Saudi Ministry Asks For $4bn Annually To Spend On Labour Reform

Saudi Arabia’s labour ministry is asking the government to spend SAR14.9 billion ($4 billion) annually on labour market reform and steps to move Saudi citizens into private sector jobs, the ministry said in a report.

The figure was contained in the ministry’s annual statistical report for 2013, published on its website. The goal of labour policy is full employment of the Saudi workforce, the report stated.

The SAR14.9 billion request is not huge compared to the Saudi state budget, which projects spending of SAR855 billion this year. But it underlines the importance that the government attaches to labour reform, and the way in which the labour ministry’s influence has increased as a result.

“Carrying out employment strategy requires providing the necessary resources to carry out mechanisms within a specific timeframe,” the ministry said.

“Given the extreme importance of this issue, it needs to be quickly submitted to the cabinet for study, as any slowdown would translate into an increase in unemployment and a decrease in productivity and would have a direct negative impact on the national economy.”

Concerned by high unemployment among Saudi citizens and lagging living standards among poorer Saudis, the government began introducing a series of far-reaching labour reforms in 2011, aiming to cut the country’s reliance on relatively low-paid foreign workers and replace some of them with local citizens.

The reforms include quotas for companies to hire Saudi nationals, levies on firms which employ large numbers of foreigners, and training and unemployment benefits schemes. A crackdown on visa violations last year is estimated to have caused a million foreign workers to leave the country, perhaps a tenth of the foreign population.

The reforms have proved costly for some companies, hitting industries such as construction particularly hard, but the government appears willing to tolerate such costs in the interest of restructuring the economy over the long term.

The ministry’s report said the reforms had achieved initial success, with the number of Saudis working in the private sector rising to about 1.5 million at the end of 2013 from 681,481 people before the reforms began.

The proportion of Saudi nationals employed in the private sector climbed to 15.15 per cent last year from 9.9 per cent in 2009, it said. Meanwhile, the unemployment rate fell to 11.7 per cent at the end of 2013 from 12.1 per cent a year earlier.