Saudi Arabia: Coping With Indigenous Unemployment And The Nitaqat Program.
By EWI EXCLUSIVE | by J. Millard Burr
Friday, December 23rd, 2011 @ 10:31PM
December 20, 2011
In May 2011 the Saudi Arabia Minister of Labor Adel Fakieh announced that his Ministry would very soon introduce a program (the Nitaqat) that would drastically reduce the overall number of sponsorship visas (the Iqama) granted to expatriates seeking work in Saudi Arabia’s private sector. Fakieh, an engineer, the former mayor of Jeddah, Chairman of the Savola corporation and head of numerous companies, is not the usual Saudi bureaucrat. He has had a history of successes to dot his curriculum vitae, but the Nitaqat would likely be his most difficult undertaking ever.
Under the Nitaqat program private companies and establishments would be classified as “Green,” “Yellow” and “Red,” depending on the number of expatriate exployees found in their work force, and the length of their employment. Green companies that had hired an acceptable percentage of Saudi citizens in their work force would enjoy all benefits to be extended by the ministry, including the continued recruitment of foreign manpower and the transfer of sponsorship visas among other Green firms.
The Yellow and Red firms, all of which had a particularly low percentage of Saudi employees, were at serious risk of forfeiting their iqamas — work visas available to both actual and prospective foreign employees. Companies in the yellow category that fell short of fulfilling the Ministry’s Saudization conditions would be given time to correct the situation. And once that occurred, companies would be allowed to renew iqamas. Minister Fakieh sent a shock through the private sector when he annouced that new regulations would be issued and the government would not renew iqamas of expatriate workers who worked in and were unable to escape the Red category. For them, visas would not be renewed “irrespective of the years” already spent in the Kingdom. Thus it appeared that one way or another, the government’s Saudization program would succeed — even if an untold number of companies in the yellow and red categories suffered the consequences and went out of business.
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It seemed that for once the Ministry of Labor under Fakieh was actually determined to reduce indigenous Saudi unemployment. For local consumption Fakieh noted that it was entirely unacceptable that there were some 500,000 unemployed Saudis, including 28% of women, and 40% of high school graduates. To meet their needs the government was determined to create 1.1 million new jobs for Saudi nationals by 2014.
Other analysts, both in and out of government, were aware that Fakieh was a brave man but given the past history of such planning he was thought to be pushing an immense boulder up a very large erg. It was generally estimated that Saudi unemployment and underemployment really totaled at least 1.5 million citizens. As for employment itself, the official data was shocking: According to 2009 figures, the private labor force totalled 6.9 million of which Saudis comprised only 681,000 – slightly less than 10 percent! John Sfakianakis, chief economist at Banque Saudi Fransi, provided another viewpoint; he argued that in 2011 the total number of foreign workers exceeded 8.5 million, and three quarters of that number were employed in the private sector.
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Modern Saudi Arabia is a far cry from the Saudi Arabia of 1975 when the Kingdom counted only 725,000 foreigners in its work force. That number has doubled nearly every decade thereafter, and with a population growth rate of 3.5 percent per annum — among the highest in the world — the demand for foreign workers to do jobs in the home and in industry that Saudis avoid has increased. Most importantly, the government has concluded that something radical had to be attempted to enhance employment opportunity for young Saudis whose restlessness could no longer be ignored.
Minister Fakieh has argued that if the Nitaqat program were handled correctly at least 300,000 vacancies could be filled almost immediately by Saudi nationals. However, observers in the private sector were not as sanguine; they pointed to Ministry of Higher Education data which proved that universities are not graduating the engineers, science and computer specialists that the nation, and they, needed. (Their complaints are eerily similar to those heard in the United States.) Still, something had to be done, and there was the economy in general to consider: If the program worked as planned, it was expected that there would be a reduction in the remission of expatriate funds which accounted for about 100 billion Saudi riyals (approximately $27 billion) in 2010. (That total had nearly doubled since 2005.)
Importantly, and some observers felt ironically, the new Nitaqat system would not apply to the hundreds of thousands, if not millions, of expatriate house servants. Their work visas would be automatically renewed without taking into consideration the years they had worked in Saudi Arabia.
Fakieh did not immediately declare when the draconian decision would implemented, but the program’s barebones were given flesh shortly afterward. And for those looking for loopholes in the program, the Minister announced that proposals would be implemented through ministerial decree to which the Ministry of the Interior would sign-off and after final approval was granted by King Abdullah himself.
The Green companies would be granted a number of distinct benefits, not the least of which was the unimpeded recruitment of manpower from foreign countries. Green companies could also raid the Iqama rolls of employees in the yellow and red categories, and they could do so without seeking company consent. In addition, Fakieh promised that the new program would end up to 99 percent of the trade in black-market work visas, and it would end the too-common practice whereby a foreigner without an iqama could operate a business “under Saudi cover.”
Cynics argued that Saudization programs had been often tried, and just as often failed. Officers of companies who knew they would be placed in the Red category warned that for security purposes the Ministry of Labor actually wanted to bar all foreigners from working more than six years in Saudi Arabia. They pointed to the great number of expatriate accountants in both Yellow and Red categories. There was an aknowledged shortage of indigenous Saudi accountants; thus, critics wondered who would take the place of experts, many of whom had worked in the Kingldom for more than six years and were considered irreplaceable? More cynical Saudis felt that in the end, the program would not really limit the influx of expatriates. Simply put, companies would find a way around the law, and once expatirates had worked six years, other expatriates would take their place and the nation’s dependence on foreign workers would continue.
