Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
Saudization and the Nitaqat Programs: Overview and
Performance
Rita O. Koyame-Marsh
The limited success of the Saudization program in curbing the unemployment of Saudi
Nationals led the Saudi Ministry of Labor to introduce, a supplemental policy called the
“Nitaqat” in 2011. The Nitaqat program has clear and well formulated policies that are
expected to help the country efficiently reach the target rate of Saudization set in the national
development plan. The paper gives an overview of the Saudization and the Nitaqat program,
looking at their performances during the eighth (2005-2009) and the ninth (2010-2014)
development plans. Data show that the Nitaqat has had some successes such as
significantly increasing the number of Saudi employed in the private sector and moving
private companies out of the unsafe zones. However, Nitaqat has not been able to reduce
the persistent higher unemployment rate among Saudis while at the same time causing the
exacerbation of the phenomenon of Ghost Saudization and the closure of more than 200,000
firms in two years. The expectation is that the implementation of the third phase of the Nitaqat
would help resolve some these issues.
Field: Labor Economics
I. Introduction
Saudi Arabia continued dependence on foreign labor mixed with rising unemployment of
Saudi nationals has been a challenging problem for the Saudi Ministry of Labor (MoL) since
the first Development Plan in 1970. To tackle this problem, the MoL introduced a
nationalization program called “Saudization” which means the replacement of foreign workers
with Saudi Nationals. A targeted Saudization or nationalization rate for the labor market is
usually set in the Ministry of Economy and Planning’s (MOEP) Five-Year Development Plan
(DP). However, these target rates are often not reached due to various reasons including the
availability of cheaper foreign labor hired in masses by the private sector, the Saudi nationals’
lack of training and preparedness for the labor market, and the inefficiency of Saudization
policies.
The failure of the Saudization program in curbing the unemployment of Saudi Nationals, led
the MoL in 2011 to introduce the Nitaqat program as a re-enforcement policy. Nitaqat which
means “bands” or “zones” is designed to provide companies with more attainable targets. It
imposes sanctions to companies in non-compliance and provides incentives to those firms in
compliance in order to advance the Saudization agenda. The Nitaqat sanctions and incentives
have been strictly enforced. However, one of the main concerns about the Nitaqat quotabased system is that it could put unnecessary burden on the private sector by
_________________________________________________________________________
Dr. Rita O. Koyame-Marsh, College of Business Administration, Prince Mohammad Bin Fahd University, P.O.
Box 1664, Al-Khobar 31952, Saudi Arabia, Email: rkoyame@hotmail.com, Phone: +966538714984
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
creating additional costs for companies, costs such as the costs of training Saudi Nationals
so they can efficiently replace foreign workers [Looney 2004 and Ramady 2013). The burden
on the private sector could potentially hinder economic growth and diversification if it leads to
the closure of businesses and a decrease in foreign direct investment (FDI) inflows.
This paper examines the performance of the Saudization program before and after the
introduction of the Nitaqat program using data from the MOEP and Saudi Arabia Monetary
Agency (SAMA). Moreover, the paper discusses the impediments to the Saudization program
as viewed by the private sector and the potential success of the Nitaqat program in curbing
the unemployment of Saudi nationals during the three years of its existence. The paper is
organized as follows: section 2 give a brief review of the literature, while section 3 discusses
the Saudization program and its performance in the eight DP. Section 4 gives an overview of
the Nitaqat program and discusses its performance during the ninth DP. The paper finishes
with a conclusion in section 6.
II. LITERATURE REVIEW
The literature on Saudization and the Nitaqat programs falls under the broad literature in labor
economics that focuses on the impact of quota-based employment programs. The United
States’ affirmative action program is the most studied quota based employment program in
this literature. Affirmative action is a government-mandated program that imposes quotas on
the employment of minority groups in government jobs and in jobs from private companies
with government contracts in the United States. See Holzer & Neumark (2000) for a detailed
survey of studies on the U.S. affirmative action program.
Papers that have studied the effect of quota-based hiring policies in countries other than the
U.S. include studies by Howard & Prakash (2012), Chin & Prakash (2011), and Prakash
(2009) that examined the impact of Indian minority quota-based employment policies on the
Indian labor market. They found that the hiring quota-based policies improved the employment
outcome of some of the minority groups in India by increasing their probability of finding a
salaried job and choosing higher-killed occupations which in turn led to higher household
consumption expenditures.
Additional studies in the literature focus on quota-based employment policies that are
instituted for the purpose of nationalization of the labor force, especially in the Gulf
Cooperation Council (GCC) countries – Bahrain, Kuwait, Oman, Saudi Arabia, Qatar, and the
UAE. These countries’ reliance on foreign work force in the face of increasing national
unemployment has forced their governments to enact and enforce quota-based hiring policies
for their citizens. These are nationalization policies put in place as employment stimulus
programs with the goal of increasing the employment of the nationals of these countries in the
private sector These nationalization programs are referred to as Bahrainization in Bahrain,
Kuwaitization in Kuwait, Omanization in Oman, Saudization in Saudi Arabia, Qatarization in
Qatar, and Emiratization in UAE (Randeree, 2012).
The focus of this paper is on Saudization policies of Saudi Arabia and their impact on Saudi
labor market. The following are some of the recent studies on Saudization, the Nitaqat
program, and the Saudi labor market: Harvard Kennedy School (2015), Peck (2014), Ramadi
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
(2013), Saudi Hollandi Capital (2012), Fakeeh (2009), and Al-Asmari (2008). Harvard
Kennedy School (2015) wrote a background paper on Saudi labor market that resulted from
its partnership with the Saudi Ministry of Labor represented by the Human Resources
Development Fund (HRDF). The HRDF-Harvard partnership connects researchers with Saudi
policy makers to generated in-depth knowledge of the current constraints in the areas of
employment and job creation in the Kingdom. This report is not a comprehensive or conclusive
or binding document. It is, however, a living document that focusses on identifying problems
in the labor market and making headway into diagnosing the underlying causes of these
problems. It promotes a smart policy design that encourages a collaborative and problemdriven scheme whereby parties use collective expertise to tackle important labor issues.
