment Issue
While the Government and the private sector have made joint efforts to speed up Saudization, there are indications that the problem of unemployment is likely to worsen in the long run in view of the fast growing population.
The SAMA annual report for 2005 emphasizes that population explosion and the growing number of job seekers pose one of the major economic challenges of Saudi Arabia.
SAMA says: "Saudi Arabia has one of the highest population growth rates in the world". The latest statistics issued by the Central Department of Statistics indicate that the population in the Kingdom has grown by 2.8 percent per annum. This will increase pressure on housing, health, education, water, electricity, telecommunications, transport and municipal services. The Kingdom's population reached 22.7 million in 2004, compared to 16.9 million according to the population census of 1992, an increase of 33.8 percent during the period. Of the total population, 16.5 million are Saudis according to the census of population conducted in 2004. (Table 5 & 6).
SAMA says that the Kingdom's high population growth will pose further challenges for both the public and private sectors as it requires:
1. Further establishment of educational and training institutions at different levels and expansion in the absorption capacity of existing institutions, continued improvement of the quality of the human factor and qualifying it to participate in the development process.
2. Creation of employment opportunities in the various economic sectors. This requires more work to increase growth rates of the producing sectors.
3 Work to establish a mechanism to match demand with supply in the labor market. This in turn requires intensification of training and qualifying programs for Saudi workers to be in line with the labor market requirements and perhaps imparting further flexibility to the labor market to absorb job seekers as much as possible.
The steady increase in population, especially of the actively working agegroup of 15 to 64, poses a major socio-economic challenge for Saudi Arabia. If the oil revenues soar and continue at high levels, it is advisable to devote part of the resources for a bigger thrust in vocational education and a massive expansion of the security and defense machinery of the country, which will serve not only as a major relief to the growing unemployment threat but also as a guarentee against regional strength, stability and security. Why not plan for a day when Saudi Arabia (which now invests heavily in other GCC) caters to the GCC needs of technical and trained manpower?
To say all this is not to affirm that the Saudization drive has been an unmixed success. Far from it. There have been loopholes and some misconceived means of achieving Saudization in some quarters. Some large companies, for instance, depend on ad hoc contract jobs (where expatriates employed by the outside agencies are used to do maintenance jobs and other regular work) to hoodwink authorities and show an inflated percentage of Saudization among the regular employees.
In some other companies, there is a practice to employ local youth without assigning any job only to meet the labor quota requirements. By such means, the basic objective of Saudization is subverted. Besides, this affects the cost and profitability of corporate operations.
While it is essential to plug these loopholes and thus ensure genuine employment of local people in larger numbers, expatriates cannot be fully done away with in certain specialized fields in the near future. In these fields, expatriates concerned should be encouraged to contribute their mite towards Saudization in the larger interest of the company, instead of looking upon them as a leech sucking the blood of the system. What we see in the media here is only the big talk about total amount of overseas remittances made by expatriates, without mentioning their productive contribution to the economy, thereby giving a wrong public perception about them. They can, and should be made to, contribute actively to the cause of Saudization. For this, there is need to create favourable conditions under which guest workers volunteer to facilitate Saudization and transfer of technical and managerial knowhow.
Conclusion
All said and done, what is of utmost concern is that the Saudi jobseekers in general lack proper education and training suitable for private sector jobs, though the situation has been steadily improving in the last few years. It is for the educationists to introspect and remedy the malady.
Here there is no use of blaming the educational curricula alone. What is overlooked in Saudi Arabia is the need to ensure high quality of teachers. There is need to teach teachers. More and more advanced training institutes for teachers seem to be a must. Similarly, in commercial and industrial establishments, there is need for intensive and specialized refresher courses for all those managers who are already employed.
You cannot battle the WTO regime without a world class cadre of managers. In the Saudization drive, the emphasis is on NUMBERS, but not QUALITY. Unless the performance standards of teachers and managers improve, the system will witness the ironical situation of the blind leading the blind. However, there is good news for the Saudi job-seekers: the economy is booming, and job opportunities are growing. Grab these opportunities.
But wait, why all Saudis should go after jobs. Develop their entrepreneurial talents and make them professionals and businessmen, big, medium or small. Job hunting is mainly for over-populated developing countries. So let there be massive Government investments in institutes for entrepreneurial development in at least all major cities.
Dr. P K Pillai
Saudi Commerce and Economic Review 2005
