Economics and Private Sector

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University of Stirling

Saudization and Skill Formation for Employment in the Private Sector

A Thesis submitted for the degree of Doctor of Philosophy Division of Business and Organization School of Management

By Serhan Abdullah Al-Shammari January 2009


My gratitude first goes to the Almighty Allah, with His word: Qun Fa Yaqun (Qur’an 19: 35). I would like to express my sincere recognition to my principal supervisor Dr. Stewart Butts who provided me with quality and friendly supervision to finalize this work. Sincere regards also due to Dr. Gerry Hallier, my secondary advisor who provided efficient supervision and academic advises during the early phase of my work. My sincere thanking goes to my wife Foza for her suffering, encouragement, sacrifice whilst studying in the UK since 2002 and throughout until graduation. I would like to thank most sincerely the Institute of Banking of the Saudi Arabian Monetary Agency for granting me a scholarship to make my study possible here in the UK. I am also deeply grateful to my family and relatives in Saudi Arabia especially Dr. Eid Al-Shammary for the full support and encouragement to finish this work.

I extend special thanks to the interviewees for participating and providing me with valuable and practical data that were the core of this doctoral thesis.


ABSTRACT The development in the Kingdom of Saudi Arabia has been associated with its growing petroleum industry since late 1930s. This development has created a

sudden wealth in the country that shaped its labour market as well as its skill formation systems in the years after. It has also, thanks to the government

involvement, developed the country’s world class economy and its evolving private sector. However, this involvement has also created a duel labour market in which Saudis expect employment in the government while expatriates are continuously employed in private organizations. Employment in the government was always available to Saudis regardless of their qualifications which are dominated by theoretical literary majors over scientific and technical degrees. In the early days of the country’s development this did not produce major concerns to the government nor to Saudis. However, the country is producing one of the highest growth rates

in the world with the majority of its citizens are under the age of 19. Government employment is always limited as the majority of employment opportunities are available in the country’s private sector. Since the late 1980s, this has generated high rates of unemployment among Saudis as government employment reached its peak and as the private sector continues in recruiting millions of cheap expatriates to increase its profits and competitiveness. This is creating an unbalanced labour market structure as well as economic, political and social problems.

A number of government initiatives have been introduced to rectify such dilemma. One of which is Saudization to replace the country’s 4.7 million of expatriates recruited mainly (95%) in the private sector with as many qualified Saudis as possible. However, such efforts has not yet produced fruitful results as the private


sector is still recruiting expatriates and as skill formation systems are still producing Saudis with incompatible skills, knowledge and attitudes with the private labour market needs. This research assumes that ineffective Saudization in the private sector is not the core problem of the employment process in Saudi Arabia. In fact it is the outcome of the government’s heavy and unnecessary involvement and control over skill formation systems in the Kingdom especially over the General Organization for Technical Education and Vocational Training (GOTEVT) which is the main skill formation provider for the private labour market This involvement imposes the government’s rigid bureaucracy and limited funding on a very dynamic, flexible and self-sufficient economy...
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