Peck (2014) empirically analyses the effects of quota-based 2011 Nitaqat policies on
nationalization, firm size, and firm exit in the Saudi’s private sector. The paper used a
comprehensive data set on the full universe of Saudi private-sector firms to perform a
regression kink. The regression kink results were then complemented with a differences-indifferences approach to estimate the overall effects of the program. The paper found that
the Nitaqat program succeeded in increasing the employment of Saudi nationals but caused
significant costs to private companies and the shutting down of approximately 11,000 private
companies within 16 months of its implementation.
Ramady (2013) discusses the Nitaqat program and examines its effect on the overall
economic growth and productivity in Saudi Arabia assuming the introduction of a SAR 3,000
per month minimum wage for Saudi workers in the private sector under the government’s
Hafiz system. The paper concludes that the Nitaqat program and the minimum wage
policies would decrease labor productivity and potentially affect other Saudi government’s
initiatives such as opening up the Saudi economy to the global market and raising the
quantity of foreign direct investment (FDI) inflows. The study suggests that foreign firms
could exit the Kingdom believing that Saudization policies will put them at a disadvantage,
especially cost wise, when compared to their foreign competitors. In addition, potential new
entrants will become more reluctant to invest in the Kingdom resulting in a reduction in FDI.
Saudi Hollandi Capital (2012) also provides an overview of the Nitaqat program and
discusses its effect on the Saudi’s economy. The paper highlights some of the factors that
incited the Saudi government to launch the Nitaqat program, factors such as the
unsuccessful implementation of the Saudization program, large presence of foreign
employees, high unemployment rate among Saudis, increase in youth population, and
unrest in the region. According to this study, the increase in the employment opportunities
for Saudis and the reduction in outward remittances are the positive effects of the Nitaqat
program while skills mismatch among local labor force, increase costs for private
companies, fall in the inflow of FDI, and closure of businesses are the potential negative
effects.
Fakeeh (2009) wrote a doctorate thesis that discusses the paradox of high wealth and high
unemployment of Saudi nationals in the Kingdom. He also attempts to determine if
Saudization is the solution to the unemployment problem in Saudi Arabia by analyzing the
shortcomings of the program as instituted by the government and as used by the private
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
sector. The study was conducted based on documented evidence as well as on interviews
with representatives of key stakeholder groups such as policy makers, employers, and
employees in Jeddah, Saudi Western Province. The study concludes that policy makers still
view Saudization as an economic and social necessity while coming to the understanding of
the difficulties that the policy presents to the private sector and the reluctance of the private
sector in applying it. The study suggested that Saudization policies must fit the reality of the
labor market in order to be more efficient.
Al-Asmari (2008) gives some background information on the efforts made by the Saudi
government in developing local manpower and replacing foreign labor with Saudi nationals
through the Saudization program. The study concludes that more still need to be done in the
development of local human resources and in reducing dependency on foreign labor in the
private sector. Saudi government’s efforts and strides made at the education and training
levels, the development of some job-replacement policies, and the creation of career
opportunities are still not enough. The study also stresses the importance of harmonizing
the education system with the actual needs and requirements of the labor market in Saudi
Arabia.
This paper adds to the recent literature on Saudization by providing updated information
about the Nitaqat program and by comparing the performance of the Saudization program
before and after the implementation of the Nitaqat during the eighth and ninth DPs. The
paper offers clear evidence on the achievement of the Nitaqat program at effectively raising
the number of Saudis employed in the private sector and the shortcomings of the program in
reducing the level of unemployment for Saudi nationals.
III. THE SAUDIZATION PROGRAM
The Saudization program, which objective is to increase the number of employed Saudis,
especially in the private sector, started with the first Saudi Government’s first DP in 1970
(1970 – 1975). However, it became a priority for the Saudi government in late 1990s due to
rising unemployment for Saudi Nationals and a rapidly growing population with more than
50% under the age of 20 (Fakeeh, 2009). Currently, the government of Saudi Arabia has
completed its ninth DP (2010-2014) and is working on its tenth DP (2015 - 2019).
Table 1 gives a brief overview of the changes in Saudi labor force during the eight DP. The
target Saudization rate (Saudi employment as percent of total employment) was set at 51.5
percent in the eighth DP (2005 – 2009). The expectation was that by the end of 2009, Saudi
Nationals should represent 51.5 percent of the Saudi’s work force. However, for various
reasons; the Saudization rate fell short of target, increasing only to about 47.9 percent at the
end of the plan in 2009, missing its target rate by 40.8 percent (Ministry of Economy and
Planning, 2010). In addition, there were 2.2 million new jobs created by the private sector
during the five years of the eight DP, however only about 8.9 percent of them (195,755 jobs)
were taken by Saudi Nationals (Sfakianakis, 2014).
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
Table 1 Saudi Arabia Main Indicators of Labor Market at the End of the Eight DP
Actual Target Actual Percent Change Percentage(1)
2004
2009
2009
during 8th DP
Above & Off
Target Actual Target
Saudi Manpower (Thousands)
Male
Female
Saudi Labor Participation rate (%)
3804.2
3271.6
532.6
36.9
4886.0
3996.7
889.3
39.2
4329.0
3636.5
692.5
36.7
28.4%
22.2%
67.1%
6.2%
13.8%
11.1%
30.0%
-0.5%
(51.4 %)
(50.0%)
(55.3%)
(108.1%)
Total Employment (Thousands)
Saudi
Non-Saudi
Saudization Rate (Saudi
Employment as % of Total)
Unemployed Saudis (Thousands)
Male
Female
Saudi Unemployment Rate
(% of Saudi Manpower)
Male
Female
8281 .8
3536.3
4745.5
42.7
9221.3
4747.1
4474.2
51.5
8173.1
3914.6
4258.5
47.9
11.3%
34.2%
-5.7%
20.6%
-1.3%
10.7%
-10.3%
12.2%
(111.5%)
(68.7%)
75.4%
(40.8%)
267.9
183.6
84.3
7.0
138.9
99.7
39.2
2.8
414.4
238.1
176.3
9.6
-48.2%
-45.7%
-53.5%
-60.0%
54.7%
29.7%
109.1%
37.1%
(213.5%)
(165.0%)
(303.9%)
(161.8%)
5.6
15.8
2.5
4.4
6.5
25.5
-55.3%
-72.1%
16.1%
61.4%
(129.1%)
(185.2%)
Note: (1) A positive number means percentage above target. Negative numbers are in parenthesis and mean percentage off target.
Source: Data from Ministry of Economy and Planning 2006a, 2006b, 2010a, 2010b, and 2010c.
