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HE Adel Fakeih, Minister of Labor, KSA, Presentation at the GCF2012
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Addressing Unemployment in the Kingdom of Saudi Arabia
Global Competitiveness Forum PresentationJanuary 2012 Riyadh
Saudi Arabia’s labor force more than doubles in next 20 years
1 Includes currently employed and unemployed
2 Range of 2-3 million female labor market entrants indicate different assumptions on future female labor force participation
3 Overall analyses is based on conservative estimates: the KSA government’s development plan projects 11.8 million Saudi employees by 2024
SOURCE: McKinsey estimates
2030 total est. national labor force3
Increased female participation2
Demographic growth of labor force
2008 Saudi labor force1
+
+ =
‘New paradigm for employment’ Initiatives of Ministry of Labor
SOURCE: Moll
Saudis:Qualify nationals for targeted jobs
Expats:Implement better controlled expat manage-ment system
Efficiency:Create more vibrant, liquid internal labor market
… create incentive system and matchmaking support2
… expand and improve quality of vocational training1
… offer preferential treatment for nationals3
… increase overall price for expat labor, focusing on sectors where nationals are well-equipped to compete with expats
4
… introduce a differentiated sponsorship system5
… create market-based incentive systems to reduce leakage into the internal sector
6
… establish robust and accurate labor market information system7
… lobby to reduce gap in attractiveness between public and private sectors
8
… encourage mobility and reduce termination rigidity9
… ensure a social safety net for nationals10
Three key policy areas to increase Saudi participation in the Kingdom’s labor force
MARKET CLEARANCE MECHANISMS
▪ Create mutually reinforcing system for Nationals
– Career counselling
– Matchmaking support
– Training measures
– Financial benefits
▪ Rigid market structure
– Limited secondary market for expats
– Termination rigidity
LABOR SUPPLY
▪ 8 million expatriate workers
▪ ~SR 100 billion remittances into home countries
▪ Facing stagnating wages
▪ Declining in productivity
Source:Team analysis
JOB DEMAND
▪ Saudi workforce 4 million (2010)
▪ Unemployment 450k
▪ Hafiz registration >2 million
▪ Increase vocation and technical PPPs, and reduce drop-out rates
▪ Investments to education up, from SR 9.5 billion (2006) to SR 18.5 billion (2009)
Overall reform roadmap
Source:Team analysis
Job placement centersIntroduce public-private partnerships to register and counsel job seekers, address capability gaps, then match to vacant positions
IstiqdamProvision of expat and national labor through ‘temporary worker agencies’, providing access to flexible, project based labor
Strategic partnerships in vocational trainingScaling up the successful model of high-quality 2-year vocational degrees through strategic employer partnerships from currently 10k to 250k students
e-TrainingSimple and easy training modules for job seekers online
Virtual Labor MarketAutomated job search engines, accessible to everybody through the Internet
Labor Inspection System reinforcementCollaboration with ILO to make labor inspections in line with international standards
NitaqatClassification system of Saudization performance along sector and company size
SME reform37 specific initiatives identified to stimulate entrepreneurship and growth of small and medium size enterprises
Hafiz programSupport program for > 2 million job seekers, including job search support, match-making, training, financial benefits
Deep dive: Nitaqat system
Vision going forward
▪ Account for quality of employment by taking wage bill into account
▪ Differentiate by qualifications of expats
▪ Establish tailored system to take into account multiple policy objectives (e.g., ‘point system’)
Changing the paradigm
From ‘arbitrary’ to ‘fact based’1
From ‘one-size-fits-all’ to ‘tailored’2
Comparison only to what other companies in the same business have already accomplished
3 From ‘aspiration’ to ‘best in class’
Complex analytics to compute average Saudization level for each segment
Differentiation by business activity and size of company
SOURCE: MOL
Finding our stride in three areas
Private sector leadership▪ Service provision largely through private sector
▪ Creative incentive mechanisms; performance linked rewards
▪ Quality through competition
Integration▪ Create a KSA Labor Agency as one-stop-shop under HRDF
▪ Develop coherent and reinforcing policies
▪ Integrate end-to-end processes
Technology▪ Integration of more than 15 government agencies
▪ Innovative access solutions (e.g., SMS registration)
▪ Leapfrog ahead of mature systems
Thank you