Time: June 04, 2018
Early on Saturday, Saudi Arabia announced a wide array of changes in the leading positions in government. The shake-up can be seen as a way to speed up the implementation of diversification plans and building a sustainable economy that does not depend on oil. With the recent improvements in government revenues, it now has more means to ensure that those plans meet their deadlines.
Most of the changes were among the technical, second-tier civil servants at deputy minister level in government agencies closely involved in the implementation of Vision 2030 and the National Transformation Plan 2020.
Several higher-level changes were also announced over the weekend, with far-reaching consequences for Saudi Arabia and beyond. First, Saudi Arabia established a nationwide system of royal reservations, under which more than 200,000 square kilometers, or 10 percent of Saudi Arabia’s land area, have been placed. The largest land management system in the Kingdom’s history — almost the size of the United Kingdom — has long been advocated by conservationists and will contribute to the development of rural and remote areas and provide jobs for local populations: A key objective of Vision 2030. A similar target is behind the establishment or upgrade of new high commissions for local development in a number of provinces.
The second change, which is in line with Vision 2030’s focus on cultural revival locally and the projection of such globally, was the establishment of a new dedicated Ministry for Culture.
Third is the focus of this column — the appointment of Ahmed Al-Rajhi as Minister of Labor and Social Development, charged with achieving two clear objectives of Vision 2030: Increasing the employment of nationals and managing the social changes introduced by the Vision. These are among the most daunting challenges of making the Vision work.
Al-Rajhi is a young business leader, son of a key banking and real estate family, and is new to government service. Before his ministerial appointment, he served as chair of the Riyadh Chamber of Commerce and Industry and head of the Council of Saudi Chambers, two powerful institutions in the business community.
Unemployment among Saudi nationals has persisted during times of economic growth and various generous programs aimed at reducing the unemployment rate have not worked as intended. One of the main reasons is a lack of enthusiasm from the private sector, which prefers to rely on expatriate workers. Al-Rajhi could change those attitudes.
By raising the expectations of discouraged unemployed Saudis, the number of active job-seekers has grown as they became more optimistic about finding jobs
Abdel Aziz Aluwaisheg
Recent figures published by the General Authority for Statistics show the unemployment rate for citizens at over 12 percent. It has remained stubbornly in double digits over the past decade, despite rapid economic growth and the generous programs that have been introduced over the past two years to lower the figure.
Saudi Arabia is not unique in facing “stubborn unemployment” — the phrase that has been coined to describe a phenomenon of high unemployment during times of economic prosperity. Its causes are complicated: They include structural changes in the economy, laissez-faire labor policies, and slow responsiveness of educational and training programs to the needs of the labor market. Several countries are facing this situation, among both highly industrialized developed countries and developing poor nations.
Saudi GDP almost doubled in the five years from 2009 to 2014, rising from $429 billion to a peak of $756 billion, before falling to an estimated $679 billion in 2017, according to the IMF. It is expected to recover to $708 billion in 2018. Government expenditure has also risen sharply during that period.
A revolutionary program of employment incentives for Saudis was introduced in early 2012 by the Ministry of Labor. Under the program, job-seekers are being paid SR2,000 ($553) a month, provided they meet certain conditions. Since the program’s main objective was to facilitate entry into the labor market, strict conditions were set for job-seekers to qualify and stay in the program.
While providing the monetary assistance went more or less smoothly in the very popular program, the new unemployment figures, if accurate, show that the main objective of the incentive may not have had the same degree of success, although it prevented the unemployment rate from climbing further.
The program may be a victim of its own early success. By raising the expectations of discouraged unemployed Saudis, the number of active job-seekers has grown as they became more optimistic about finding jobs. The monthly stipend the Hafiz program provided offered an additional, financial incentive for actively looking for work.
But, for the program to achieve its objective of reducing unemployment, and to avert the financial squeeze that could result if the number of beneficiaries keeps growing, more has to be done to find jobs for Saudis. Its main objective was to help nationals become gainfully employed as soon as possible.
The new minister may discover what other countries have found: That fixing stubborn unemployment may not be easy and will require innovative tools. Reducing unemployment needs the support of the business community, where most of the jobs created by the economy are and will also be located in the future. Solutions have to be found at both the demand and supply sides of the labor market equation.
Popular ideas that Saudi Arabia could wean itself off foreign labor overnight are naive. With Vision 2030 projecting robust economic growth over the next decade and beyond, Saudi Arabia will continue to need foreign workers, probably more than the 10 million currently in the country. Even if all the unemployed Saudis — about 750,000 — find jobs, that will still leave millions of future jobs to be filled by expats.
The new Minister of Labor will have his hands full with resolving the stubborn unemployment of nationals, even before he meets his second daunting challenge of managing the rapid social transformation Saudi Arabia is going through.