Saudization Takes Priority

Saudi Arabia is determined to replace foreign workers with natives.

Officially known as the Saudi nationalization scheme, Saudization—the replacement of foreign workers with Saudi nationals through a quota policy—is spreading to more parts of the economy. With nearly half of the native population under the age of 25 and a national native unemployment rate of more than 12%, jobs for Saudis are a priority.

In phases, beginning in September, the Ministry of Labor and Social Development has expanded the policy to 12 retail sectors, including automotive, apparel, kitchenware, electrical and electronics and furniture stores. Businesses in these sectors now have to employ at least 70% Saudi nationals.

Saudization started in the 1980s and has largely been a success in public employment. In 2018, the public sector saw a 20% drop in expatriate workers compared to 2017. Saudi nationals now make up more than 95% of public-sector workers; the government aims to reach 100% by 2020.

In the private sector, however, results have been more modest—except in sectors like banking and telecommunications, where the authorities claim the 90% Saudization threshold has been crossed.

“For every position we hire, we look for local candidates. This doesn’t have a negative impact on our activities,” says Mohamed Badat, chief commercial officer of Bidaya Home Finance, which hires 88% Saudi nationals. “I can say Saudi nationals are available, and they are highly skilled and motivated.”

Some foreign investors argue that Saudization restricts their ability to manage human resources. However, waivers are available for public-private partnerships.