Private Sector and Saudis

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  • Topic: Saudi Arabia, Private sector, Economy of Saudi Arabia
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Saudi Economy
Term Paper: Saudization
Done By: Mais Atiyeh & Noura Nadir
Saturday, January 6, 2011

Introduction
Saudi Arabia is a wealthy country with a young population structure and a high population growth rate. People under the age of 40 make up 78% of the population of which 32% is under 15 years. This means that the dependency ratio in Saudi Arabia is very high compared to other countries (2.4 times the world average). This also means that there will be a continuous increase in the number of new labor market entrants in the coming years. With high costs of living and a high dependency ratio, there is great pressure on the Saudi individual to find a job and greater pressure on the Saudi government to create more jobs. Over-saturation of the public sector has created a need for young nationals to look for work inside the expatriate dominated private sector. However with so many expatriates working in the country it is harder for the Saudi national to find a job in the private sector, and thus unemployment has been a serious issue in Saudi Arabia. In an effort to facilitate the employment of nationals, the Saudi government has instituted a number of policies favoring the Saudi worker in an effort known as Saudization Saudization is a tool used to combat unemployment and involves replacing foreign workers with Saudi workers. The Saudization plan was imposed by King Fahd bin Abdul Aziz to in order to significantly decrease dependence on cheap foreign labor. Under the plan, 75 percent of the workers should be Saudi, and should receive at least 51 percent of the company’s total salary payment.

Goals of Saudization
The three main goals of this policy are:
* Increase employment opportunities for Saudi nationals in the country especially in the private sector: the main aim of Saudization is to reduce unemployment levels and increase the availability of jobs for the nationals across the economy. By replacing Saudi non nationals, the government would be creating more jobs for the Saudi nationals.

* Reduce and reverse the reliance on foreign labor: The Saudi economy is heavily dependent on foreign labor; many hired during the oil boom years (and currently make up about 67 % of the workforce). With Saudi unemployment increasing in the country (reaching 25 % according to CIA World Fact Book)), Saudization aims to reduce the need to hire foreign labor and instead create a Saudi workforce capable of replacing foreign workers.

* Recapture and reinvest money that would have flowed overseas as income from foreign workers to their home countries: another reason that has been suggested for the current enforcement of Saudization is the significant financial losses incurred by remittance outflows. Between 1993 and 2002 expatriates remitted 585.4 billion Saudi riyals ($156.1 billion), averaging roughly 60 billion riyals ($15 billion) a year.

Obstacles to Saudization
One obstacle to Saudization is that the education and training of Saudi nationals does not meet labor market requirements. The current specialties taught at universities and institutions no longer cater to the demands of the changing job market. ILO studies and the World Bank indicate that the Saudi educational system is still failing to produce enough well educated males and females for the modern Saudi labor requirements. There is also no sufficient technical and vocational training provided to the students and thus Saudi graduates enter the labor market unprepared and struggle to perform as efficiently as expatriates. Young nationals are also considered to be less fluent in English, have poor communication skills and have less IT literacy than foreign employers. Therefore the country remains heavily reliant on imported labor to meet the requirements of economic growth and contribute to the development of the country. The number of foreigners in the kingdom as at 2009 is estimated at between six and seven million, compared to around 17...
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