In June it was announced that while King Abdullah himself had approved the program, he had added the stern warning, “No one is above the new labor law.” Fakieh added that the King wanted the law to be applied “without fear or favor,” whether in terms of the recruitment of Saudis or expatriates. (Source: Saudi Gazette 2 June 2011). The Minister then noted that recent data indicated that some 300,000 foreign worker would have to be discharged. The Saudi government then set the introductory date for the Nitaqat program in September, and 26 November was given as the “drop dead” time limit after which no working permits would be granted foreigners working in companies classified in the red category.
The introduction of the Nitaqat Program begun in September 2011, but November 26 came and went without any noticable progress. Still, in a news report dated December 9, the Government announced that about half of all private businesses had been placed in yellow or red categories, and most were below (and in most cases well below) their Saudization targets. To show it meant business, on 2 December the Government had announced that Iqama for 18 job categories and sub-categories would not be renewed for “certain subcategories” listed under: Secretary/Salesman/Administrator/Sales Manager/Sales Supervisor/Finance Manager/Chief Accountant/Senior Accountant/ Office Manager/Sales Assistant/Administration Manager/Office boy/Driver/ Receptionist/Warehouse Manager/Forklift Operator/Logistics. All commercial enterprises operating in Saudi Arabia that had not done so were required to immediately submit to the Ministry of Labor their manpower requirements for the coming year. Stiff penalities for non-compliance would be imposed. (Arab News, 9 December, 2011)
A December conference of businessmen and owners of small and medium construction companies acknowledged that they would have practically no chance of escaping the “Red Zone” in which most had been placed. At the time, about half of all private companies have yet to escape the yellow or red categories, and as a last resort many were planning to merge with more powerful Green entities.
According to Ministry data published in the Saudi media in December 2011, about 6 million foreigners were still employed in the private sector, and the number of unemployed Saudi men and women remained constant at about one million. The Nitaqat program had yet to have a major impact on foreign employement, and noting the widespread discontent within the Saudi labor market the Ministry of Labor prepared to launch an interview program (the Liqaat) through which job seekers and employers could meet under one roof. The plan was, however, hardly prepossesing. In anticipation of the Liqaat the biodata of about 100,000 young Saudi males and females had been gathered and was being scrutinized. Only about 15,000 were to be selected for job interviews, and the first of the Liqaat fairs will be held in Riyadh on Jan. 28-30, 2012. Though not much to start with, it is a beginning nonetheless.
In addition, a national monitoring center for manpower information was launched, and the ministry urged all Saudis who had not registered under the Hafiz unemployment assistance program to register immediately. The Hafiz had been introduced by King Abdullah in November 2010, and it provides a maximum monthly allowance of 2,000 Saudi riyals. The program has its critics, however, as the payment was usually far less than advertised. While the Hafiz-Liqaat program would help Saudis to locate job opportunities, the government would also introduce the Taqat, a four month training program that would provide skills needed to find work in the private sector.
Despite the Labor Ministry’s efforts the Nitaqat program seems to be fighting a hydra-headed foe. Perhaps it is the cynacism of a large portion of the Saudi population, perhaps it is the easily recognized reality that most Saudis don’t want a job in the rough-and-tumble private sector. A sinecure in the public sector is much more appealing; it demands far less work, and is better paying. Perhaps an anecdote would illustrate an attitude that Minister Fakieh must confront: When interviewed, a 24-year-old male showed an obvious dislike of the Taqat program, and his attitude was seen as prevolent among college graduates: “Saudis will first look for a job in the governmental sector, as the salaries are higher. Why should we enroll in a four-month training course, setting us up to find a job in the low paid private sector?î
Given the estimated one million unemployed Saudis in the 30-35 age group, the Labor Ministry has has strongly urged the private sector to take advantage of the opportunities being provided for them by the Liqaat program to employ young Saudis. Thus far, businessmen have argued that they have found few qualified applicants to replace the expatriates, and they oppose the creation of make-work desk-bound sinecures just so they can survive. Nevertheless, that seems their only alternative.
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Most recently, Minister Faqieh has admitted that foreigners still account for around 90 per cent of the private sector work force. Meanwhile, a recent report from the United Arab Emirates (MENAFN, DEC 12, 2011) was less than sanguine when reviewing the progress of the Nitiqat program. It noted that the Saudi Ministry of Labour was putting on a brave face when it announced that, “almost 50 percent of the companies working in the kingdom are following government’s new rules to up Saudi workforce levels.” It reported that overall progress was dismal, and expatriates “still dominate the employment picture in the kingdom’s private sector.” And despite the recent economic recovery, “nearly one million Saudis remain unemployed.” Perhaps prematurely, it editorialized that, “This marks the failure” of the government’s latest and most aggressive Saudization job initiative.” It can be hoped that is not the last word on the subject.
J. Millard Burr, a Fellow at the Economic Warfare Institute, authored with Robert Collins, Alms for Jihad,, Revolutionary Sudan and many other publications, and is a former State Department official.
Categories: U.S. Policy