By James Gavin
Saudi Arabia's Nitaqat programme to employ more nationals is generally viewed in one of two ways: either as an onerous and crudely implemented burden on the private sector or a genuine attempt to address the declining participation of Saudis in the non-government workforce.
The proportion of Saudi nationals working in the private sector dropped from 17 per cent to just 10 per cent over the decade leading up to 2010. A year ago, the government introduced the Nitaqat scheme, a colour-coded system rewarding companies for good behaviour and punishing those that fail to recruit sufficient nationals.
It is too early to fully gauge how effective the scheme has been in boosting the percentage of Saudis in employment, replacing some of the 8 million expatriate workers in the kingdom, and tackling the 40 per cent unemployment rate for those aged 20-24. But early indications suggest a mixed picture.
King Abdullah bin Abdulaziz al-Saud dispatched an upbeat cable to Labour Minister Adel al-Fakih in early June, congratulating him on the nearly 250,000 Saudis who have been employed through Nitaqat. According to the Labour Ministry, 195,000 Saudi men and 51,000 women have found jobs.
The scheme applies to public sector companies too, and leading state-owned corporates say they are on course to meet their targets. Saudi Arabian Mining Company (Maaden), which employs about 800 staff, says it has reached 63 per cent, placing it firmly in the 'green' category.
Expensive implementation of employment programmes
The programme can be costly, though. Some companies have made stock market disclosures that suggest the increased training requirements of hiring new staff are hitting their bottom line. One large, Jeddah-based Saudi firm estimates the cost of implementing Nitaqat over the next 10 years at about SR1bn ($267m).
Few are prepared to go public with their anxieties about Nitaqat, but a senior Western business representative in Saudi Arabia says he hears frequent complaints that companies hiring Saudis are encountering too many with a poor work ethic. Employers also face issues unique to the kingdom, such as men needing to leave work and collect their children from school, since women are not allowed to drive.
Although the construction industry only has to reach a 31 per cent Saudisation target to achieve an 'excellent' rating, it has become tougher to bring in large numbers of foreign workers, making projects harder to implement.
"Nitaqat represents an effort to introduce more incentives for companies to employ Saudis and in that sense it is an improvement on what went before," says James Reeve, an economist at the local Samba Financial Group. "The reason you are hearing more complaints is probably because the system is being enforced with greater vigour."
Despite the grievances, there is a widespread acknowledgement that the demographics of the kingdom's workforce are unsustainable and that at some point Saudis need to start entering the private sector. With a national population increasing by about 500,000 a year, the Labour Ministry needs to create job opportunities in a country where nearly 30 per cent of the population is aged under 15.
"Although some companies are not happy with the restrictions Nitaqat brings, most accept why it needs to be done and respect the fact that it's not a blanket system and is graduated across companies of different sizes and across sectors," says Paul Gamble, head of research at Riyadh-based Jadwa Investment.