Despite Saudi Arabia’s launch of initiatives to ensure better employment rates among its nationals, there is still a deficiency in the country’s labor market which affects its “competitiveness” in the global arena, the latest World Economic Forum report shows.
Saudi Arabia stands at rank 70, out of the 148 countries analyzed, in terms of “Labor Market Efficiency” on the Global Competitiveness Report, released on Tuesday.
The disappointing standing comes despite the kingdom’s Saudization program, “Nitaqat,” which aims to offer job opportunities to nationals and demands that companies operating in the kingdom hire a certain number of Saudi employees to be determined in accordance with the company’s size.
Introduced in 2011, the program did increase the numbers of nationals employed in the private sector, Khaled al-Reesh, a Saudi economist, told Al Arabiya English. However, he added that the private sector was not accepting as many Saudi nationals as the government had hoped.
According to al-Reesh, companies in the private sector “were not given enough time” to adopt and implement the Saudization regulations and are using several means to “manipulate the program and get out of the red zone and into the green zone.”
Cheating the system
The Nitaqat program categorizes companies into two zones based on their compliance with the program. When a company falls into the “red zone,” it is barred from obtaining licenses and completing other procedures vital to its operations, while companies in the “green zone” are considered compliant and can run as usual.
“Some private sector companies are manipulating the system by registering Saudi family members and relatives – not real employees – to reach the minimal percentage of national employees set by the Ministry of Labor,” added al-Reesh.
The wider picture
Saudi Arabia has dropped two positions on the Global Economic Competitiveness raking over the past year. It currently ranks 20th in the 2013-2014 report, falling from the 18th position in the 2012-2013 report.
Competitiveness is defined in the report as the set of institutions, policies, and factors that determine the level of productivity in a country. It goes on to state that the labor market inefficiency continues to impact negatively on the kingdom’s overall economic competitiveness.
On a regional level, Saudi Arabia ranks third in economic competitiveness, after Qatar and the United Arab Emirates.
Saudi Arabia continues to be “rather stable” despite the slight drop, according to the report.
The inefficiency in Saudi’s labor market, said an official who spoke on condition of anonymity, is a symptom of the country’s “inadequate” education system.
“A fair knowledge of the English language and computer skills have become one of the minimal requirements to produce work, but around 80 percent of Saudi job seekers cannot efficiently communicate in English,” he told Al Arabiya English.
He also stated that there is an “inherited methodology,” leading many Saudis to prefer employment in the public sector over the private sector.
Al-Reesh explained this notion: “Many believe that there is more job stability and long-term guarantee [of work] in the public sector than the private sector.”
He added that the there is a very low turnover rate for employees in the public sector, “except if the employee has stolen from the organization, or [committed] a major, scandalous mistake.”
What affects economic competitiveness?
According to the report, labor market efficiency is one of 12 pillars on which an economy’s competitiveness is measured. Other pillars include efficiency of institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, financial market development, technological readiness, market size, innovation, and business sophistication.
To give a more detailed view, Saudi Arabia ranked 48th globally in the competitiveness of their Higher Education and Training institutes, with numerous universities conducting research on a regular basis.
The kingdom also came 41st in terms of their ability to adopt new technological advancements.
According to the report, while the country has seen major advancements in some fields, health and education “do not meet the standards of other countries at similar income levels.”
Saudi Arabia is among 20 economies that are currently in a transitional phase between factor driven economies – in which growth is driven by the infrastructure, health and education sectors- to efficiency driven economies- driven by growth in the fields of higher education and training, labor market efficiency, financial market development, technological readiness, and market size.
Kuwait, Libya, and Algeria fall in the same transitional category as Saudi Arabia.
Bahrain, Qatar and the UAE are considered innovation-driven economies, where business sophistication and innovation drive growth. The U.S., UK and Japan are also considered innovation-driven economies.