Saudization of Work Force Not Making Much Headway

Yusuf Dhia-Allah

Dhu al-Hijjah 22, 1442 2021-08-01

News & Analysis

by Yusuf Dhia-Allah (News & Analysis, Crescent International Vol. 50, No. 6, Dhu al-Hijjah, 1442)

Despite painting a rosy picture about employing Saudis instead of expatriates in the kingdom, the scheme has not made much progress. Called nitaqat (Saudization), the plan has faced numerous hurdles not least because the Saudis do not want to work in low paying jobs.

Instead, nitaqat has resulted in many businesses shutting down because foreign workers (called expatriates) have been laid off and forced to leave the country. This is apparent from the thousands of properties that have become vacant. There are rental signs for properties in all major cities with few takers.

A joke circulating on the Internet accurately captures the Saudi attitude to work. Contrasting the work ethic of Japanese and Saudis, the joke goes something like this:

Japanese: If others can do it, I can do it better. If others can’t do, I must do it.

Saudi: If others can do it, let them do it. If others can’t do it, ya akhi, how can I do it?

In 2019, the year for which the latest statistics are available, an estimated 800,000 expats were laid off, most of them doing menial jobs. They had to leave the kingdom and went home most being from India, Pakistan, Bangladesh, Sri Lanka, Nepal and the Philippines. True, these countries have or will suffer a sharp decline in remittances now that their workers have been expelled from the kingdom but the nitaqat scheme has not been a roaring success for the Saudi regime either as is evident from businesses shutting down.

Expatriate workers were allowed into the kingdom with the oil boom of the 1950-1960s. There was plenty of money. Saudi citizens did not need to work. Imported workers and labourers did menial jobs creating a lifestyle of dependency. Recipients of royal patronage facilitated by abundance of oil wealth, Saudis and work became oxymorons.

With no representation for people, the regime gave handsome monthly stipends. Most people were happy with this arrangement. There was little incentive to learn, acquire skills or find employment. “If others can do it, let them do it” syndrome took hold.

Even in those days some Saudis, especially those that went abroad to study and returned home with degrees and skill sets, realized that this policy was unsustainable. A country cannot function if the overwhelming majority of its citizens are unskilled and lack motivation.

Starting in the 1980s, some voices called for Saudization. They argued that with falling oil prices, especially from 1980 to 1988 when the price was kept artificially low, the kingdom’s economy would suffer. Low oil prices were part of a US-instigated policy to cripple Islamic Iran’s economy during the Iraqi-instigated war that was launched by Saddam Husain’s regime but supported by Arabian and Western regimes. Low oil prices hurt Iran’s economy badly; it also had a drastic effect on the Saudi economy. Money was no longer so easily available especially when the rapacious appetite of thousands of ‘royals’ had to be indulged.

Two other factors also came into play: rising cost of living and an exploding population. The income pie was shrinking. There was not enough money to go around. While Saudi citizens were still not directly affected in terms of cutting off their stipends, the axe fell on expatriate workers when the first steps toward Saudization were taken in the 1980s. These continued in subsequent decades but in typical Saudi style, it did not work out as planned.

The major reason for its failure was opposition from the business community and employers who objected to hiring Saudi workers. Expats continued to work because unlike the Saudis, they had the skills and they did not demand high salaries. The Kafalah system (sponsorship) kept the expats in a virtual slave relationship. Employers also found it almost impossible to fire Saudi workers who lacked proper skills, had no training or a poor work ethic. Further, the Saudis were not interested in low-paying jobs that expatriates performed.

The 2011 uprisings across the Middle East proved a turning point. A number of long-entrenched dictators were consigned to the dustbin of history in quick succession. The Saudi rulers felt particularly vulnerable although without organized opposition, they were able to weather the storm. Taking no chances, then King Abdullah announced a number of schemes: increased spending on new houses, raising government workers’ salaries and job creation schemes. Called ‘Hafiz & Jadarah Programs’, the regime announced unemployment benefits of 2,000 Saudi riyals/month allowance to job seekers, unemployed men and women, and in particular, the youth that comprise the bulk of Saudi population.

Concurrently, a new nitaqat program was launched by the Ministry of Labour and Social Development (MSLD) in 2011. It offered incentives to hire Saudis and fined companies failing to meet the required quota. Colour-coded designations were created for employers. Those that met the requirements were placed in white or green categories and were rewarded with certain perks. Yellow (since abandoned) and red meant fines. But there was a way around these as well. Employers could pay the government the requisite amount of money that they would have spent hiring Saudi workers and get upgraded to the higher level.

In typical Saudi style, it quickly turned into a racket. Here is one example. Under the nitaqat scheme, one disabled Saudi employee is counted as four able-bodied employees. Employers realized that hiring disabled workers will save them money since employment costs are greatly reduced, so they adopted this approach.

While the number of Saudis entering the workforce has increased, the rate of unemployment has not changed much. In the first quarter of 2017, Saudi unemployment was 12.7%. Next year, it actually rose to 12.8% and the year after that (2019), it dropped slightly to 12.5%, not a huge change. Lack of improvement in Saudi employment figures has occurred despite the fact that the number of male expats employed in private Saudi companies is falling by about 300,000 every quarter. Oddly, employment rate for non-Saudi females has increased. Saudi women clearly seem to have a bigger clout than hitherto realized!

The basic question is: would a Saudi, spoiled by years of government handouts, be prepared to become a taxi driver or a plumber, much less a construction worker? It seems highly unlikely given their present mindset.

So much for Saudization!