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Arab News
08-03-2025
- Business
- Arab News
Saudi Arabia's labor market booming as world wakes up to its potential
RIYADH: From advanced technology to bustling tourism, Saudi Arabia is witnessing a labor market transformation that is reducing its reliance on oil and creating jobs in construction, green energy, and beyond. Government initiatives such as the Saudi Nationalization Scheme and Nitaqat initiative have played a pivotal role in shaping the labor market landscape. These policies have encouraged private sector employers to hire more of the Kingdom's nationals across various industries, leading to a significant reduction in unemployment rates. The commitment to enhancing workforce participation has also contributed to a more inclusive job market, while a strategic focus on developing a knowledge-based economy has led to increased investments in education and vocational training programs. These initiatives are equipping the local workforce with the skills required to thrive in sectors such as advanced manufacturing, healthcare, and financial services, further accelerating employment growth. Construction boom fuels job creation The construction and infrastructure sector has experienced exponential growth in recent years, underpinning the Kingdom's economic expansion, with contract awards in 2024 reaching $146.8 billion, a record high as it overtook 2023's figure of $118.7 billion, according to Kamco Invest's GCC Projects Market Update. The report added that Saudi Arabia accounted for over 53.8 percent of total project awards across the Gulf Cooperation Council in 2024. Sachin Kerur, managing partner of Middle East at Reed Smith, told Arab News that this boom is leading to a rise in the opportunities for project managers, designers, architects and many other construction professionals. 'Anyone studying Vision 2030 or visiting the important cities of the Kingdom will be very aware of the construction of large-scale housing, rail and road networks, new airports, infrastructure for major sporting events and industrial production plants,' Kerur said. Tourism-related construction has also seen a surge, with new hotels and resorts hiring more Saudi nationals. 'Anyone visiting the Kingdom's hotels of late will have noticed the number of Saudi nationals employed,' Kerur added. Major projects such as the Rua Al-Madinah and Qiddiya are further fueling demand for skilled labor in the sector. Tourism as a booster The tourism sector continues to play a pivotal role in shaping Saudi Arabia's labor market, and is only set to grow as the Kingdom pushes ahead with its aim to attract 150 million visitors annually by 2030. As a result, the demand for hospitality, transportation, and cultural service jobs is rapidly increasing. 'With millions of visitors anticipated to visit Saudi each year, tourism has one of the fastest growing and elastic demand for employment,' Kerur said. From religious tourism initiatives in Makkah and Madinah to entertainment-driven projects such as the Red Sea Project, the sector's expansion is creating thousands of jobs for Saudis. Technology and green energy sectors see expansion On a tech front, Saudi Arabia's technology sector is experiencing unprecedented growth, driven by the government's investments and incentives for global tech firms. 'Foreign investments are driving significant job creation in Saudi Arabia's emerging industries, particularly technology and innovation, aligning with Vision 2030's goals of economic diversification and private sector growth,' said Faisal Al-Sarraj, Saudi Arabia's deputy country senior partner at PwC Middle East. He continued: 'PIF's focus on technology and innovation has bolstered local employment, particularly in AI, digital transformation, and data analytics. Its support for startups and partnerships with global tech firms is strengthening local expertise.' Initiatives such as the $100 billion AI and data analytics initiative, known as Project Transcendence, as well as smart city projects including NEOM, are fostering high-skilled employment in advanced fields. Foreign investments are driving significant job creation in Saudi Arabia's emerging industries. Faisal Al-Sarraj, Saudi Arabia's deputy country senior partner at PwC Middle East. Citing media outlets Bloomberg and CIO, Al-Sarraj said: 'This $100 billion plan positions Saudi Arabia as a global AI and data analytics hub, creating thousands of high-skilled jobs and rivaling regional tech leaders.' The green energy sector is also taking off in Saudi Arabia, bringing a fresh wave of job opportunities and supporting the Kingdom's sustainability goals. Solar and wind farms are being developed across the country, creating thousands of new roles and giving locals the chance to dive into the world of clean energy. Kerur also cited the life sciences and food industries as other sectors that have seen employment growth. Saudi welcoming the world The government's Saudization initiatives, particularly the Nitaqat program which was established in June 2011, have played a crucial role in increasing the number of nationals in the private sector. 