Percentage changes and percentage above & off target calculated by the author
In addition, the unemployment rate for Saudi nationals was expected to decline from 7
percent in 2004 to 2.8 percent by the end of the eight DP in 2009. Unfortunately, rather than
falling, Saudis’ unemployment rate rose to 9.6 percent in 2009, missing its target by 161.8
percent. Moreover, the number of unemployed Saudis which was targeted to decrease from
267,900 in 2004 to 138,900 by the end of 2009, increased to 414,400 unemployed Saudis,
missing its target by 213.5 percent. While, the number of employed Saudi nationals rose as
expected but fell short of target by 68.7 percent.
Of all the labor market’s targets set by the MOEP in the eight DP, only one exceeded
expectation, the number of employed foreign workers which declined by 10.3 percent,
almost twice as the set target of 5.7 percent. This was good news for the MoL which at least
managed to reach and exceed one of the key goals of the nationalization program, that is,
the reduction in the number of foreign workers in the Kingdom.
3.1. Impediments to Saudization
3.1.1. Private sector Perspectives
The literature presents several impediments to Saudization program. However, this study
shall discuss the following four barriers as perceived by the private sector: Saudis’ lack of
skills and work ethics, mismatch between acquired skills and required skills, lack of strategic
planning by the government and the private sector, and increase costs to the private sector.
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
The first barrier to Saudization is the belief by the private sector that most Saudis lack skills
and work ethics when compared to their expatriate counterpart. According to Fakeeh (2009),
many business owners in the private sector think that Saudi nationals have an undesirable
attitude towards work. They stated that Saudi workers behave as though they are above
work while lacking knowledge and skills. In addition, Saudis are believed to be disrespectful
towards companies’ laws; they lack discipline, and are unreliable. As a result, the private
sector is reluctant to hire them. The following is a quote from the private sector concerning
Saudis’ work ethics and attitude (Fakeeh, 2009; p.109):
“Assuming I could train them on policy and procedure as well as how to use the
computer, how am I supposed to teach them how to behave with patients and lend
themselves to think and communicate appropriately for the work place. Manners, oh talk
about manners! [Lebanese medical director, private hospital, Jeddah]
The second stumbling block to Saudization is the mismatch between the skills acquired by
young Saudis through education and the skills needed in the labor market (Harvard
Kennedy School, 2015). Saudi students have been choosing college majors that are not in
high demand in the labor market. This mismatch stems from the lack of up to date
information about the skills required by the private sector which in turn fails to guide the
educational choices of young Saudis. Saudi college students continue to prefer fields of
studies that have poor job prospects, fields such as education and humanities. This causes
market failure where private firms can’t find qualified Saudi workers and the latter can’t
provide their labor services to the market.
The suboptimal human capital investment decisions made by young Saudis will continue
unless they get access to quality information about job opportunities and career choices.
The Saudi’s Technical and Vocational Training Corporation (TVTC) is working on bridging
the gap between acquired skills and required skills to help steer students toward the most
promising college majors and vocational opportunities. TVTC provides direct job training
programs through the College of Excellence (CoE).
Other programs such as the Career Education Development (CED) program are designed to
improved young Saudis access to career information. The goal should be to reach young
Saudis with information campaigns on career availabilities and the appropriate fields of
studies earlier in their education trajectory, starting for instance in middle school and
continue until their last year of high school. The ongoing information campaigns should help
guide young Saudis in making important decisions about their college education. Career fair
and school career day are the best forms of info campaigns that have been used
successfully in United States of America.
The third stumbling block to Saudization is the lack of strategy and planning from both the
Saudi government and the private sector. From his field work Fakeeh (2009) concluded that,
the private sector in Saudi Arabia had been complaining that Saudization laws and methods
seem to have been created on an ad hoc basis, using a trial and error system that changed
as the program progressed. In addition, the Saudization program was established before the
establishment of the infrastructure necessary for its implementation. Furthermore,
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
Saudization sets generalized quotas that are unrealistic, bans visas for jobs where there are
not enough qualified Saudis to fulfill them, and restrict jobs to Saudis that they are not
interested in occupying due to social reasons or unfavorable work conditions.
The lack of strategic planning on the private sector side resulted from the belief that the
Saudi government will delay executing the Saudization program. Private firms believed that
the MoL will find other ways of employing the unemployed Saudis rather than looking at
Saudization as the way of the future for the labor market. The following is a quote from a
private businessman concerning his lack of strategic planning about the Saudization
program (Fakeeh, 2009, p. 122):
“Saudization is a national program. It deals with humans, the economy, and the whole
society. Yes, we knew it was coming, but it was like a rumor or the flu that comes and
goes seasonally.”[An elderly national businessman in electric appliances retail]
Finally, the fourth major hurdle to the Saudization program is the costs resulting from its
implementation. The private sector believes that it would be economically costly, especially
in productivity, to force private companies to replace their hard working, experienced, and
cheap foreign labor with inexperienced Saudis who often are under qualified and lack proper
work ethics. In addition, the payroll budget of private companies would have to rise
tremendously when nationalizing their work force because Saudi workers cost more in
wages and salaries compared to their foreign counterparts. For companies that have
resorted in hiring two Saudis for the job of one person to counteract low productivity,
absences, and high turnover of Saudi workforce, the costs will be even higher (Fakeeh,
2009).
Private companies face additional costs for training Saudis in order to provide them, for
instance, with the IT skills and English business terminologies that are needed for a
successful on the job performance. This is even more costly when the trainee drop out in the
middle of the training program as it is often the case. The good news is that the Saudi
Human Resources Development Fund (HRDF) provides companies with financial help to
cover part of the costs of training Saudis but only for those who complete the program.
Some of the private companies find the process just too complicated and choose not to ask
for HRDF help (Fakeeh, 2009).
3.1.2. Saudi Workers’ Perspectives
It will be remiss not to mention the Saudi workers’ perspective on Saudization since they are
one of the major stakeholders of this program. According to Fakeeh (2009), economic
expectations, educational factors, social constraints, career planning, and work
circumstances are what Saudi workers consider to be the impediments to their successful
participation in the Saudization program.
The economic pressure for young Saudi graduates comes from the high cost of living, the
dependency ratio per person, and a very low participation rate of women in the economy.
