As Saudi Arabia comes to terms with reduced national income due to low oil prices and growing unemployment among its citizens, its Saudisation policy or replacing foreign workforce with Saudis is extending beyond the private sector.
In May, the Ministry of Civil Service announced plans to replace expatriate workers in the government sector with citizens by 2020. Currently, about two-thirds of Saudi workers are employed in the public sector.
If implemented, about 70,000 foreign workers would be forced out. This is part of Saudisation 2020 plan, a sub-plot of the ambitious National Transformation Programme 2020 and Vision 2030.
Together, the Saudi government aims to develop a sustainable non-oil economy that serves as a buffer against social unrest.
With expatriates making up about 10 of the 32 million living in the Kingdom, unemployment rate among Saudis is reported to be about 12 per cent. The government intends to reduce it to 9 per cent over the next three years.
The move to extend the work localization programme to the public sector is part of a nearly two-decade-long systematic drive that has widened reserving private sector jobs for Saudis.
This plan has intensified during the last two years.
Without revealing the operational details, the labour ministry announced in April this year that expatriates will no longer be allowed to work in shopping malls.
In March 2016, foreign workers were banned from selling and servicing mobile phones and accessories. It was stipulated that at least half the staff in stores selling telecom gadgets must be Saudis, with a provision to extend it to 100 per cent in a phased manner.
Replicating the strategy adopted over the years in other sectors like travel agencies, jewellery stores and lingerie outlets, among others, 20,000 Saudis started receiving training in selling and servicing mobiles.
In order to entice Saudis to take up these not-so-well-paid jobs in the privates sector, the government is paying a part of the increased salaries by compensating small mobile shop owners to the tune of $800 per month for two years.
These changes are also part of the ‘Guided Localisation’ programme launched by the Ministry of Labour in 2016.
Another noteworthy initiative is Nitaqat. Launched in 2011, the government started grading firms according to number of Saudis employed by them. While companies with higher number of Saudi staff get some benefits when obtaining new work visas for foreign workers, those employing fewer Saudis are penalised.
This hiring restriction and grading system involves about 60 industries, including construction and retail firms.
Among several other proposals being explored is limiting the stay of expatriates to eight years.
Linked to Nitaqat is the amnesty plan. The 2013 campaign resulted in about a million ‘illegal’ workers leaving the country. The ongoing amnesty – ‘A Nation without Violators’ – is scheduled to end in late June and is also expected to ensure that another million expats overstaying without work or residence permits will be issued exit permits.
The campaign “would revive the economies of companies and establishments and protect small businesses and projects from illegal expats, while also reducing unemployment rates and creating a safe economic and social environment.”
According to the Ministry of Interior, the status of nearly three million other undocumented expats was corrected in 2013.
It is unclear how the workforce localisation policies will impact overall economic growth both in Saudi Arabia and the other Gulf Cooperation Council countries. The private sector has constantly complained about lack of trained workforce even for semiskilled jobs and higher salaries driving down profits.
Reacting to the second phase of the Nitaqat programme in 2015, the Council of Saudi Chambers (of Commerce) said: “We understand the ministry’s desire to increase the Saudisation rate to accommodate new Saudi graduates from universities and technical institutes. However, the ministry must take into account the reality in the market. The market does not have adequate number of qualified Saudi hands to fill industrial jobs. Private companies do not attract enough Saudi workers when they advertise to fill vacancies, even after offering good salaries and benefits.”
Such obstacles have precedence from about a decade and a half ago.
In September 2002, Saudi officials declared that all expatriate taxi drivers would be replaced by nationals within a few years. With the proposal not making headway due to the reluctance of Saudi private taxi companies, it was later announced that the substitution process would take longer to implement. The last word on this is yet to be heard.
New jobs for Saudis
On a positive note, however, the Nitaqat programme met a few objectives. About 200,000 private sector companies out of 1.8 million in the ‘Red Zone’ were closed down by the end of 2013. Nearly 60 per cent of these firms were micro and small enterprises, which were required to employ at least one Saudi national.
The Saudi government also revealed that, during the same period, the Nitaqat scheme helped 750,000 Saudis find new jobs in the private sector.
More Saudis could have found jobs, but about 682,000 women refused private sector jobs offered to them by the labour ministry’s Hafiz unemployment assistance programme.
This meant that foreign workers had to be hired to fill the vacancies, which naturally affected the Kingdom’s job nationalisation initiatives.
Notwithstanding these setbacks and obstacles, nationalisation of workforce programmes will be the norm, than an exception, in the region in future.