Saudization helps increase employment in private sector, says law firm

The goal of regional localization programmes is to ensure that employment opportunities, primarily in the private sector, are created for locals in the respective country.

However, the difference in approach, both at a policy level and procedural implementation, amongst the programmes in each GCC country is substantial. These differences point towards the overall demographics of the local workforce and their skills set as well.

Haider Hussain, senior manager Middle East and North Africa (MENA) at global law firm Fragomen Worldwide, talks about the long-term benefits of Saudization on the Kingdom’s economy.

Here’s the full interview:

Q: How different are the policies and procedures of Saudization as compared to Emiratization and Omanization?

A: Looking at Saudi Arabia in particular, its nationalisation program is very sophisticated in its construct and the implementation. Given that Saudi Arabia has the highest local population within the GCC with an unemployment rate of nearly 13 percent, its need for nationalisation is also high.

Saudi Arabia has the ‘Nitaqat’ program which provides companies with nationalisation targets based on their industry sector of activity. This allows authorities in The Kingdom to identify the number of skilled Saudis available in a specific sector – if there is an abundance of skilled Saudis in that industry, the target is increased to ensure suitable opportunities are made available to Saudi nationals as a priority.

Along with these targets, the Ministry of Labor and Social Development (MLSD) has taken measures to Saudize specific job titles. Examples of these are Government relations officer, HR and administrative positions, front office representatives within the hotel industry and more recently, much of the retail sector.

In comparison, the UAE’s localization program is more driven through incentivising the private sector to hire Emiratis and become part of the ‘Emiratization Partners Club’. The implementation of Emiratization is primarily conducted by requiring certain job roles to be exclusive to UAE nationals.

Omanization, on the other hand, has always worked with a combined quantitative and qualitative approach. Whilst companies have set individual target percentages to comply with, there is also a focus on longer term development and ‘up-skilling’ of the workforce by ensuring Omanization is achieved across the spectrum of skills.

In fact, companies are required to provide a five-year plan showing the progression of Omanization percentages towards the higher skilled end of the spectrum including key leadership positions. This means that the government want the private sector to be involved in the development of Omani nationals for future leadership roles.

Q: Which are the sectors that might have seen an impact due to the recent wave of Saudization?

A: Saudization has impacted business across all sectors. However, more recently, we have seen an increased impact across 12 retail sectors. The MLSD announced a phased implementation of these 12 sectors starting with the automobile and motorbike showrooms, readymade garments, as well as children and menswear shops. Home and office furniture shops and household utensil shops are to be part of the first wave effective from September 11, 2018.

On Nov. 9, a further four sectors were Saudized including shops selling electrical appliances and electronics, consumer items and accessories, and medical equipment. The final wave will be implemented on Jan. 7, 2019, and will apply to the remaining four sectors including building and construction, car spare parts, carpet and textiles and, finally, food. 

To ensure that the Saudization in these sectors is being implemented, authorities in the Kingdom have also initiated inspections of given establishments.

Q: What are the opportunities that Saudization might have created in the Kingdom?

A: Ongoing Saudization across various sectors and job roles is ensuring the notable and visible participation of the local workforce in the private sector. Historically, Saudi Arabia has depended on the foreign nationals to fulfil much of the private sector roles in the Kingdom, while the public sector roles were taken up by Saudi nationals. The Kingdom has been utilising Saudization to bring about a change in the cultural mindset across the local population towards work.

The recent Saudization of retail sector further ensures that Saudi nationals are at the forefront and face of the Vision 2030.  Furthermore, the local female population has now opportunities to enter the labour market across various sectors.

Q: What are the challenges that companies might have to face due to Saudization?

A: The primary challenge centres on achieving the expected volume of Saudization and ensuing sustenance requirements. Of course, every organisation should realise its social responsibility in respect of addressing the needs of the local labour force in the market they operate in. However, with the expected targets increasing, it remains a challenge to firstly source talent with the appropriate skills and experience, followed by training needs when it comes to replacing experienced positions.

For instance, in the recent move to Saudize sales positions across several sectors including retail and other operations, the implementation timeframe of nine to ten months is not sufficient to allow companies to simply replace years of experience and talent development.

Having to reinvest significantly in doing so at the same time as meeting sales and profitability expectations in tougher market conditions places significant pressure to be able to realistically meet the goals.

They will also be faced with increased competition and higher turnover of their Saudi employees given the high demand for Saudi nationals in these roles. Companies will be competing for the best Saudi talent which may also result in increased salary costs.

Q: What are the long-term benefits of Saudization on the country’s economy?

A: The Saudization program is designed to help Saudi nationals be part of the change that is happening across the Kingdom. It ensures that they are at the forefront their country’s progression.

Through Saudization, the private sector is helping increase employment levels among Saudi nationals. It is also aiding in the development of country by ensuring that Saudi employees receive adequate training development and further enhances future opportunities for the Saudi youth. 

Write to Paromita Dey at paromita.d@argaamplus.com