[Originally published by SaudiDebate].
Saudi Arabia is getting younger. In 2004, one out of every two Saudis was less then fifteen years old. That means a lot of new jobs are going to need to be created by the time these kids are out of school.
And that is just the problem. Despite fairly high levels of investment, gross domestic product (GDP) increased by just 1.6% between 1990 and 2000, while the population kept growing by an annual rate of 2.7%. If that wasn’t bad enough, there are not even enough jobs to go round those who are already old enough to be working. The unemployment rate is 8.1%, reaching a high of 32% among younger workers. Cordesman’s book, Saudi Arabia Enters the 21st Century (1), points out even the 8.1% figure released by the Saudi Central Department for Statistics assumes that only 19% of the population actually participates in the labour force. Only 19% of the population participates in the labour force. Add unemployed young people to discontent with the government and a three year campaign by militants in the kingdom and you have an explosive mix.
The idea of unemployment in Saudi Arabia might strike many people as a novelty. Across Asia and the Middle East Saudi Arabia has become thought of as representing the possibility of work. For alongside all this unemployment there is a huge force of immigrant workers. The Ministry of Labour estimated that there were roughly seven million foreigners in 2003 – making up a third of the population of the country. Some estimates put the numbers even higher. In 2004, the statistics department of the ministry of economy and planning claimed that this immigrant population accounted for 67% of the Kingdom’s labour force.
The government, clearly concerned about the problem, has been trying to implement a policy of Saudization, which would mean the replacement of foreign workers by nationals. In 2003 the government issued guidelines saying that foreign workers and their families should not exceed 20% of the population by 2013. While this is not a new idea, having been called for since at least the fourth development plan in 1985, with the population increasing and the situation getting more desperate, does it have any chance of succeeding?
To answer this question, one needs to understand how this strange situation came about.
With the boom in oil prices that started in 1973, Saudi Arabia needed to build a lot of new infrastructure. Lacking the manpower necessary for these jobs, the government brought labour from abroad. First people came from other Arab states, noticeably Yemen and Egypt. And despite the economic downturn of the 80′s, immigration continued to increase apace, except this time it was mainly people from Bangladesh, India, Philippines and Pakistan – populations that today make up half of Saudi Arabia’s expatriate population (2) .
As Maurice Girgis notes (3), by the end of the 80′s there was a situation of mass unemployment and mass immigration. It is a situation that continues to this day.
You can’t work here
It is noticeable that while expatriate labour constitutes 67% of the labour force, it is 95% of the labour in the private sector. The reasons for this go a good way towards explaining the story. Working for the Saudi Arabian state is still the employment of choice for young Saudis today, as they remember – and feel entitled to – the benefits and secure job opportunities it gave their parents. Indeed, it has come to be seen as something of an entitlement to work for the state. The problem being, rather like in France (4), the government can’t provide the same jobs to everyone any more.
While relatively less difficult (as we shall see), it is still hard to get Saudis into private sector jobs that are highly skilled. This has its history in the idea that everyone had an entitlement to work for the state. Until 1984, Saudi graduates were forbidden to work in the private sector and had to work for the government who sponsored their studies. The government used these jobs to distribute oil revenue in what some describe as a rentier state (5). This has led to overstaffing, underemployment and a labour market uninterested in the private sector.
Moreover, during the 90′s there were very few people who had the necessary technical ability to do high skilled jobs. Between 1995 and 1999, of the 120,000 people who had graduated from Saudi Universities, only 8% had studied technical subjects – this is just 2% of the total number of Saudis who entered the job market during the period. As Okruhlik points out, this has a lot to do with religious politics. Following the Shi’a uprising and al-Utaibi’s capture of the great mosque in Mecca, the regime “The regime chose to embrace rather than confront religious radicalism to protect the centrality of the ruling family in national life.” (6) This meant that the religious institutions continued to grow even as other programs were cut back. The combination of the lack of skills and the relatively privileged outlook of a state job meant that high level private sector jobs were effectively marked off for immigrants.
However, highly skilled work amounts to only 15% of the total immigrant worker population. The rest do jobs that the Saudis “refuse to take what are commonly considered menial jobs.” (7) Just how menial cannot be understated. In its 2003 report (8), Human Rights Watch describe working conditions for immigrants where pay is regularly lower than agreed upon, people have to work 16 hour days, and exploitation and abuse are commonplace. There is summary dismissal, forced confinement, and abuses of the foreign labour sponsorship agreement which sees people bundled from employer to employer for less and less money. In such conditions it is hardly surprising that no one wants to work ‘menial’ jobs.
