Among the many challenges Saudi Arabia faces, a jobs shortage should be at or near the top of the list. The Kingdom has one of the youngest populations in the world: two-thirds of all Saudis are under the age of 30 and more than one-third are under the age of 14. By some estimates, Saudi Arabia will need to create nearly 2 million jobs over the next decade to meet the demands of its young population.
With youth unemployment in the Kingdom hovering near 30%, the creation of jobs represents a policy challenge of the highest order. On October 12, the Saudi Cabinet approved the creation of a new federal body aimed at tackling this challenge – the Commission for Job Generation and Anti-Unemployment. This is a long overdue initiative.
Notably, the Commission will be linked organizationally with the Council on Economic and Development Affairs (CEDA), another new federal body launched in January 2015 and tasked with streamlining government decision-making on economic development issues, which have often been mired in bureaucracy or competing ministerial agendas.
Underperforming in its economic potential
Indeed, the creation of an organizing entity like CEDA is also long overdue because Saudi Arabia had fallen into the trap of creating too many “supreme councils” for this or “special commissions” for that, and CEDA, it seems, has the potential to clean up this alphabet soup of agencies that I believe were slowing down the development process, while coordinating ministerial plans under a single, overarching vision.
Today’s Saudi population – especially its young – are the most wired, most connected, and best-educated population in Saudi history.Afshin Molavi
On a regular basis, ministers responsible for economy and development issues meet to discuss coordinated strategies. The establishment of the new Jobs Commission likely emerged from CEDA. After all, in any Saudi public policy economy discussion, it does not take long before the jobs issues rises to the center of debate.
At the end of the day, Saudi Arabia – not unlike other emerging economies -- is underperforming its economic potential. True, the Kingdom has made great strides from just a few decades ago when things like mass education, mass literacy, and country-wide healthcare were just the stuff of reformer dreams, but Saudi Arabia is not the only country in the world that has made strides in building roads, schools, universities, hospitals, and the like. Today, to compete in the 21st century, the Kingdom will need a 21st century economic vision of growth and 21st century productivity from its citizens.
That’s where the Jobs Commission comes in – or at least should come in. A young population that is significantly unemployed or under-employed represents not only a drag on the economy, but also a drag on society. There is nothing more tragic than witnessing the squandered potential of unemployed and under-employed youth anywhere in the world. Saudi Arabia’s demographics can be either a burden or a gift. If channeled properly, young populations can drive growth and job creation as they did across East Asia in the 1980s with similar demographic portfolios.
Saudi Arabia is not alone in facing a jobs challenge for its youth. In a recently launched report by the International Labor Organization, the Geneva-based body reported a total of 73.3 million unemployed youth worldwide. The report, entitled “Global Employment Trends for Youth 2015” and launched last week, noted that while some regions improved their youth employment prospects, the large emerging market regions of East Asia, Southeast Asia, and the Middle East and North Africa saw an increase in youth unemployment between 2012-14.
But is the answer another federal agency? It all depends on what the new commission chooses to focus on. Michael Klein, the former chief economist of the World Bank’s private sector development arm, the International Finance Corporation, rightly notes that the basics such as savings, investment, education, resources, and new technology are “fairly easy to obtain.” On the other hand, he also rightly notes that “what is hard to obtain are the institutions that allow these factors of production to be combined and translated into productive job creation.”
The key factor, Klein argues, is the growth and competition of companies that are “key vehicles that spread best practices and productive jobs.” Thus, “it is necessary that new firms can enter markets, that substandard firms are allowed to fail, and that good firms face few barriers to growth. This is the definition of competition, and competition is what selects good firms and thus drives the spread of best practice and productive jobs. Governments need to provide the framework in which capable firms can emerge.”
This is a good overarching philosophy for any economy seeking to create sustainable jobs. The buzzwords these days around discussion of job creation center on entrepreneurship, innovation and small and medium-sized enterprises. These are certainly important pieces of a job-creating ecosystem, but one should not forget the power of large corporate players in innovating or creating jobs – or nurturing the ecosystem of entrepreneurs and small and medium-sized businesses.
The new Jobs Commission would do well to consult a report produced by the World Economic Forum in 2012 that focuses on the role of large employers in driving job creation in the Arab world. The report noted that “Large employers can play a decisive and central role in fostering the development of skilled national workforces.” The report further noted that “These employers, whether state-owned enterprises (SOEs) or private family-owned conglomerates, dominate the national economies. The combined workforce of firms such as Office Chérifien des Phosphates (OCP) in Morocco, Sonatrach in Algeria, and Saudi Aramco, the Olayan Group and the Saudi Basic Industries Corporation (SABIC) in Saudi Arabia is approximately a quarter-million strong. Their size, in local and international markets, gives them important skills development capabilities.”
The report outlined a number of initiatives that these large employers should pursue, including greater collaboration with educational institutions, government ministries tasked with labor, expanded training opportunities, and targeted outreach to local firms. Of course, much of this happens organically. Some of the leading small and medium-sized businesses in Saudi Arabia’s Eastern province have grown on the back of regular Aramco contracts. Saudi Aramco is also the gold standard in staff training: the company spends about a $1 million a day on executive and staff training.
Indeed, it does not take long to spot the difference between a Saudi Aramco employee and a Saudi government staffer in terms of efficiency, skills, and management practices. It was no surprise then that when the late King Abdullah bin Abdulaziz wanted to build a world-class science and technology university (now known as the King Abdullah University of Science and Technology), he tapped Aramco to do the job, not the bureaucrats at the Education Ministry.
Many Saudi government ministers and top-level deputies are highly competent, with broad experience, relevant education (often PhDs from the West), and globalized outlooks. Deeper down in the ministries, however, I believe skill levels and work ethic are often sub-standard, but this is partly the fault of those same globe-trotting ministers who fail to invest in their staffs. Ministries should take a page from Saudi Aramco and begin developing training and executive management programs to bring staff in line with the needs of 21st century government.
Saudi Arabia faces a unique moment in its history: Today’s Saudi population – especially its young – are the most wired, most connected, and best-educated population in Saudi history. They also face tough global economic headwinds arising from a slow-down in China, declining oil prices, a sputtering Eurozone economy, and a still uncertain recovery in the United States. The relative success of education, healthcare, and industrialization initiatives over the past few decades has created a Saudi society that is overwhelmingly middle-class – with rising middle-class expectations and a heavily consumerist culture.
Those rising expectations will need to be met. Widespread joblessness threatens the future of a country that remains a pivotal power in the world.
Afshin Molavi is a senior fellow and director of the Global Emerging and Growth Markets Initiative at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies (SAIS) and a senior research fellow at the New America Foundation, a Washington DC-based think tank.
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