Saudization

By Ashraf Khan,

Saudi Economic Digest, April 2005

The term “Saudization” refers to a development strategy that seeks to replace foreign workers with Saudis in the Kingdom of Saudi Arabia. To date this has been largely accomplished through various employment quota targets – i.e. regulating by law the percentages of foreign employees allowed to work in different companies. Saudi Arabia is not the only country adopting a program that stresses the employment of native workers over foreign ones - Kuwaitization, Emiratization, Qatarization and Omanization are to one degree or another being implemented in the neighbouring GCC countries.

Achieving quota goals can be a difficult task. The Sixth Development Plan (1995-2000) aimed to create nearly 319,500 jobs for Saudis through replacement of foreigners. However, instead of a reduction in the foreign workforce, the number of foreign workers actually grew by 58,400.

Some of the laws enacted to help the Saudization process include:

• A law requiring private businesses employing more than 20 people to increase the number of Saudi nationals by five percent of the workforce every year. The current required rate of Saudi employees is 30 percent.

• The employment of foreigners in twenty-two, mostly administrative professions, has been banned.

• Early in 2003, the Saudi labour ministry ordered the faster Saudization of the 9,771 bank jobs held by foreigners.

• In July 2003, the government announced its decision to reduce the number of foreign workers to 20 percent of the total population by 2013, in order to open up jobs for its citizens.

In January of 2003, the Shura Council began to apply Saudization policies to companies doing business in the Kingdom that are directly owned by Saudi Aramco as well as those working on Aramco projects. The Saudization level of contractors must now be included in annual reports submitted by the Ministry of Petroleum and Mineral Resources. Saudi Aramco helps in the implementation of Saudization by requiring the companies it has contracts with to reach or maintain certain quotas of Saudis: 35 percent for construction companies, 50 percent for services companies and 60 percent for importers, industrialists and engineering offices.

Aramco is pleased with its efforts to saudize the company and its contractors.