Saudi Arabia to localise all jobs in malls

Latest push to replace foreign workers with citizens

From the Saudi Press Agency:

The Minister of Human Resources and Social Development Eng. Ahmed bin Sulaiman Al-Rajhi has issued three decisions to localize a number of activities and professions in the labor market.

The first decision included limiting work to Saudis in all activities and professions in malls and malls’ management offices, with the exception of a limited number of activities and professions in these malls.

The second decision covered the increase in the rates of localization in restaurants and cafes according to percentages and requirements specified in the procedural guide issued with the decision.

The third decision included increasing localization rates in supermarkets in accordance with the definitions, professions, ratios, stages and requirements specified in the procedural guide issued with the decision.

These decisions, announced by MHRSD earlier this month, represent the latest push in the localisation drive as the government seeks to create jobs for young Saudis in a private sector traditionally dominated by cheap foreign labour. The move is part of a long-standing policy to gradually replace expat workers with locals. The ministry said it would provide around 51,000 jobs for Saudi men and women.

“We are targeting all sectors, activities, and professions, and we will invest in all opportunities so as to enable the sons and daughters of the country to take up jobs. We will soon implement a decision to localise the legal and educational professions also,” Rajhi said in remarks he made during a meeting with members of the Council of Saudi Chambers in February.

Mall operator Fawaz Alhokair Co has welcomed the decision to localise more jobs, calling it a “milestone for local retail” that aligns with the goals of the reform programme launched by Crown Prince Mohammed bin Salman to diversify the economy.

“We are pleased to see fresh Saudization initiatives for the retail sector. These efforts will create new and exciting opportunities for local talent, driving exposure to new sectors and upskilling a powerful section of the local workforce,” Marwan Moukarzel, chief executive of Alhokair, told Arab News.

The new localisation policies will start coming into effect in August to give business owners time to adjust. MHRSD warned that “commercial establishments should adhere to the decisions issued, in order to avoid penalties against violators”, according to a statement.

Saudi Gazette provides some more details on how these decisions would be applied:

The first decision is to allot 100 percent of jobs to Saudis in all activities and professions in malls as well as at mall management offices, excluding a limited number of activities and professions. The exempted activities and professions include cafes and restaurants where the rate of Saudization shall be 50 percent and 40 percent respectively. The exempted activities also include hypermarkets and supermarkets.

The professions that are excluded from 100 percent Saudization are cleaning work, loading and unloading, maintenance of recreational facilities, and barbershops. However, the percentage of employees should not exceed 20 percent of the entire workforce at the mall. There should also be identical uniforms for the workers.

Although many Saudis now work in service jobs compared with ten or 15 years ago, sceptical questions are often asked every time the government announces intention to localise one sector or another. The Saudisation policy has seen many twists and turns over the years, including false starts and U-turns.

“The decision to Saudise mall jobs comes to open work opportunities and absorb a large segment that was classified as unemployed. But what is important in this regard is applying and following up on the decision so it does not turn out like previous decisions that failed to limit unemployment and became ink on paper. We are living in the age of firmness, seriousness and decisive ministries that stand by their decisions, and this is a real test to the Ministry of Human Resources and Social Development”, columnist Abdulaziz al-Jarallah wrote in al-Jazirah.

In contrast with this call for strict enforcement of decisions to reshape the labour market, other voices in the local media are raising concerns about the possibility of doing that effectively without hurting businesses and calling on the government to show flexibility as the economy recovers from the twin impact of the coronavirus and low oil prices.

“The effectiveness of any administrative decision is measured not only by how correct it is theoretically, but rather by how to apply it on the ground and achieve the desired results with minimum side effects”, columnist Waleed al-Ahmed wrote in Dammam-based daily al-Yaum. He explains:

While it should be emphasised that increased localisation in all areas is a good ting sought by all states and societies, especially that these decisions are expected to provide 51,000 jobs for Saudi men and women, but there is fear that the number of graduates from tourism and hospitality colleges and departments as well as specialised institutes is too small to meet this large number of jobs that would be vacated as a result of this decision, which has not said how many Saudis are qualified to take up these jobs today.

If we take the job of “restaurant manager” as an example, we would find that its description covers specialised tasks, including the selection, recruitment and training of staff, financial auditing, profit and loss management, managing operations, crises and contractual obligations with suppliers as well as ensuring customer satisfaction. Not to mention English proficiency and passing job interviews with brand owners if the restaurant is a global commercial franchise, of which there are thousands in the kingdom. These tasks and conditions are central to the success of any restaurant, and they need knowledge with experience, making their full Saudisation within the 180 days deadline a real challenge if not impossible.

To be sure, many retail jobs do not require high academic qualifications and many of the skills needed to perform them can be acquired through practical training, but the example he gave here does reflect the wariness of many business owners over the devil hiding in the details of these decisions. To aid with the transition, the government said it plans to provide subsidies and support to recruitment and training operations.

Khalid al-Shunaiber, the founder of a human resources consultancy, wrote in the same newspaper that the biggest challenge facing the labour market is how to create businesses of various sizes to absorb a larger number of the local workforce, but he sounded more upbeat about the economic outlook as Saudi Arabia tries to emerge from the pandemic: 

Some people are viewing the decisions announced recently in a negative way. As is the case with any decision, there would be varying reactions. But the current phase requires decisions like the ones issued lately because the labour market needs urgent interventions to improve. Moreover, the targets of these decisions should be identified before applying them.

In conclusion: as we move towards privatisation as well as taking a regional and sectorial focus, my optimism grows in the future of the labor market in the kingdom. The most important thing in the current period is to avoid adventurism when it comes to amendments in labour laws and regulations during this phase, and leaving space for discussing them after the end of this global crisis.

Latest official data show that unemployment among Saudi citizens fell to 12.6% in the fourth quarter from 14.9% in the third quarter of 2020, returning to pre-pandemic levels as the government relaxed coronavirus restrictions and gradually allowed the resumption of economic activity.

Last year saw as many as 129,000 expatriates leaving the kingdom on final exit visas, while 74,000 Saudi men and women joined the workforce during the same period, according to figures released by the General Organization for Social Insurance.

Unemployment will continue to be the most difficult problem vexing the crown prince’s economic reform plans, and the aforementioned numbers are leaving many observers scratching their heads.

“Detailed data of the labour market and the nature of the distribution of manpower in it lead to astonishment and denunciation of its horrendous distortions that contribute to our national challenges and deepen their effects on development as a result of policies that do not meet those existing challenges”, Ablah Murshid, a former professor at Taibah University who studied Gulf demographics, wrote in al-Watan.

“Therefore, we are not surprised at the continuation of labour market distortions, despite the ministry’s initiatives and programmes that have not yielded visible positive outcomes for years, because they are either weak and lack follow-up, or contradictory in other parts with the challenges we are facing and the reforms we hope for.”