Economically and socially, young Saudi men are expected to be the breadwinner of their
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
own family as well as helping their aging parents and many siblings financially. These
expectations add an additional layer of challenge to new graduates, make it much harder for
them to adjust to the work environment, and cause them to change jobs often looking for
better paying ones. The constant moves from job to job deprive them of the benefit of
building experience and the adjustment to work environment that they tremendously need
(Fakeeh, 2009).
The lack of educational background is mostly a hindrance for young unemployed Saudis
with a high school diploma and college graduates with degree in fields that are not in high
demand in the Saudi labor market such as libraries and archive, Islamic law, and Arabic
language. Most unemployed Saudi high school graduates struggle to find jobs due to lack of
IT and communication skills, lack of command of the English language, lack of problem
solving skills, and undesirable professional conduct (Fakeeh, 2009). It is very frustrating for
a young Saudi to realize that the Saudi educational system didn’t provide him with the basic
skills that the labor market dim necessary for employment as stated in the following quote
(Fakeeh, 2009, p. 151):
“They ask me how good my English is. I tell them, as good as they taught me in the
school. You can’t expect me to speak English like the Filipino or the Indian; it is fed to
them since childhood. Ask anyone, we learn English ABC at 14 by a Saudi teacher
who
translates the lesson into Arabic. [Saudi errand messenger, industry and retail
organization,
Jeddah]
Finally, young Saudis feel that the workplace ambience, work requirements, and pay
structure are more suitable for foreign workers than nationals (Fakeeh, 2009). A requirement
such as working long hours without proper financial compensation is not acceptable to a
Saudi but it is to an expatriate, so they refuse to comply. In addition, Saudis are not satisfied
with the pay system that pays a wage that is not sufficient to support a large family or to
compensate for inflation. They believe that Saudi Arabian inflation is not a concern for most
foreign workers whom they are expected to replace because these expats leave alone in the
Kingdom and most of their expenses happen in their home countries where their families
reside. Moreover, the lower wage that the expats receive in Saudi Arabia is more than
enough for their families to have a decent life in their homeland in addition to covering their
own expenses while living in Kingdom. The following quotes illustrate the feeling of a Saudi
worker when it comes to the pay structure (Fakeeh, 2009, P. 153):
“Be logical, he, the Filipino accountant clerk, can live as a rich man back in Manila on
700
dollars a month. He lives and eats in the company’s compound for nothing.
Translated in
Riyals it is 2600, just a bit more than my rent and we haven’t started with expenses, the wife’s
needs and the car instalments. Can we both live the
same life on the same pay? [Saudi
accountant trainee, marketing organization]
Some unemployed Saudis and those new to a job describe the work ambience as more
tailored to the ways of the expatriate and cause them to feel uncomfortable in the workplace.
The superiority that a supervisor holds over its subordinates in setting policies and in
communicating with them is portrayed as demeaning and impossible for a Saudi to accept
since it affects his image and pride (Fakeeh, 2009).
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Proceedings of Annual South Africa Business Research Conference
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Overall, Saudi workers complain that as newcomers to the organization, they feel
undermined and isolated by their foreign counterparts. They also believe that foreign
workers don’t trust their ability to learn, so they intentionally delay the training and interfere
negatively with the learning process. They feel that, during the training, their foreign
counterparts in fear of being replaced by the Saudis; are willingly withholding information
that might lead them to acquire the required skills faster and perform better quicker. One
Saudi worker puts it this way (Fakeeh, 2009; p. 159):
“For example, when I ask how are you going to charge this patient? What’s the method?
They would say later, later. Oh, it’s okay. It’s easy. We will tell you later. I would ask,
how
do I channel this patient? Is there a special treatment for his being a VIP or an
insurance patient?
She would not give me the information I need. [Saudi administrative
trainee, private health
care, Jeddah]
Only a few interviewed unemployed Saudis (two out of ten) blame their own attitude and
lack of skills for their unemployment (Fakeeh, 2009). These Saudis feel unprepared and
intimidated to replace the expatriates in a modern work environment. In addition, they claim
that their inability to work long hours and not have time off for social and family matters work
against them when compared to foreign employees who don’t have such obligations.
Most Saudis also mentioned that social constraints do not allow them to fill many of the
potential jobs that Saudization made available to them. Indeed, they will not accept certain
types of occupations or categories of jobs, such as manual and technical work and some
service-oriented jobs due to social considerations (Fakeeh, 2009). These types of
occupations are deemed inferior by Saudis compared to a lower paying office job in an air
conditioned building with a desk and a chair. Many young unemployed Saudis will not train
or take these manual and technical jobs.
IV. THE NITAQAT PROGRAM
Due to the continuing failure of the Saudization program in reducing the number of
unemployed Saudi nationals, the MOL decided in June 2011 to introduce a new re-enforcing
program called the Nitaqat. The “Nitaqat,” which stands for “bands” or “zones” in Arabic, is a
program aims at increasing work opportunities for Saudi nationals in the private sector by
following a different set of rules than Saudization. Under the Saudization program, all private
companies, irrespective of their economic activity and size were required to have 30% of
their workforce occupied by Saudi nationals.
Unlike the one size fits all Saudization quota system, the Nitaqat program measures the
nationalization performance of companies by calculating, over successive periods of 13
weeks, a moving average of the percentage of Saudi nationals employed by a firm, taking into
account the firm’s economic activity and size (Ministry of labor, 2011). Saudi nationals
counted as employed in the quota measurement are those registered with the Central
Department of Statistics and Information (CDSI). Based on the measured nationalization
performance, companies are grouped into four bands: Excellent (Premium), Green,
Yellow, and Red. The description of each band is presented in Table 2 below.
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Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
Table 2 Nitaqat Companies’ Classification
Excellent/Premium
Green
Entities achieving superior
nationalization performance with the
highest percentage of Saudi employees
Yellow
Entities achieving good nationalization
performance, with good percentage of
Saudi employees
Red
Entities achieving below average
performance with lower percentage of
Saudi employees
Entities achieving poor nationalization
performance by hiring the lowest
percentage of Saudi employees.
These firms should represent no more than
the bottom one fifth percentile of entities
with same size and economic activity
Source: Saudi Ministry of Labor, 2011; Saudi Hollandi Capital, 2012.
