Saudi Arabia to reconsider applying Nitaqat system in select sectors

Saudi Arabia is reconsidering the decision to apply Nitaqat system in specific sectors that find it difficult to attract citizens, local media reported.

Local newspaper Saudi Gazette quoted sources as saying that the government decided on the move after a number of ministries requested authorities to rework the quotas set aside for citizens.

Ministries said that some professions did not appeal to Saudi citizens due to the nature of the work while others required them to stay away from urban areas, discouraging them from working for such companies.

The Nitaqat system, a scheme that penalises companies based on the percentage of its expatriate employees, was primarily put in place to increase localisation in the Kingdom, which is heavily dependent on expat labour.

However, the kingdom’s private sector has found it hard to cope with the targets set by the government.

Earlier this year, Saudi Arabia postponed the third stage of the programme after the private sector urged the government to rethink its policies. Businesses said that such strict caps on expat labour will impact industries such as retail, construction and manufacturing.

The kingdom’s minister of labour Adel Fakeih also confirmed that the third phase of Nitaqat was postponed to help the private sector adjust to the changes brought about by labour reforms.

If implemented, the third stage would have stepped up quotas for Saudis working in the private sector, implement new methods of calculation to assess the number of locals employed in private companies and change the incentives for workers.

As per the third stage, retail and wholesale firms would be required to increase localisation quotas from 29 per cent to 44 per cent while other major commercial firms will be required to hike the limits from 29 per cent to 66 per cent.

Nitaqat is one among many of Saudi Arabia’s efforts to diversify its economy and reduce the local unemployment rate, which has been hovering between 11 and 12 per cent.

But stringent quotas have previously hit profits at private firms in sectors like construction that rely on skilled and blue collar jobs- positions that affluent Saudis are reluctant to take up, experts say.

Saudi builder Al Khodari said earlier that its profits declined more than 50 per cent in the first quarter of 2014 after being hit by the reforms. But the firm, which returned to profits in Q4, was able to withstand the effect of the regulations.