Grand Mosque in Medina 311.
(photo credit: Associated Press)
Saudi Arabia’s latest effort at getting more of its citizens to work is running into opposition everywhere from boardrooms in Jedda to the living rooms in Cairo amid fears that masses of trained and inexpensive expatriate workers will be sent packing and replaced by inexperienced and high-priced locals.
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Labor Minster Adel Fakieh reignited the controversy over the weekend when he told business executive in Jedda, the country’s commercial capital, that companies would be able to keep an expatriate employee on their payrolls for no more than six years and that some businesses might lose the right to hire foreigners altogether.
The comments set off a firestorm of criticism in the press by businessmen, who said they would struggle without their expat employees. In Cairo, Saleh Nasr, an official with the Chamber of Commerce, warned that the rule would increase unemployment if Egyptian guest workers are sent home. The Labor Ministry was forced a day later to “clarify” the minister’s remarks.
The kingdom’s eight million expats – in a population of about 26 million
– keep the Saudi economy running. But they also deprive locals of jobs.
Even as the economy booms on the back of high oil prices, the official
unemployment is 10.5% and will likely grow as waves of university
students enter the job market.
“Saudization” of the labor force has been a topic of discussion for a
long time, but the campaign has taken on more ramifications because of
the Arab Spring. Fearful that unrest may spread to the kingdom, the
government has boosted spending and created jobs. In Egypt, expat jobs
and the money they send home is an important crutch as the economy slows
in the face of domestic political turbulence.
Clearing office cubicles and factory floors to make room for Saudis
isn’t as simple as it seems. While there are a half million Saudis
looking for work and tends of thousands more graduating from
institutions of higher education at home and abroad, there’s a mismatch
between their skills and the needs of the economy.
“The poor quality of labor has to be lifted to meet the demand
businesses in the private sector,” said Nancy Fahim, an economist at
Standard Chartered Bank in the United Arab Emirates. “That’s a long-term
challenge. While they are investing in educational systems the fruit
will only appear later. It’s about striking a balance between long-term
features of labor market and current needs of population.”
Just over two weeks ago, the government and the South Korean company
Samsung inaugurated the $100 million Samsung Naffora Techno Valley in
Jubail, which will serve as a recruitment, education and training hub
for Saudi engineers and includes dormitories, dining facilities and a
Another problem is cost. Private sector employers don’t offer the same
pay and conditions as the public sector, so Saudis naturally gravitate
to government jobs. Of the eight million or so expats working in Saudi
Arabia, about 6.9 million are employed by private businesses. By
comparison only about 680,000 Saudi nationals work in the private
“The public sector provides higher pay and compensation and more comfortable working conditions,” Fahim told The Media Line
“This creates huge distortions between the private and public sector.
But the public sector has become saturated with workers, so Saudi
nationals have to move into the private sector.”
Businessmen complain that Saudization will boost their costs. The money
they have invested in training expat employees will evaporate if they
are forced to leave after six years. Meanwhile, the government made it
tougher for businesses this week to close the public-private wage gap
after King Abdullah approved increasing the minimum salary of Saudi
civil servants to 3,000 riyals a month and ordered a 15 percent
The government’s newest effort to addressing problem, unveiled early in
May, would rate companies as green, yellow and red, according their
level of compliance with Saudi-employment quota. Red companies will be
barred from renewing the work visas of their expat workers while green
companies will be entitled to take foreigners from the other two
categories and transfer their sponsorship without the approval of their
“Saudization has become a national necessity rather than a choice,”
Labor Minster Fakieh told reporters, who estimated as many as 40% of all
business would be classified as yellow or red under the so-called
nitaqat (Arabic for “limits”) program.
Further details, including incentives to green employers, are to be
announced June 11 so that businesses, employees and expats are still
unclear about what lies in the future. It was in this context that
Fakieh’s remarks this week set off protests.
In Egypt, Saudization could end up forcing large numbers of the
estimated 2.5 million Egyptians working in Saudi Arabia back home to a
country of already high unemployment. Nasr of the Chamber of Commerce
estimated that 70% of them have worked in Saudi Arabia beyond the
Egypt’s jobless rate jumped three percentage points in the first quarter
of the year to 11.9% as hundreds of thousands of expats fled the
fighting in Libya and the tourism industry, a major employers, is in the
doldrums. Worse still, the Saudi program might become a role model for
other Gulf states, sending more Egyptians packing.