'Many commentators regard Saudization as having been most successful in the retail and tourism and hospitality sectors,' Kerur said. He continued: 'Perhaps less success has been achieved in areas such as life sciences, medicine and design and construction where more skilled resources are needed. That is certainly an area of development for the next few years.' Moreover, the drive for greater workforce inclusion is also reflected in the increasing focus on supporting female participation in the labor market. As more opportunities arise in flexible and remote work arrangements, women are stepping into roles across diverse sectors, contributing to the Kingdom's broader economic transformation goals. Figures released by the General Authority for Statistics showed that by the end of the third quarter of 2024 the labor force participation rate of Saudi females reached 36.2 percent — well above the original Vision 2030 target of 30 percent, with that goal now upped to 40 percent by the end of the decade. Kerur added: 'Saudi Arabia's labor market reforms and initiatives are successfully reducing unemployment levels and so much credit must go to Vision 2030 as economic diversification develops at pace. However, this is not merely labour economics.' He went on to say: 'As with other GCC countries like the UAE, there are social and cultural norms that have to be assessed to ensure they are maintained whilst at the same time ensuring unemployment is minimised and the national workforce is equipped for the challenges of the next three decades.' Regional Headquarters Initiative and FDI One of the biggest wins for Saudi Arabia in 2024 was the success of its regional headquarters initiative, which has drawn in over 540 multinational companies to set up shop in the Kingdom. This surge in corporate presence is not just about numbers — it is about turning Saudi Arabia into a thriving business hub, buzzing with new ideas and opportunities. Companies such as Amazon, Google, PwC, and Deloitte have relocated their regional headquarters, leading to job creation in professional services, consulting, and administrative roles. 'This achievement is having an employment impetus as more and more companies are employing Saudi nationals in line with the Kingdom's status as a developing business hub,' Kerur said. The Kingdom's push to attract foreign investment has not only created job opportunities but also fostered knowledge transfer and skill development among the local workforce. With multinational firms bringing global best practices and expertise, Saudi nationals are gaining invaluable exposure to international business operations, positioning them competitively in the job market. Another key initiative was the Golden Visa, which allows foreign nationals to live, work, and own property in the Kingdom without a sponsor, In order to qualify, applicants must meet specific criteria such as significant investments in real estate or business ventures. Al-Sarraj said the visa 'incentivized' highly skilled professionals and entrepreneurs to relocate to Saudi Arabia, and has expanded employment in sectors such as healthcare, education, and technology, and fostered a knowledge-based economy. He added: 'Reforms like the Labor Reform Initiative improved mobility and flexibility for expatriates, making Saudi Arabia a more attractive job market. This policy also encouraged Saudization, driving the hiring of skilled nationals.' Challenges and the road ahead Despite the progress, challenges remain in bridging skill gaps and positioning manual labor or skilled trades as a viable career path for Saudis. 'Education and training will be vital all round for the labor market. Indeed more labor capacity is required to implement Vision 2030 projects and this provides Saudi nationals a significant opportunity to develop blue collar skills,' Kerur said. He continued: 'Of course the private sector, both national and international, will have a key role to play to train, develop and employ nationals. The issue will be the stick or the carrot.' Kerur further explained that the private sector in Saudi Arabia will require support and assistance, particularly in areas where their capacity to operate or expand is currently limited, and where significant financial investment is needed. 'Saudi Arabia has shown a willingness to enable public private partnership in their labor market and more will be expected in this regard,' he said. According to Al-Sarraj, one of the key issues is that many workers may not have received the necessary training and or hold the qualifications required by employers. 'Despite significant progress, challenges remain, including skill gaps among the workforce, the need for enhanced educational and vocational training programs, and ensuring sustainable employment opportunities for the growing local population,' he said. Al-Sarraj added: 'Employers often cite skill gaps and higher wage expectations as reasons for not hiring Saudis, highlighting the need for enhanced educational and vocational training programs.' As Saudi Arabia's labor market continues to evolve, the combined impact of strategic government initiatives, foreign investment, and workforce development efforts will be key to sustaining momentum. With significant achievements in 2023 paving the way, the Kingdom is well-positioned to achieve its ambitious Vision 2030 objectives and create a dynamic, diversified workforce that meets future economic demands.
