In the third quarter of 2017, 13.76m people were registered as working in the Kingdom, according to the General Authority for Statistics, with Saudi citizens making up just over 3m of the total. Foreign nationals have accounted for the bulk of the workforce for decades, and can be found in all strata of the economy, from CEOs and white-collar positions to blue-collar and manual labourers. While the Kingdom’s ability to attract an international workforce has underpinned its economic development since the first commercial oil well in Dammam, this has been accompanied by a persistently high national unemployment rate. The government’s answer to this challenge has been Saudiisation, an official policy to replace foreign workers with nationals. First implemented in the mid-1990s, the initiative has been pursued by a range of ministries and government departments over the intervening years, with varying degrees of success.
An update to the policy in 2002 and subsequent public debate over a more refined approach to the programme in March and April 2006 kept the issue alive into the present century. Then, in 2011 the Ministry of Labour and Social Development revealed its new Nitaqat (categories) framework, a system which evaluates companies on their Saudiisation level, and assigns them a colour category accordingly – yellow or red for the poor performers, and platinum, blue and green for those that employ the most nationals.
Implementation of the scheme, however, has historically been relatively inconsistent. The prominence of the Saudiisation policy in government thinking has traditionally shown a strong correlation to oil price: when revenue from hydrocarbons production is high, the government’s ability to provide employment and social support to the citizenry means efforts to increase local participation in the workforce become less intense; when revenues fall, however, focus once again returns to the Saudiisation programme as a means to reduce pressure on the Kingdom’s finances.
This inconsistency of Saudiisation implementation has successfully brought more Saudis into the workforce in some sectors, but overall the results have not met the expectations devised in the 1990s. In the third quarter of 2017, 12.8% of the working age national population was unemployed, according to data from the General Authority for Statistics. Unemployment among young people is a particular concern, and one highlighted by the IMF in October 2017 when its updated “World Economic Outlook” revised the growth forecast for the Kingdom from 2% to 0.4%. “For nationals, unemployment is already high, at around 12%, and the young population is still growing,” Timothy Callen, the assistant director for the Middle East and Central Asia department at the IMF, told local media in January 2017.
Women In The Workforce
To date, the Kingdom has achieved the greatest success with its female population. According to the General Authority for Statistics, the number of employed Saudi women reached more than 1m by the end of the third quarter of 2017, which is a 28.1% rise on the end-2014 figure of 796,220. Social mores, transportation challenges and a lack of day-care centres for children have traditionally acted as blocks to the employment of Saudi women, and the recent gains have been made from a low base: the total Saudi unemployment rate of 12.8% rises to 33.1% in the case of females, according to data from the General Authority for Statistics, resulting in an economic participation rate of just 17.4% for Saudi women, compared to 62.1% for their male counterparts, as of mid-2017. However, there are signs that this ratio is beginning to shift.
This recent uptick in female employment comes at a time when many of the traditional impediments to their employment are being eroded. Saudi institutions have shown a marked willingness to employ women at the highest organisational levels in recent years, a trend that caught the world’s attention in February 2017, when the Saudi Stock Exchange (Tadawul), appointed a woman, Sarah Al Suhaimi, to the position of chairperson for the first time in its history. That same month, Rania Nashar was appointed CEO of Samba Financial Group. Women have recently been appointed to important government positions as well, with Princess Reema bint Bandar Al Saud becoming vice-president for women’s affairs at the General Sports Authority and later president of the Saudi Federation of Community Sports, and Deemah Al Yahya becoming CEO of the National Digitisation Unit after a career at Microsoft Arabia. These developments have provided a beacon for aspirational Saudi women.
The restrictive effects of the male guardianship system and a ban on women’s driving have also been eased somewhat. The arrival of ride-sharing apps such as Uber and its regional variant Careem have made it cheaper and easier for women to travel to work without a personal driver, for example. In September 2017 news broke of an even more significant advance: in a surprise announcement, the Kingdom announced that it would allow women to drive themselves for the first time in the country’s history. The move follows a decades-long campaign by some Saudi women to be granted driving licences on an equal basis to men, and promises to add yet more fuel to the recent rise in women’s employment.
The extended period of low oil prices since late 2014 has helped to drive Saudiisation back to the top of the government’s agenda. In 2016 it introduced its latest version of the Nitaqat scheme – its third iteration in five years – in a bid to inject new momentum into the Saudiisation process. In doing so, the government set a target of creating 1.1m-1.3m jobs. This initiative feeds into a broader objective established by the National Transformation Programme (NTP) to reduce the total unemployment rate to 9% by 2020, a bold target that will involve both the provision of new job opportunities and the continued replacement of foreigners by Saudis.
The latest version of the scheme seeks to avoid past mistakes, where rushed policy and lack of coordination among stakeholders resulted in negative outcomes. For example, the 2004 decision to impose a 100% Saudiisation rate for travel agencies, and the short implementation period that came with it, resulted in the closure of nearly 200 businesses and the arrest of some agents. In an effort to prevent a similarly unfavourable result, the new policy establishes a high degree of communication between the Ministry of Labour and Social Development, the central and regional governments, and the various economic sectors that are implementing Saudiisation. This includes the telecoms sector, which the government had chosen to focus on in 2016-17.
On September 5, 2016 the telecoms retail sector reached its deadline for achieving complete Saudiisation. Shops dealing with mobile phones or their maintenance had been given six months to comply with the directive, but the failure of some to meet the new requirements resulted in closures and fines. This outcome demonstrated the difficulty of implementing an ambitious Saudiisation programme even when taking the more nuanced approach characterised by intergovernmental cooperation and stakeholder consultation.
However, one of the most notable features of the recent implementation of the latest Nitaqat framework is that it is being carried out under the sole leadership of the Ministry of Labour and Social Development, the government body with the best track record on Saudiisation initiatives. Proponents of the scheme hope this clearly defined leadership structure will help the government meet the subtler objectives of its Saudiisation drive, which include a greater consideration of qualitative issues such as the sustainability of the jobs offered by employers, as well as the ratio of women in businesses.
Despite the promising changes under way, many challenges still remain. Saudi citizens generally require higher wages than expatriate workers in most industries, and in some areas of the economy, such as the service and construction sectors, it is difficult to find national candidates. Moreover, the social changes being ushered in by the government, such as a woman’s right to drive, have some way to travel before the female workforce can be fully utilised. Education opportunities for both genders, according to many in the business community, must also be enhanced to keep pace with the demands of the Kingdom’s growing private sector. In the face of these challenges, the government’s recent overhaul of the Saudiisation programme, and its commitment in both Vision 2030 and the NTP to increase the number of citizens in the workplace, suggest that the issue will remain a central one over the medium term.