Complex Made Simple

Why is the retail sector central to Saudization plans?

Saudi’s job market is undergoing a transformation, mostly thanks to government-led initiatives to put more nationals at work.

At the center of this is Saudization, a program a few years in the making but with varying degrees of success for reasons ranging from Saudi youth leaning towards higher paying public sector jobs, to fake private sector jobs created under the guise of Saudization.

Regardless, we look at the latest trends impacting employment in the Kingdom, especially in retail.

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Retail training

The Saudi Gazette reported Prince Mishal Bin Majed, governor of Jeddah, recently inaugurating the Jeddah Localization Training Center at Jeddah, where contracts between companies and job seekers were signed.

Prince Mishal stressed the need to combat unemployment by providing as many jobs for youth as possible highlighting the program’s aims at finding jobs for 5,000 youth of both genders.

Adnan Al-Humaidan, chairman of the University of Jeddah, considered the program as the first integrated training project that provides training followed by guaranteed jobs in the retail sector.

So far companies taking part in this project have offered 6,000 jobs and 6,345 job seekers have been registered, according to the Saudi Gazette.

The training is divided into three levels: The basic level of 24 training days that includes theory and practical parts, advanced levels that includes 12 days of training while the final level is the professional level, which has also set training for 12 days.

Related: Arab youth unemployment: Is there a way out?

The program will help provide local manpower for car showrooms, shops selling auto spare parts, gold, mobiles, electric appliances, medical equipment, sweets, construction material, clothes, children’s eyeglasses, watches, motorbikes, and carpets as well as mobile maintenance and car rentals.

Earlier this year, the governorate of Jeddah has launched a training program to localize jobs in the city with 3,611 Saudis receiving training at 16 retail sectors with 5,809 individuals registering their interest in getting a job and 94 companies looking for qualified young Saudis.

About 490,000 jobs at sales outlets of 12 business activities will be Saudized by the beginning of September 2018, according to Mahmoud Mazi, retail sector development manager at Small & Medium Enterprises Authority, Saudi Gazette reported.

“Saudis will be employed in sale outlets for watches, spectacles, car spare parts, medical equipment, electrical and electronic devices, building materials and all types of carpet businesses,” Mazi said.

The new Saudization drive will also cover showrooms for cars, motorbikes and home and office furniture as well as shops for readymade and children’s garments, men’s clothes, and household utensils.

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Retail is king

“Big and small retail firms have achieved 24% Saudization, with grocery stores registering 10% of the total Saudi employees in the sector,” Mazi said, adding that related agencies are working to increase Saudization rate from 24 percent to 50% by 2020.

Small firms account for 70% of the retail sector which plays a significant role in the economy as it contributes 10% of the gross domestic product (GDP), according to Mazi.

Financial analysts Argaam said that Saudi Arabia’s Ministry of Labor and Social Development is considering to reduce Saudization rate at 12 retail job types to 70% from 100%, according to the ministry guidelines.

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“Certain professions are excluded from the Saudization requirement, mainly opticians, car mechanics, watch and maintenance technicians, tailors, cooks, and confectioners, subject to compliance with the general conditions set by the ministry,” said Argaam.

“One expatriate is allowed to manage a retail shop, which employs ten Saudi citizens for six months from the decision application date,” the ministry said.

“Last January, the ministry issued a directive limiting 12 jobs at various shops to Saudi nationals, starting from the new Hijri year,” Argaam reported.

In the first stage, jobs at car and motorbike shops, men’s and children’s wear, home and office furniture, and home utensils will be nationalized as of September 11, 2018.

Saudization at shops selling electronic and electric appliances, watches and eyeglasses will come into effect on Nov. 9, 2018.

Read: How well is Saudi’s diversification strategy working?

Employment needs

Reuters said that Saudi needs 1.2 million jobs by 2022 to hit unemployment targets, and seeks to do so by focusing on the retail sector in order to reduce unemployment to 9% percent, quoting Ahmed Kattan, deputy minister of labor, telling the media.

Current unemployment stands at 12.8%.

“We are focusing on the retail sector because retail is labor-intensive, a sector that requires medium skills which is aligned with the unemployment supply, so it means we are not pushing the private sector where they cannot find demand,” Kattan said.

Reuters said that some 10 million foreigners are working in Saudi Arabia, in sectors, like construction, that most Saudis shun.

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Kattan said 47% of unemployed Saudis have only been educated to high school level or less, making them suitable for retail jobs.

Cutting the jobless rate to 7% by 2030 and raising women’s participation in the workforce to 30% from 22% are among a raft of ambitious targets in a program to diversify Saudi Arabia’s economy and reduce its dependence on oil exports, according to Reuters.

Two-thirds of Saudi workers are employed by the public sector.

Kattan said the authorities were trying to make hiring Saudis more attractive by reducing the wage gap between them and foreigners and limiting employers’ control over foreign workers’ residency permits, which often locks them into long-term contracts.