The government of Saudi Arabia expects to quickly replace foreign workers with Saudi
nationals in the private sector using the Nitaqat quota-based program. Each of the four
classification groups of the Nitaqat has nationalization quotas which vary according the
economic activity and employment size of the firms. This led to the remapping of the labor
market into 45 economic activities and the grouping of companies into five sizes according
to the number of employed workers. A micro company is a business with a total of 1 to 9
workers, while a company that has between 10 to 49 employees is classified as small.
Medium size companies are businesses with a workforce of between 50 to 499 employees,
while large companies are businesses with a total of 500 to 2999 employees. Giant
companies are those with 3,000 employees or more.
Altogether, the MoL created 225 different nationalization quotas for companies of different
sectors and sizes. However, since business entities categorized as “Micro” were exempt
from the Nitaqat system at the initial stage of the program for fairness and protection, the
total number of nationalization quotas decreased to 180. Micro firms are, however, required
to employ a least one Saudi nationals in their companies. Table 3 below shows a sample of
Nitaqat color band ranges for the education sector. The quota ranges are widespread
across the four categories of education services.
Table 3 Samples of Nitaqat Color Bands (Saudization Quotas) in Education Sector
Sector
Small Size
10-49 Employees
Kindergartens, Institutes And Colleges
Red
0-9%
Yellow
10-33%
Green
34-69%
Excellent
70% above
Medium Size
50-499 Employees
Large Size
Giant Size
500-2,999 Employees 3,000 & more Employees
0-11%
12-34%
35-69%
70% above
0-14%
15-34%
35-69%
70% above
0-14%
15-34%
35-69%
70% above
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Source: Saudi Hollandi Bank, 2012.
For instance, a medium size (50 – 499 workers) college with 20 Saudi workers and 80
foreign employees will be classified as Yellow with a Saudization rate of 20 percent.
The Nitaqat program was implemented in phases from its inception in June 2011. During the
first phase of the program, all private companies were asked to update information about
their employee at the Ministry of Interior and the General Organization for Social Insurance
(GOSI). The Saudi MoL used the information provided by these companies to calculate their
initial nationalization levels. The implementation of the Nitaqat program started with the
second phase of the program that began in September 11, 2011. During this phase, the
MoL began implementing sanctions against companies in the lower bands (Yellow and Red)
and incentives for companies in the higher bands (Premium and Green).
Additional sanctions and incentives were added incrementally in November 2011 and in
February 2012. Both sanctions and incentives of the Nitaqat program are designed in a way
that should lead the program to reach its goal of having 50% of companies of the same
sector and size in the Green and Premium bands. Table 4 gives a summary of the Nitaqat
sanctions and incentives for companies by color band.
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Color Band
Red
Yellow
Table 4
Nitaqat Sanctions and Incentives
for Companies by Color Band
Sanctions
- Not granted new work visas
- Not allowed to renew existing work visas
- Not allowed to transfer visa to other Jobs
- Can’t hire foreign workers from other firms
- Not allowed to open new facilities or
branches
- Their foreign employees are allowed to
transfer jobs to companies in the Premium &
Green bands without their consent.
(In the past, expats were required to work for
at least two years with their current employer
before they could work for another one).
- Not allowed to renew work visas of foreign
employees who have been in the Kingdom
for six years or more
- Not allowed to transfer visa to other Jobs
- Can’t hire foreign workers from other firms
- Not allowed to open new facilities or
branches
- No new temporary or seasonal visas
- Their foreign workers are allowed to
transfer jobs to companies in the Premium
and Green bands without their consent
including those who want to continue
working in Saudi Arabia beyond six years.
Incentives
None
- Can renew work visas of their foreign
employees who have been in the
Kingdom for less than six years.
- Entitle to one new visa for every two of
its foreign workers leaving the country
on a final exit visa
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Green
None
- Can renew existing work visas
- Can apply for new work visas every
two months
- Entitled to one new visa for every two
foreign workers leaving the country on a
final exit visa
- Entitled to “Open profession visas,”
that is, firms can change and update their
foreign workers’ profession (job
descriptions) as necessary (excluding job
restricted to Saudis)
- Can hire foreign workers from Red and
yellow firms without the consent of their
current employers
- Entitled to a six-month grace period for
the submission of the Certificate of Zakat
and Income Tax.
- Entitled to a six-month grace period in
the renewal of their expired professional
license, commercial registration, and all
MoL documents.
Color Band
Premium
Sanctions
Incentives
None
- Entitled to unrestricted approval of new
visas, that is, firms can hire anyone from
any part of the world any time.
- Entitled to one new visa for every two
foreign employees leaving the country
on a final exit visa
- Can use electronic system to apply for
work visas for any type of profession
(except for jobs restricted to Saudis)
- Able to renew existing visas for any
employee within three months of their
expiration.
- Entitled to open profession visas.
- Can hire foreign workers from Red and
yellow firms without the consent of their
current employers
- Entitled to a six-month grace period for
the submission of the Certificate of Zakat
and Income Tax.
- Entitled to a one year grace period in
the renewal of their expired professional
license, commercial registration, and all
MoL documents.
Source: Ministry of Labor, 2011; Saudi Hollandi Capital, 2012.
4.1. Jobs Restricted to Saudis
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In 2013, the Saudi MoL decided to tighten labor market regulations by reserving 19 jobs
categories exclusively for Saudi nationals (Sayel, 2013). These restricted jobs are listed in
Table 5. As per the MoL, there will be no work permit renewal for expatriates currently
occupying jobs that are reserved for Saudis.
Table 5
The 19 job titles off-limit to expatriates
Executive HR manager staff relations clerk
hotel receptionist
Broker
HR manager
recruitment clerk
health receptionist
key specialist
labor affairs manager
staff affairs clerk
claims clerk
customs broker
staff relations manager
attendance control clerk treasury secretary
staff relations specialist
receptionist (general)
Female sales specialists
Security
Source: Sayel, 2013.
Restricting some jobs to Saudis should help speed up the Saudization process in these job
categories which is in line with the nationalization campaign and the objective of reducing
the number of unemployed Saudis. Other job categories such as Physicians, engineers,
nurses, educators, designers, administrators, and technicians, can be occupied by
foreigners, as long as they are not part of the exclusive list.