The big plan… version three
But it is not this that is worrying the Saudi royal family. Their concern is their flagging economy. But the two things are linked. Guest workers, made to feel highly unwelcome, tend not to spend much money in the Saudi domestic market. Instead it is sent back home in remittances. Between 1993 and 2002 expatriates remitted roughly $15 billion a year. In 2003 the Saudi GDP was $287.8 billion. Abdel-Rahman (9) argues that remittances between 1990-1999 equalled 11.79% of the countries GDP. With a Saudization campaign that money would stay in the country. More importantly, it would mean increased spending in the private sector, which would in turn stimulate business growth.
Saudization should therefore bring employment, a boosted economy and a youth employed and not alienated and radicalised. This fine plan has proved difficult to implement in practice. The sixth development plan (10) targeted the creation of nearly 320,000 new jobs through Saudization. Instead, the number of expatriate workers grew by 58,400.
Being effectively a command economy (11), the main way the Kingdom is trying to achieve Saudization is through quotas. Starting in the mid-90′s, when private businesses employing more than 20 people were required to increase their Saudi quota by 5% each year, the kingdom has gradually called for decreases in foreign workers. By now, almost all administrative and government jobs are off limits to foreigners. However, this progress is only being made in the public sector, and even some of this is doubtful. As Al-Dosary and Rahman note: “To solve the unemployment problem, the government has forced the public sector to higher Saudis for nonexistent jobs, which has turned government agencies into a vast social welfare system.” (12)
Still, some good moves are being made. The Kingdom has invested in training institutes for various professions to make up the skills shortfall, and some companies are responding well to the call. Saudi Aramco, the huge state petrol company, has restricted contracts for foreign companies and set up a centre to teach Saudis how to work for contractors. But as Robert Looney argues in an article for Strategic Insight, new jobs will have to be created, and the best way to get Saudis into new jobs is to make them employable.
This can be done through market mechanisms rather than quotas that force the market to adapt artificially. However, some of the mechanisms that Looney suggests are bound to be very unpopular. To improve the attractiveness of the private sector he suggests “Separating wages and social benefits in the public sector” (13) and making it easier to fire nationals from jobs. This would not just be unpopular economically. In a country where “The official narrative meticulously weaves together the power of Islam and the al-Saud family as protector of Saudi Arabia’s moral integrity,” (14) changing the role of the state as provider for the people would further erode the limited legitimacy of the House of Saud. It would also be heavily resisted by those currently benefiting from the arrangement.
While making state jobs marginally less attractive might make people want to work high end jobs in engineering – it will have no difference at all in terms of the jobs done by the bulk of the immigrant population. Given the current conditions for many guest labourers, it remains highly unlikely there will be a Saudi replacement. Thus, ironically, it may need the Kingdom to improve working conditions for the immigrant workers for them to be replaced. And in a country where “I am Saudi” came to mean “I am not an imported labourer,” (15) it may be through making Saudi Arabians a bit more exposed to the working conditions of the market, and a bit more equal to the immigrant workers, that the Kingdom develops a private sector and a notion of citizenship less based on the House of Saud as a paternal distributor of oil revenues and favours.
1. Cordesmen, Anthony: Saudi Arabia Enters the 21st Century (http://www.amazon.co.uk/gp/product/0275979989/026-5565941-9051630?v=glance&n=266239) Quoted in *Al-Dosary, A. S. & Rahman S. M. Saudization (Localization) – A Critical Review. Human Resource Development International, vol. 8, No. 494-502 (December 2005).
3. Maurice Girgis, Would Nationals and Asians replace Arab workers in the GCC? For the Fourth Mediterranean Development Forum Amman, Jordan. October 2002.
6. p. 157. Okruhlik, G. 2005: The Irony of Islah (Reform). The Washington Quarterly. 28:4. pp. 153-170.
7. Looney, R. Saudization and Sound Economic Reforms: Are the Two Compatible? Strategic Insights, Volume III, Issue 2 (February 2004) http://www.ccc.nps.navy.mil/si/2004/feb/looneyFeb04.asp
8. Human Rights Watch, “Bad Dreams” Exploitation and Abuse of Migrant Workers in Saudi Arabia. http://hrw.org/mideast/saudi/labor/
9. Abdel-Rahman, A-M. M. The determinants of Foreign Worker Remittances in the Kingdom of Saudi Arabia. http://www.mafhoum.com/press6/184E15.pdf
12. p.500 Al-Dosary, A. S. & Rahman S. M. Saudization (Localization) – A Critical Review. Human Resource Development International, vol. 8, No. 494-502 (December 2005).
13. p.6. Looney, R. Saudization and Sound Economic Reforms: Are the Two Compatible? Strategic Insights, Volume III, Issue 2 (February 2004) http://www.ccc.nps.navy.mil/si/2004/feb/looneyFeb04.asp
14. p.154. Okruhlik, G. 2005: The Irony of Islah (Reform). The Washington Quarterly. 28:4. pp. 153-170.
15. p.155. Okruhlik, G. 2005: The Irony of Islah (Reform). The Washington Quarterly. 28:4. pp. 153-170.