One of the Saudi Arabia’s most pressing issues came to the fore recently when the Ministry of Labor unveiled new “Saudiization” legislation, aimed at replacing immigrant laborers with Saudi Arabians. Contractors managed to win some concessions from the ministry, but emphasized the importance of immigrant labor for the completion of the kingdom’s numerous mega-projects.
For years, the kingdom has relied on expatriate blue-collar workers, particularly from India, Pakistan, Sri Lanka, Bangladesh and the Philippines for heavy manual labor such as construction site work. High numbers of expatriate workers are also found in a broad range of sectors, particularly those requiring a high level of skill, such as engineering. In addition, the majority of house-staff are imported. Unofficial estimates place the number of expatriate workers at just under 7 million.
Saudiization, however, is the process of replacing expatriate labor with Saudi nationals. Saudi Arabia has a growing population, with a majority under the age of 25. Creating employment for what analysts term the youth bulge is a priority for the government. The problem is compounded by the lack of adequately qualified Saudis for the skilled job market, as many are reluctant to do the types of job expatriates have traditionally held.
The other factor is cost. While the responsibilities for employers of hiring foreigners in areas such as health insurance have increased, they are still cheaper than Saudis and more willing to work long hours, often in uncomfortable environments.
Little success in local recruitment
“We have had little success, to be honest, in employing nationals at the operational end, where the bulk of our requirement is, while our middle-management and above is over 75% Saudi,” said the CEO of a Riyadh-based service company. “This situation is repeated all over the kingdom.”
Last month, Ghazi al-Gosaibi, the labor minister, signalled the government’s intent to push on with Saudiization by raising the minimum number of Saudis employed by any company to 5%. The quota will still vary between sectors. Companies failing to meet the required percentage will be publicly named and barred from foreign recruitment.
For some sectors, the new quota comes as good news—it is a readjustment from higher quotas—particularly for construction.
The Ministry of Labor has recently recognized the concern of contractors and reduced the sector’s Saudiization quota to the minimum 5% from 10%. The ministry also permitted labor visas for the sector to be extended to two years as opposed to one.
Most Saudi businessmen agree with the Saudiization concept, yet they face challenges implementing it. Abdullah Ibn Hamad al-Ammar, chairman of the National Committee for Contractors (NCC), voiced the concerns of members of the group. He stated that while a national contracting base was the ultimate aim, the raft of new large-scale infrastructure projects and industrial expansion plans, including those of Saudi Aramco and Saudi Basic Industries Corp (SABIC), required at least 1.2 million additional visas to recruit engineers, skilled labor and ordinary workers. He estimated the worth of these projects to be in the region of $75 billion.
In a parallel move, the ministry is making it more complicated for employers to take on expatriate employees. Al-Gosaibi announced that companies wishing to take on such workers will now need to prove that they have the means to pay them—there have been a number of instances where complaints have been made by foreign workers who claim not to have received their salaries. He said that the new initiative links the import by any company of foreign laborers to its capital and its ability to pay salaries.
Still, with restrictions on expatriate labor, observers have voiced concern over how the massive economic city projects planned for Rabigh, Hail, Madinah and Jizan will be built. The $80 billion developments require huge infrastructure development and will undoubtedly require more imported labor for their completion.