Other initiatives of MoL are the “Hafiz,” “Liqaat,” and “Taqat” programs also introduced in
2011 and are run in conjunction with Nitaqat. Hafiz is an unemployment benefits program
that grants unemployed Saudi men and women an allowance of SAR 2,000 ($533) every
month for up to one year (Al-Jassem, 2012). In addition, Hafiz provides Saudi jobseekers
with training and helps them find jobs. The “Liqaat” program holds job fairs across Saudi
Arabia for the purpose of facilitating job interviews between employers and Saudi job
seekers. The “Taqat” (capability) program focusses on helping match unemployed Saudis
with jobs in the private sector.
4.2. Nitaqat Outcomes
From its inception in 2011 to 2014, the quota-based Nitaqat program has reached its goal of
moving companies out of the unsafe zones (Red and Yellow bands) and increasing the
number of Saudis employed in the private sector. Saudi Deputy Minister of Labor Ahmad
Al-Humaidan pointed out that almost 86 percent of private firms and establishments were in
the safe zones (Green and Platinum bands) of the Nitaqat Saudization program as of
October 2014. This was a big achievement for the Nitaqat program because in 2011, at the
start of its implementation, companies in the safe and unsafe zones were at 50 percent each
(Saudi Gazette, 2014a).
Another positive result of the Nitaqat is the large increase in the number of Saudi nationals
employed in the private sector which rose by 83.6 percent between 2011 and 2014 as
shown in Table 6. he Saudization rate in the private sector rose from 10.8 percent in 2011 to
15.5 percent in 2014, a 43.5 percent increase (SAMA 2013, 2015). Data in Table 7 and
Figures 1 & 2 show that this is a modest increase when considering the higher number of
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jobs created in the private sector during those three years. Indeed, the private sector
created about 2.2 million jobs (90.2 percent of total jobs created) between 2011 and 2014,
however, only about 31.5% of these jobs (0.7 million jobs) went to Saudis and the remaining
68.5 percent went to foreign workers.
Table 6 Private Sector Employment by Nationality, 2011 and 2014
Year
Saudis
(Million)
Non-Saudis
(Million)
Total
(Million)
Saudization
Rate (% )
2011
2014
Percentage
Change (%)
0.844
1.550
83.6
6.937
8.471
22.1
7.781
10.021
28.8
10.8
15.5
43.5
Source: SAMA 2014, 2015.
Percentage changes calculated by the author
Table 7
Job creation in the private and public sector, 2011-2014.
Saudis
Total Employment
Private Sector
NonTotal
Saudis
6,937,020
7,781,496
Total Employment
Public Sector
Saudis
NonTotal
Saudis
919,108
79,030
998,138
Total
Employment
8,779,634
2011
844,476
2014
1,549,975
8,471,364
10,021,339
1,168,586
72,162
1,240,748
11,262,087
Net increase-New
Jobs created
Jobs created as
share of total
(%)
Allocation of new
jobs (%)
705,499
1,534,344
2,239,843
249,478
(6,868)
242,610
2,482,453
9.8%
100%
90.2%
31.5%
68.5%
100%
102.8%
(2.8%)
100%
Source: SAMA 2013, 2015. Percentages measured by the author.
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Figure 1. Share of Job creation by
Sector, 2011-2014
Figure 2. Distribution of Newly
created Private Sector 's Jobs by
Nationality, 2011-2014
Public
Sector
9.8%
Private
Sector
90.2%
Source: SAMA 2013, 2015
Figure 3. Distribution of Newly created
Public Sector Jobs by Nationality, 20112014
NonSaudis
0%
Saudis
31.5%
NonSaudis
68.5%
Source: SAMA 2013, 2015
Saudis
100%
Source: SAMA 2013, 2015
The public sector is the sector that employs the highest number of Saudis but creates fewer
jobs as pointed out in Figure 2 above. The public sector created about 242,610 jobs (9.8%
of total jobs created) between 2011 and 2014 and all of them were allocated to Saudis in
addition to 6,868 public jobs that used to be occupied by expatriates. The Saudi labor
market, thus, continues to be dominated by foreign workers who represented 8.5 million
(75.2 percent) of a total of 11.3 million people working in the Kingdom in 2014 (SAMA,
2015).
Did the Nitaqat program help the MOEP reach the targets set for the Saudi labor market in
the ninth DP? Table 8 gives a summary of changes that occur in the Saudi labor market
during the ninth DP in comparison to the set targets. According to the MOEP, the overall
Saudization rate in 2014 stood at 44.5 percent (Jadwa Investment, 2015). This was a 7.1
percent decrease from its 2009 level, while the expectation was for the rate to rise by 11.9
percent. The Saudization rate was, thus, off target by 159.7 percent during the ninth DP.
In addition, there was no big improvement in Saudis’ unemployment rate during the ninth DP
despite the significant rise in the number of Saudi nationals employed in the private sector
after the introduction of the Nitaqat program. Table 8 shows that Saudis’ unemployment rate
rose from 9.6 percent in 2009 to about 11.7 percent at the end of the ninth DP in 2014,
missing its target by 151.3 percent. Figure 4 demonstrates the increasing trend in the
unemployment rates of Saudis nationals when compared to that of expatriates between
2008 and 2014. Saudis’ unemployment rate, which has been higher than that of expatriates,
rose from 10 percent in 2008 to reach 12.4 percent in 2011, but declined modestly afterward
with the implementation of the Nitaqat program. The higher level of Saudis’ unemployment
rate, even after the implementation of the Nitaqat quota system, is not due to lack of jobs but
to the faster growth in Saudi manpower and higher allocation of newly created private sector
jobs to expatriates.
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Table 8 Saudi Arabia Main Labor Market Indicators of at the End of the Ninth DP
Percent Change
during 9th DP
Target Actual
Percentage(1)
Above & Off
Target
Actual
2009
Target
2014
Actual
2014
Saudi Manpower (000)
Total Employment (000)(2)
Saudi
Non-Saudi
Saudization Rate (Saudi
Employment as % of Total)
Unemployed Saudis (000)
4329.0
8173.1
3914.6
4258.5
47.9
5,328.6
9,396.3
5,037.0
4,359.3
53.6
5,577
11,068
4,927
6,141
44.5
23.1
15.0
28.7
2.4
11.9
28.8
35.4
25.9
44.2
-7.1
24.7
136
(9.8)
1741.7
(159.7)
414.4
291.6
651
-29.6
57.1
(292.9)
Saudi Unemployment Rate
(% of Saudi Manpower)
9.6
5.5
11.7
-42.7
21.9
(151.3)
Source: Data from Ministry of Economy and Planning 2010a, 2010b, and 2010c and Jadwa Investment, 2015.
