The list of industries undergoing Saudi Arabia's nationalization plan continues to expand as the kingdom tackles chronically high unemployment rates among its youth.
This week, the country's Ministry of Labor and Social Development signed an agreement that's set to Saudize the industrial sector, which is one of the most vital in the kingdom.
The memorandum of understanding (MoU) got the seal of approval from the ministry's deputy official Abdullah Abu Thunain, in collaboration with the Ministry of Industry and Mineral Resources, the Technical and Vocational Training Corporation, the Saudi Human Resources Development Fund, and the Council of the Saudi Chambers.
According to officials, the latest move will guarantee the opening of over 35,982 jobs in the industrial sector to Saudis by 2021.
Khalid Aba Al-Khail, spokesman for MLSD, said the latest initiative comes in line with the kingdom's Vision 2030 and the National Transformation Program 2020.
Launched by Crown Prince Mohammed bin Salman, Vision 2030 mainly aims at diversifying the country's economy while also focusing on solving Saudi Arabia's major unemployment problem. One way officials are trying to do the latter is by Saudizing industries and opening more jobs to nationals. However, the process hasn't really lowered unemployment rates yet.
Though over 3.87 million expats have either left the kingdom or are currently detained and awaiting deportation, the country recorded its highest-ever unemployment rate among citizens during the first quarter of 2018. This rate stayed the same by the end of the year.
There have been slight improvements since, especially in numbers of Saudi women joining the workforce, but more needs to be done beyond Saudization to create opportunities that nationals are willing to explore.
Not many Saudis are interested in jobs being nationalized
A major obstacle facing the Saudization process is the fact that some Saudis refuse to take up jobs previously filled by expats as they deem them low-wage. This explains why despite the fact that vacancies are opening up for locals, Saudi business owners are still finding difficulty employing nationals.
According to employers, this is because most Saudis are "accustomed to undemanding work in the state sector and generous unemployment benefits." They therefore don't find much appeal in moving towards more demanding jobs with less benefits.
In recent years, several local private companies went about finding loopholes to a law that required them to hire a specific percentage of Saudis when they couldn't find locals to fill up jobs. They resorted to a process called "fake Saudization," which involves hiring nationals and paying them low salaries not to work but to be legally registered as workers at their establishments.
Effectivity aside, Saudi Arabia continues to move towards Saudization
This year, officials have signed more nationalization agreements than ever before. In September, MLSD signed an MoU with six government agencies that are set to provide 32,500 jobs to young Saudis in the agriculture sector. The agreement will Saudize 6,000 jobs in various agriculture fields, in addition to 6,500 jobs in firms that have signed contracts with the water sector, and over 20,000 occupations in privately owned firms.
That same month, officials issued a royal order banning local government departments from seeking consultancy services from foreign firms and limiting them to working with Saudi companies instead.
In recent months, the country partly nationalized its retail sector, which was previously dominated by expats. Last year, there were 330,000 nationals working in retail and wholesale business, versus 440,000 (men and women) in 2019.
The country's public sector in its entirety is also moving towards Saudizing its entities. In 2017, the kingdom's Ministry of Civil Service ordered all ministries and government departments to terminate contracts with expatriate workers within three years. Only Saudi nationals will be able to replace those who lose their jobs in the government.