Saudization efforts in the Kingdom harness local talents

Since Saudi Arabia started the Nitaqat nationalisation scheme, also know as Saudization, employment of Saudi nationals in the private sector has skyrocketed across the Kingdom.

The scheme requires Saudi companies to fill up their workforce to certain levels with Saudi nationals.

Job creation was one of the main goals of the ambitious Saudi Vision 2030 introduced by the Saudi Crown Prince Mohammed bin Salman. The vision aims to reshape the country’s economy that has long relied on oil exports and labor imports.

The coronavirus pandemic had a double impact on unemployment. On one side it raised it due to the lockdowns, while on the other it changed the mindset of several Saudi youths as they started to take on all types of jobs including blue-collar ones.

Saudi workers are now present in all sectors, delivering packages, serving espresso, and transporting oil-drilling equipment. Many companies with foreign employees trapped abroad due to the coronavirus-related border closures have said they have accelerated their plans to hire Saudi nationals. In the third quarter of last year, the number of Saudis working in the private sector rose by more than 80,000.

Companies started to put Saudi employee seekers through testing and extensive training programs, and the local employees have risen to the challenge.

While many countries are struggling to cope with the high unemployment rates caused by the coronavirus pandemic, the challenge in Saudi Arabia was of complex nature, as it depended on many foreign employees especially in the oil sector.

Foreigners now make up a third of the kingdom’s population of 34 million. While the government is the main employer for Saudis, the country’s private sector relies heavily on labor from Asian and other Arab countries.

Almost 75% of the employees in Saudi private companies are foreigners, who usually accept a lower salary, which makes their competition with citizens extremely difficult.

The kingdom’s government has long imposed quotas and incentives to direct more citizens into the private sector, in a process dubbed “Saudisation,” but the results have not kept pace with population growth.

It is worth noting that unemployment was steadily increasing when Prince Mohammed bin Salman assumed the mandate of the Crown Prince in 2017 and began to witness a noticeable decline in 2019 with the rise in economic growth.

As the pandemic impact soften, Saudi Arabia now is trying to balance Saudization with maintaining economic growth and without hindering foreign investors who play a critical role in achieving the Crown Prince’s plan.

To keep the unemployment rate steady, the kingdom must create 150,000 jobs annually over the next decade, according to Bloomberg Economics. Prince Mohammed bin Salman’s goal of halving the unemployment rate of citizens, from 14% to 7% by year, requires 2030, more concrete efforts.

Saudi Arabia is on the right track

According to a recent report by Saudi Arabia’s Human Resources Fund private sector employment of Saudi nationals rose to 121,000 in the first quarter of 2021. 

This marks a huge step toward the achievement of Saudi Vision 2020, raising Saudi employment in the Kingdom’s thriving private sector.

In April, the Saudi National Labor Observatory said that Saudi nationals now make up around 22.75% of private-sector employees in Q1 2021, in line with the Saudization scheme.

This is up from just 20.37% in the first quarter of 2020.

On a sector basis, seven sectors have recorded 50% Saudization, much higher than the total private sector average of 25%.

In the first place came the financial and insurance sector with a Saudization rate of 83.6%.

In the second place came the public administration, defence and mandatory social insurance at 71.9% Saudization.

While Saudi employees made up around 63.2% of the Kingdom’s mining and quarrying sector.

Furthermore, more than half of Saudi Arabia education, as well as information technology and communication sectors employees are currently Saudis.

Accordingly, the Kingdom now has the lowest dependence on foreign labor compared to the rest of the Gulf Cooperation Council at around 77%. While Qatar has the highest at around 94%.

Malls are the latest addition to the Saudization scheme

In early August, Saudi Arabia began implementing the decision to limit work in closed malls to Saudi nationals only, and the specified grace period has expired.

Last April, the Minister of Human Resources and Social Development, Ahmed bin Sulaiman Al-Rajhi, issued 3 ministerial decisions to localize several activities and professions in the labor market.

The decision applies to all professions in closed commercial complexes (malls) and closed commercial complex management offices, except for a limited number of activities and professions in these complexes.

The Saudization decision comes in line with the ministry’s plan to increase opportunities for Saudi men and women to participate in the labor market.

It is noteworthy that the Ministry, in cooperation with the Human Resources Development Fund offers training and support programs for the professions targeted by the decision.

It is expected that these decisions will contribute to the provision of 51,000 jobs for Saudi men and women.

The Saudization decision will enter into force after 120 days from the date of its publication, and according to the procedural guide to the decision, the statutory penalties will be applied after the end of the grace period to all establishments that are not bound by the decision.

Violations are divided into two categories, the first is the employment of non-Saudi workers in professions restricted to Saudis, and the second is non-compliance with the Saudization percentages.

The Kingdom of Saudi Arabia is intensifying its plan to localize jobs in many economic sectors to provide job opportunities and raise participation rates in the private sector.

Since 2018, the Saudi Ministry of Labor has issued a decision to localize jobs in 11 sales activities in the retail markets.

Among the activities that began applying Saudization in early September 2018, are watch stores, eyeglasses, medical devices and equipment, electrical and electronic appliances, auto parts, construction and construction materials.

Last May, the Assistant Undersecretary for Labor Policies at the Saudi Ministry of Human Resources and Social Development, Ahmed Al-Sharqi, said that the ministry is studying the nationalization of leadership positions in cooperation with other government agencies.

The unemployment rate among Saudis decreased during the first quarter of 2021 to 11.7% down from 12.6% in the fourth quarter of 2020.

The unemployment rate of Saudis in the first quarter was 7.2% for males, and 21.2% for females; The overall unemployment rate (Saudis and foreigners) decreased to 6.5%, compared to 7.4% in the fourth quarter.