(1) Positive numbers mean percentages above targets & negative numbers in parenthesis mean percentages off targets
(2) Data from the Ministry of Economy and Planning are slightly different from data from Saudi Arabian Monetary Authority
Percentage changes and percentage above & off target calculated by the author.
Unemployment Rate by Nationality, 2008 – 2014
Figure 4
14.0
12.0
11.5
10.0
12.4 12.1 12.0
11.7
10.5
10.0
8.0
Saudis' Unemployment
Rate (%)
6.0
Non-Saudis'
Unemployment Rate (%)
4.0
2.0
0.5
0.3
0.4
0.4
0.1
0.4
0.7
0.0
2008 2009 2010 2011 2012 2013 2014 Year
Data Source: SAMA 2013, 2015 and Jadwa Investment, 2015.
It is clear from Table 8 that the quantity of Saudi manpower sharply increased during the
ninth DP, rising above target by 24.7 percent, while the number of employed Saudis rose
but by a lower percentage than expected and was off target by 9.8 percent. Meanwhile, the
number of employed expatriates in the Kingdom rose by 44.1 percent during the ninth DP,
exceeding target by 1,742.7%. The Nitaqat incentive system is partially to blame for the
inadequate employment number for Saudis in the private sector. Indeed, the current
Nitaqat’s incentives available to private companies in the Green and Premium bands
facilitate their hiring of more foreign labor. These companies are being granted new work
visas as reward for being in the safe zones and they can hire foreign workers from unsafe
zones without their employers’ consent. This increases the capability of firms in the safe
zones to hire even more foreign workers as long as they remain within the quota. The
Nitaqat’s incentive system, thus, seems to be contradictory to the goal of Saudization and
will eventually have to be amended if visible changes in the Saudization rate are to occur.
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Another reason for more hiring of expatriates in the private sector is the fact that most
Saudis wouldn’t want to occupy jobs made available by the private sector that they deem
inferior for cultural reasons. Better be unemployed than be caught doing one of those jobs.
Consequently, the private sector will continue to need foreign workers for jobs rejected by
Saudis. Most Saudis prefer to work for the government but there are not enough public jobs
to accommodate all of them. Saudis preference of public jobs over private ones stems from
the belief that private companies provide poor working conditions and low job security than
the government (Harvard Kennedy School, 2015).
Overall, the Nitaqat quota system was neither able to curb the level of unemployment for
Saudis nor speed up the overall Saudization process during the past three year of its
existence. Saudis’ unemployment rate only fell from 12.4 percent in 2011 to about 11.7
percent at the end of the ninth DP in 2014. The Saudization rate stood at 15.5 percent in the
private sector and at 94.2 percent in the public sector in 2014 as shown in Figures 5 and 6
(SAMA, 2015).
Figure 5. Share of Private Sector
Employment by Nationality, 2014
Saudis
15.5%
NonSaudis
84.5%
Source: SAMA, 2015
Figure 6. Share of Public Sector Employment by
Nationality, 2014
NonSaudis
5.8%
Saudis
94.2%
Source : SAMA, 2015
The overall Saudization rate, which was around 41.7 percent in 2011, rose but moderately
after the start of the Nitaqat program, to reach 44.5 percent in 2014 (Jadwa Investment,
2015).
Figure7 shows how the large number of expatriates employed in the private sector
continues to growth even after the establishment of the Nitaqat quota system. The
Saudization pace in the Kingdom would only speed up when the private sector will start to
allocate more jobs (new and old) to Saudis. This might be possible after the introduction of
the third phase of the Nitaqat program. The latter was supposed to be introduced on April
20, 2015 but was postpone until latter to allow the private sector more time to understand
the standards of this phase. The Council of Saudi Chambers (CSC) put pressure on MoL to
postpone the third phase of the Nitaqat for three years to avoid labor shortage in some
sectors of the economy (Naffee, 2015).
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Figure 7: Private Sector Employment by Nationality
12
8.21 8.47
10
8
6.21 6.27
6.91
7.35
6
Saudis (Million)
4
2
Non-Saudis
(Million)
1.13 1.47 1.55
0.68 0.72 0.84
0
2009 2010 2011 2012 2013 2014
Data Source: SAMA 2012, 2013, 2015
The third phase of the Nitaqat program will raise the minimum Green zone’s Saudization
requirements for several sectors, implement new calculation methods for the quota, and
change the incentives system. The sectors that will be the most affected by changes in
Green zone’s minimum Saudization requirements will be manufacturing, construction,
financial, retail, and wholesale. The previous minimum Saudization requirement of 28
percent for retail and wholesale companies in the Green zone will rise to 32 percent. For
large commercial establishments, the Green zone minimum Saudization rate will more than
double going from 29 percent to 66 percent, while that for big firms will rise from 25 percent
to 41 percent (SICO, 2015). Raising the Saudization rates at the current moment would
negatively impact the labor market as Small and Medium Enterprises (SMEs) in sectors
such as manufacturing, sales, and construction would not be able to recruit enough Saudi
workers said the CSC (Naffee,2015)
The start of the third phase of the Nitaqat will also bring a new calculation of Saudization
rate for private sector companies that will be based on a moving average of the number of
Saudi employees over successive periods of 26 weeks after being registered with GOSI
rather than the current 13 weeks (SICO, 2015).
Finally, the changes in incentives during the third phase will affect mostly companies ranked
in the low Green zone, while changes in penalties will mostly impact companies in the Red
and Yellow zones. Companies in low Green zone will no longer be granted new workers’
visas nor will they have permission to move employees around by changing their profession.
Companies in the Red zone will have their licenses revoked while those in the Yellow zone
will have their license suspended (SICO, 2015).
4.3. Nitaqat Shortcomings
Some of the Nitaqat shortcomings include increase in private sector’s operating costs,
increase in private business closures, and increase in ghost Saudization. Increase in
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Proceedings of Annual South Africa Business Research Conference
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operating costs for private businesses are mainly due to the costs of training of Saudi
employees and the higher wages they received compared to the wages of foreign workers.
Yosef Al Zanbagi, HR manager of MICE Arabia Group for Exhibitions and Conferences, said
that the royal order has made it mandatory for Saudis to be hired for management positions.
