Young Saudis on the spot as prince plans to expand private sector
For decades, young Saudis have grown accustomed to walking into easy public sector jobs, cushioned by decent salaries and benefits paid for by the kingdom’s petrodollars.
It is a phenomenon that has bred a reluctance to take on private sector work, which entails longer hours and fewer perks. The result is that expatriates — who account for a third of Saudi Arabia’s 30m population — fill about 85 per cent of private sector jobs.
But Mohammed bin Salman, the ambitious deputy crown prince, wants that to change. If he succeeds, millions of Saudis face a rude wake-up as the young prince attempts to implement a bold transformation plan that envisages shrinking the civil service and having half of all Saudis seeking work in the private sector by 2020.
While analysts agree that radical reform is needed to modernise the sclerotic, oil-dependent economy, the risk is it that forging ahead with social change could spark popular resentment.
“This is the point at which the commitment of the leadership to the adjustment process will be really tested,” said Simon Williams, HSBC’s chief economist for the Middle East. “The resistance to change this implies is likely to increase before it recedes as social and economic losses accumulate and reform fatigue sets in.”
A central tenet of Prince Mohammed’s “National Transformation Plan,” which was unveiled last month, is to reduce unemployment from 11.7 per cent down to 9 per cent by 2020 and 7 per cent over the following decade. Estimates of youth unemployment run as high as 30 per cent.
Policymakers are mindful that young men with little to do are easy prey for radicalisation by extremist Islamist groups, such as Isis, as footsoldiers for domestic attacks or recruitment to the battlefields of Syria and Yemen.
To tackle the issues, the NTP has the ambitious target of creating 450,000 private sector jobs by 2020 through the expansion of non-oil sectors, such as mining and tourism. But at the same time it plans to decrease the civil service by 20 per cent, as part of its aim of reducing the dominant role of the state.
Steffen Herthog, an associate professor at the London School of Economics, said that implies an “unprecedented reduction of government employment” at a time when the private sector job market is struggling in the wake of the slump in oil prices.
“While the working age Saudi population continues to grow at a fast clip, such a reduction (in the civil service) would be politically quite difficult,” Mr Herthog said.
Abdullah al-Alami, a Saudi writer, says the government will need to legislate to improve working conditions for Saudis and make the private sector more conducive to nationals.
Previous proposals have included shortening the hours worked in the private sector, mandatory two-day weekends, and earlier closing times for retail outlets to allow Saudi workers to spend more time in the evening at home.
“This is definitely a big challenge because Saudis have grown accustomed to working in the more ‘relaxed’ public sector,” Mr Alami said. “Let’s be realistic, in order for Saudis to accept this move into private sector, we need to change the work ‘culture’.”
The labour ministry is also studying implementing a new version of nitaqat — the labour regulations that have introduced effective penalties and incentives for businesses to hire more Saudis.
But businesses say they are already struggling with these closely-monitored national employment quotas.
One foreign financial services company, which employs seven executives, including three Saudis, needs to hire another seven Saudis as it expands to keep in line with current regulations.
“It is a hell of a tax on operations,” said the company’s manager, who declined to be identified.
“The real issue is finding qualified Saudis, and then working to keep them, because any with marketable skills know they can jump ship at the drop of a hat,” he said. “If they have any quarrel, even something small, then they will just go.”
While some Saudis are keen to join the private sector, especially white-collar jobs, many lack the skills needed to compete with cheaper foreign workers.
The conservative kingdom’s education system has been dominated by religious learning for decades.
Saudi Arabia’s human development indicators, spanning factors such as health and education, lag far behind other emerging markets such as Zambia and Ghana, according to the World Bank’s human capital index.
And in the short term unemployment could rise as public sector job creation plateaus, with wages stalling and the cost of living rising as subsidies are cut, according to HSBC.
“If there should really be substantial reductions in the public sector, one key political question would be how the losers in this process would be compensated,” said Mr Herthog.