Wamda
17-02-2025
- Business
- Wamda
The real impact of Saudization on the Kingdom's economy
The Saudi government has put a comprehensive Saudization policy in place to increase the number of nationals in the workforce. Forming part of the Vision 2030 scheme, this policy, which has evolved over the years, sees the government wanting to reduce unemployment from its 12.9% peak in 2018 to 7% by 2030. Adopting a phased approach, the policy will be a critical tool in shaping the future of the Kingdom. Originally, Saudization was implemented through a comprehensive and strictly enforced industry and firm-specific quota system known as Nitaqat, launched in 2011. At the time, the country had its private sector consisting of more than 80% foreign nationals, and the policy focused on labour-intensive sectors such as construction and retail. Now, the policy focuses on high-skill sectors, such as finance, IT and government-related consultancies. This initiated the first phase of localisation for consulting firms in 2023. These firms were exempt from the Saudization requirements applied to other sectors. However, they now needed to have Saudi nationals occupy 35% of consulting positions. In March, these targets were increased to 40% for professions that include financial consulting specialists, business consulting specialists, cybersecurity consulting specialists, project management directors, engineers and specialists. These changes are critical given how they promote the participation of Saudi nationals in sectors that are vital to the Kingdom's economic diversification goals of the Vision 2030 initiative. Impact The impact of Saudization on employment was most significant between 2018 and 2020. In 2018, the Saudi labour force consisted of only 20% of Saudi nationals; by 2020, this increased to 33%, with women mostly taking up the portion of the growth. The Saudi healthcare, tourism, and technology sectors faced an influx of Saudi workers. In the tourism sector, women now account for 22% of the workforce, an area previously dominated by expatriates. Red Sea Global has played an important role in this regard by offering vocational training and job placements specifically for Saudi women. Women now own 40% of small and medium-sized businesses (SMEs) in Saudi Arabia. The efforts to integrate women into the workforce align with the government's broader objectives of driving innovation and fostering economic growth. Challenges faced Given the historical preference given to foreign nationals, many Saudis lack the necessary skills for roles designated by the policy. This is especially the case when it comes to technical and engineering positions. Companies are therefore finding it difficult to adhere to the strict targets for local talent put in place by the policy. Other obstacles, especially in sectors such as construction and retail, have seen companies finding it difficult to find Saudi nationals to take on these roles. This resulted in several companies trying to abuse the system by hiring disabled workers who counted as multiple employees under the Saudization framework. Another concern is the wage inequality between Saudi nationals and expatriates. Under the Nitaqat system, Saudi nationals have a higher minimum wage than expatriates, which means that employers' costs have increased to comply with the Saudization regulations. Female workers Another achievement due to Saudization is the increased participation of women in the workforce. The lift of the driving ban and easing of guardianship laws have led to women participating in the labour market. Another thing that has greatly contributed to encouraging this is the Qurrah programme, which is a program that offers childcare services to working mothers. Because of this, women have started becoming prominent roles in traditionally male-dominated sectors such as technology, finance and healthcare. Moreover, another program, the Monshaat programme, encourages female entrepreneurship since it provides regulatory support and loan guarantees to small- and medium-sized enterprises (SMEs) that are owned by female Saudi nationals. Long-term Success Since its implementation, the Saudization policy has evolved significantly and has become a comprehensive workplace development strategy. To ensure this continues, it is crucial to address the ongoing challenges of Saudization's implementation to ensure its long-term success. A key enabler for this is widening the range of vocational training opportunities for Saudi nationals. This will be most helpful to high-demand fields like artificial intelligence, cybersecurity, and renewable energy. Another enabler for long-term success is to bridge the skills gap and enhance leadership skills by creating mentorship programs that connect Saudi employees with experienced professionals. The Saudization policy has overall transformed the country's economic landscape. While the country works towards diminishing its challenges, the progress made has been promising. With continued support, it is safe to say that the Saudization policy will continue to be a key player in shaping the future of Saudi Arabia.
