Employers need to be aware of how Saudisation policies will impact their businesses, and prepare in a timely manner, a corporate immigration firm says, as the first stage of a new resolution comes into effect.

As of last week (Tuesday, 11 September) the kingdom’s retailers of cars and motorbikes, ready-to-wear clothes, home and office furniture and household goods and utensils were required to employ 70 per cent Saudi nationals in their workforces, marking the first of three new tiers of changes in the sector.

Murtaza Khan, partner of corporate immigration firm Fragomen Worldwide, said the resolution had first been announced in January 2018, meaning employers have had time to prepare for the change.  

He said it was too early to say whether all employers had been able to comply with the first set of changes: “We do work with groups in Saudi who have been conscious of this requirement who have been planning and putting in place the requisite number of staff and focusing a lot on the training and development and knowledge transfer in relation to hiring for these positions,” he said.

“A lot of that has been ongoing and many of them have met the 70 per cent threshold. It’s not to say that everyone is compliant. It is very difficult for us to comment on that right now. It is certainly a challenge for them to be able to deliver to the challenge right away.”

Recent liberalisation in the country, for example, surrounding women’s rights, have the potential to contribute to the increase in the number of nationals in the workplace, according to Khan.

“What you are looking at is the potential for a lot more willing workers in the workforce,” he said.

For the time being, certain retail categories, such as pharmacies, are being excluded from Saudisation policies as the training period required to have the requisite number of Saudi nationals in post is much longer than for others, he explained.

Saudisation is one of the measures aimed at tackling unemployment among Saudi nationals under Vision 2030, to reduce the number of Saudis unemployed from close to 13 per cent in 2018 to seven per cent in 2030.

Nationalisation has been a key topic around the world, said Khan, as instances of elections being fought and won on immigration platforms demonstrates, and that governments need to be conscious of the skills and qualification needs of their economies.

“In the last two years, many elections have been decided by the discussion on this. Nationalisation, giving priority to local nationals, to take up positions is very common across the world. Countries have that priority and it is important, from a long term perspective.

“The cost of not creating opportunities for nationals is far greater than the short-term gain of what is perceived to be a quick and lower cost option of bringing foreign nationals in.

“There has to be a balance in the labour market. Imbalances, where they exist - government intervention is quite a common mechanism to correct that, to encourage the right behaviours.”

Dr Adil A Al-Qusadi, CEO and chief strategist of the Riyadh-based consulting firm Gulf Think Tank said that despite reports of shop closures as employers struggled to meet the requirements, on an anecdotal level, he had not noticed any impact on the retail sector so far.

“As a citizen and a regular shopper going to malls, I never saw evidence of this. I personally did not feel that my shopping habits have been affected,” he said.

“From another perspective, from a different angle, the retail sector has been targeted by the Ministry of Labor for a long time, I can see a strategy behind that coming from three main justifications.

“The first one is the retail sector, it’s one of the biggest compared to other sectors in the Saudi non-oil economy, the second one is that we have majority of the population who are young, under the age of 30 or 35, and that requires them to get their hands dirty in the market, being part of the front office service in the retail sector, this is going to help them understand the challenges and the opportunities in the market as a whole.

“The third one is that the Saudisation, like Emiritisation, is based on making sure that everybody is having a decent job, a reasonable income, people are healthy and working somewhere.”

The latest resolution is part of a wider shift in the Saudi employment market, he said, which had been deliberately designed as a corrective measure.

“This is going to be used in making sure that not everyone graduating from high school is seeking a place in university, it is a corrective measure of a longer standing tradition, where all men and women, boys and girls, who graduated from high school go to the university, which ended up in high inflation, a high level of unemployment of qualified graduates.”

Saudisation has affected not just retail, but other sectors, from travel and tourism, to banking and finance and human resources. However, it has taken more than a decade for some of the Saudi Government’s policies on the matter to come into effect, said Al-Qusadi.

“We have seen at least in the last 20 years a lot of decisions that have never materialised,” he said, adding that while legislation had been discussed for at least 15 years on getting more women in the workplace, they were not employed in Saudi shops until within the last five years.

“All these reforms in the meeting rooms have been discussed many times, have been proposed. What is happening now is we are moving more bravely to execute them,” he said.  

Al-Qusadi said that although it would take time to understand any unintentional consequences of the new changes, “the intentional consequences are already clear – there are much more available jobs for Saudis”.

Al-Qusadi said that now “nobody can claim that he or she is not able to find a job, there is plenty of jobs in the retail sector”.

“This is not only the retail sector that is being affected, the way Saudis look at work is going to be redefined again,” he added.

Saudisation was also important for labour security, he said: “Imagine that electricity generators are operated by [employees from] specific nationalities and president of that country, like what happened with Kuwait and Philippines, when they decided to withdraw all the labour force. Overnight, you will not be able to run these generators. The aspect of labour security has been always integrated.”

The remaining tiers of the resolution will come into effect in November 2018 and January 2019.  

As of 9 November, 2018, the 70 per cent Saudi staff rule will apply to the sale of electronic items, watches and optical instruments.

As of 7 January, 2019, the same rule will apply to medical appliances and equipment shops, shops selling building and construction materials, vehicle spare parts, carpets and confectionery.

(Reporting by Imogen Lillywhite; Editing by Michael Fahy)

(Imogen.lillywhite@thomsonreuters.com)

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