Saudi Arabia seeks private sector's help to create jobs

Saudi Arabia has again turned to its private sector to support long-standing efforts to tackle its festering unemployment problem, which it sees as a key reason for a surge in terrorism over the past few years.

Despite steady growth in its economy during the oil boom of the past seven years, Saudi Arabia is still reeling from high jobless rates caused mainly by a rapid rise in its indigenous population, redundancy in the public sector and reluctance of Saudi nationals to take up private sector jobs.

Saudi Arabia, the world's top oil exporter and largest Arab economy, rarely publishes unemployment data, but widely varied local private estimates put the rate at between 10 and 25 per cent in 2008.

At the end of the first half of last year, about 450,000 Saudis were estimated to be jobless, slightly higher than the level a year ago, despite a surge in the domestic economy because of strong crude prices.

"Hopes and wishes will not tackle unemployment," Ghazi Al Qusaibi, Saudi Labour Minister, told newly employed Saudis in Jeddah last week. "Giving social aid to Saudis is also not a solution. The only way to eliminate this problem is through training and rehabilitation of Saudis. Hard work will produce results, but it will be useless without a concerted effort by both the public and private sectors. The private sector can play a crucial role and I call on Saudi youth to get training and take up jobs."

Al Qusaibi said Saudi citizens should not be "fed with false hopes and promises about jobs", adding they should strive hard to get work and accept junior jobs.

He reiterated his call to people to accept any job on the grounds "there is nothing called a senior or junior job". "There is only good and bad work and I hope our youth will stay away from bad work. You should accept any job… you should climb a ladder step by step."



Jobless rate

According to the Saudi Ministry of Economy and Planning, the jobless rate among Saudis stood at 11.2 per cent in the first half of 2008 but estimates by local banks and other institutions show it is much higher.

The ministry's figure is slightly higher than the unemployment rate of 11 per cent in the first half of 2007. It also put the number of jobless Saudis at more than 453,000 in the first half of 2008, up by some 9,000 a year earlier.

The rate increased despite a steady growth in Saudi Arabia's real economy because of high oil prices, which allowed the kingdom to spend more. Official figures showed the real gross domestic product grew by about 4.5 per cent in 2008 compared to 3.4 per cent in 2007 and 3.2 per cent in 2006. Analysts believe the rate is high enough to create jobs because the population growth rate averaged three per cent during that period.

Saudi Government estimates also show the unemployment problem is worse among women as the rate grew from 24.7 per cent in mid-2006 to 26.6 per cent in mid-2007.

It gave no figures for 2008, but the report showed Saudi men and women aged 20 to 24 years accounted for 44 per cent of the total jobless nationals.



Emergency plan

In a recent study, well-known Saudi economist and Shura (appointed parliament) member Ihsan bu Hlaiga called for "an emergency plan" to tackle the unemployment problem. He said the problem could deteriorate with the decline in oil prices and the absence of a clear employment strategy.

The latest jobless figures make the prospects of achieving manpower goals of the eighth Development Plan for 2005-2009 more difficult. The plan envisages some 139,000 job seekers by 2009 versus 268,000 Saudis looking for employment opportunities in 2004. It also expects the unemployment rate to drop from seven per cent in 2004 to just 2.8 per cent by 2009.

Unlike other Gulf oil producers, Saudi Arabia has a large population of more than 25 million and Saudis are the dominant component.

During the oil boom of 2002-2008, growth in the kingdom's GDP exceeded that in its population while it was below one per cent or has even contracted in preceding years. For 2009, the IMF and many Saudi institutions forecast the GDP to shrink by more than one per cent.



Serious problem

"Unemployment in Saudi Arabia is a serious problem that has accumulated over many years because of several factors," said Al Qusaibi. "We cannot tackle this problem with a magic wand and the ministry alone cannot alter the traditions and culture of this society."

Al Qusaibi's statements, the latest in a series of the government's critical remarks about Saudi job seekers, reflect growing official disappointment with efforts to reverse an upward trend in unemployment.

The government has repeatedly blamed both the job seekers and the private sector for the plight, saying most Saudis prefer the public sector or seek only senior jobs in the private sector. It has also criticised local companies for preferring foreigners on the grounds they are paid less. While some Saudi employers have responded to repeated pleas by the king to recruit more citizens, they have not gone beyond individual initiatives.



Poverty

In recent press remarks, Khaled Al Qussaibi, Minister of Economy and Planning, said successive five-year development plans over the next 15 years would focus on ending poverty and tackling unemployment by achieving sustainable growth away from unpredictable oil exports.

"These plans will concentrate on improving the living standards of the citizens, tackling poverty and unemployment, achieving sustainable and balanced development, rationalising natural resources, encouraging investment, strengthening partnership between the public and private sectors, and pursuing economic and social reform. We will also make sure development reaches all areas of the kingdom."

Economists said they doubted such plans would eliminate unemployment because the Saudi national population is growing much faster than the expatriate population and there are not enough incentives for the private sector to employ Saudis.



Per capita income

Despite its massive oil wealth of more than 260 billion barrels, which accounts for nearly a quarter of the world's proven crude reserves, Saudi Arabia is much less well off than other Gulf oil producers in terms of per capita income.

In 2008, the kingdom's per capita income was estimated at about SR70,000 (Dh68,558) compared to more than Dh190,000 in the UAE, about Dh150,000 in Kuwait and as high as Dh255,000 in Qatar. Its GDP per capita income is projected to dive to SR55,220 in 2009 before rebounding in 2010, said Riyadh-based Jadwa Investment company.

Jadwa expected the population to maintain its high growth of about 3.2 per cent to peak at nearly 25.8 million at the end of 2009.



GDP decline

Forecasts by the Saudi American Bank Group (Samba) showed the real GDP will contract by about 1.2 per cent in 2009, while it could plunge by 26.8 per cent because of lower oil prices and production.

"The expected contraction in economy this year is not a problem as the financial resources are huge," said Saeed Al Shaikh, Chief Economist at Saudi National Commercial Bank. (Nadim Kawach)



Training and employment

The Saudi Fund for Human Resources Development (FHRD) said last week it had spent nearly SR350 million (Dh343m) to provide training and jobs for Saudi nationals in the private sector in the first half of 2009.

Ahmed Al Zamil, Director of FHRD, said the investments covered the signing of 891 employment agreements with local private sector institutions to provide nearly 29,000 jobs for Saudi men and women. Spending stood at about SR141m in the first quarter of 2009, providing more than12,900 jobs for Saudis in hundreds of the country's private sector establishments.

He said about 5,290 new jobs were created in June by Bab Rizq Jameel employment project, which is owned by Saudi businessman Abdul Latif Jameel. The project also funded 644 small ventures, including 429 enterprises for women. Loans extended to those projects ranged between SR15,000 and SR150,000 and they covered various small industries and trade activity.

The employment project was launched in 2003 in response to pleas by the government to fill the gap and help Saudis find jobs.

By the end of June, Bab Rizq Jameel has provided more than 20,600 jobs to Saudis.

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