He, then, added that training is important for Saudi employees hired in these positions in
addition to their educational qualification. He believes that at least three months of on-thejob training are needed, including training for English, IT knowledge, Human Resources, and
management training sessions (Khan, 2013).
The higher costs of operation for private companies come from a higher minimum wage for
Saudi employees, currently set at SAR3000 (Al-Jassem, 2012). The minimum wage for
Saudi workers is expected to increase to SR5300 ($1,412) during the third phase of the
Nitaqat program while that for foreign workers will be set at SAR2500. The rise in minimum
wage would result in higher costs for companies in sectors such as retail, construction, and
wholesale where the current average wage for Saudis is below SR5000 (SICO, 2015). The
Deputy Labor Minister Ahmad Al-Humaidans said that “The challenges are setting a
minimum wage commensurate with the needs of Saudi employees, as well as increasing the
level of competiveness between the Saudis and expatriates,” (Arab News, 2014a). He also
added that Saudi HRDF is currently providing financial support to private companies for
payment of Saudi salaries up to 50 percent for two years. In addition, companies in the
Green and Premium zones can benefit from this salary support for up to three or four years.
However, this is a temporary solution that is only delaying the inevitable.
The increase in the operating costs from the Nitaqat nationalization scheme and Saudi
nationals’ reluctance to take up certain types of jobs had made it more difficult for
companies to comply with the Saudization quota, resulting in a number of companies
closing doors. For instance, more than 130,000 Saudi contractors were forced to close down
in 2015 citing Saudization quotas under the Nitaqat as the root cause of their demise
(Bhatia, 2015).
In addition, statistics released by the MoL showed that 200,118 private sector companies
(11.1 percent) out of 1.8 million companies in the Red zone of the Nitaqat program closed
doors in 2013 (Arab News, 2014b). Furthermore, of all the firms that shut down in 2013,
58.6 percent of them were micro and small enterprises which are known to be in the White
zone and exempt from the Nitaqat quota system but are required to employ at least one
Saudi national. The rest of the firms that shut down were from the 255,833 private
companies with 10 or more employees. More than 500,000 expatriates were employed by
firms in the Yellow and Red Zones in 2013 (Arab News, 2014b).
Finally, with the enforcement of the Nitaqat, some firms in the red and yellow bands illegally
increased the number of their Saudis employees through “Ghost Saudization” so they can
move to the Green band and avoid Nitaqat’s penalties. “Ghost Saudization,” means the
registering of fake Saudi employees as employees of the company in order for the company
to boost its Saudization quota. Ghost or fake Saudization has been used by private
companies to circumvent the Nitaqat quota system and stay away from unsafe zones.
“Ghost workers” are not required to go to work but receive a small monthly compensation for
their services.
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The phenomenon of Ghost Saudization has been exacerbated by the Nitaqat quota system.
For instance, it was reported in Saudi Gazette that in early 2014, 30 schools were involved
in the practice of ghost Saudization. They fake their Saudization figures by hiring over 2,000
ghost teachers. The schools signed contracts with the Saudi teachers who were not actually
working for them (Saudi Gazette, 2014b). Moreover, in 2015, 18,000 women were found to
be registered as ghost workers in several private companies and were paid around SAR500
to SAR1000 to be counted as employees. These women confessed to their crime, when
they were caught while applying for social insurance with GOSI saying that they needed
social insurance because their employment was fake Saudization (Saudi Gazette, 2015).
In 2014, the MOL warned companies that if they engage in the hiring of ghost workers, they
would be subject to punishment such as heavy financial penalties, the slashing of all
services from the HRDF, and no hiring of new staff. Any company found guilty of hiring
ghost workers will be asked to pay between SAR3,000 to SAR10,000 in fine. While any
Saudi who agrees to be registered as ghost worker by a company or an institution will be
denied support for a period of three years for the first offense and five years for the second
(Naffee, 2015).
It is worth noting that any established system of rules and regulations is always subject to
loopholes, evasion, and corruption and the Nitaqat is not immune to it. The Nitaqat quota
system has had its share of loopholes. For instance, private companies have used
loopholes to cut the number of employees to nine or less in order to move to the White zone
that is exempt from Nitaqat’s Saudization quotas. Some firms have paid bribes through
ghost Saudization to increase the number of Saudis listed as employees of the company
and evade the Nitaqat’s penalties. Unemployed Saudis accepted bribes so private firms can
list them listed as fake employees of the company. The Nitaqat, thus, requires higher level
of monitoring capabilities to prevent companies and individuals from defrauding it. The MOL
has decided to establish a new controlling body for labor inspections that is expected to
significantly increase its capabilities in monitoring and evaluating private companies.
V. CONCLUSION
The Nitaqat, as a re-enforcement program for Saudization, has had some level of success in
meeting its goals but at significant costs to the labor market and the economy in the form of
private companies’ closures. Nitaqat has led to the abandonment of the previous blanket
quota of Saudization and to a better measurement of Saudization rate. In addition, more
Saudis are now employed in the private sector as a result of Nitaqat and more companies
have moved to the safe zones of the program. However, over 200,000 companies shut
down two years after the introduction of the Nitaqat in 2011. These private companies
couldn’t afford to hire enough Saudi employees to stay in the safe zones.
So far, the Nitaqat program has not been able to put a dent on the unemployment rate of
Saudis. Higher percentage of jobs created in the private sector is still being allocated to
expatriates. The implementation of the third phase of the Nitaqat program might bring the
much needed reform to the quota system. This phase of the program will initiate changes
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Proceedings of Annual South Africa Business Research Conference
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such as increase in the minimum Saudization rate for some of the industries in the private
sector, a better measurement of the labor quota, and improvement in the penalties and
incentives’ system.
Changes in culture concerning some jobs are also needed for young unemployed Saudis to
consider occupying jobs that were considered as inferior in the past. Information campaigns
should be used to help counteract the stigma about these jobs. Otherwise, there will be jobs
available but nobody to occupy them as companies are squeezed even more in the number
of expatriates they can hire. It is, therefore, paramount that the MoL considers the reality of
the Saudi labor market and the state of the Saudi economy in its formulation of any new
Saudization reform policies. There must be a synergy between labor policies and
macroeconomic policies, otherwise, the opposite result could be attained and the economy
will suffer for it.
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