One day, in the teeming summer of 2008, the former Saudi labour minister Ghazi Algosaibi turned up at a Jeddah fast-food restaurant, put on an apron and started serving hamburgers to bemused customers. To some Saudis, it appeared to be another publicity stunt from a minister with a penchant for the maverick.

Improving staff retention has become a major issue for the Saudi private sector in recent years

But Algosaibi was making a serious point. Serving burgers may not be the epitomy of career success, but the now-deceased minister wanted to convey the message that young Saudis need to take on jobs once deemed fit only for low-paid expatriates. “Young people can realise their ambitions if they are persistent and work hard,” Algosaibi told the local Al-Watan newspaper after his three-hour shift.

Rising unemployment in Saudi Arabia

Fast-food catering may be at the bottom of the career ladder, but the message is clear. The growing legion of jobless young Saudis need to realign their job expectations for a competitive marketplace; jobs for life, with six-figure incomes, merely for turning up, are becoming a thing of the past.

With the private sector primed to become the engine of growth for the future, local workers need to rethink their suitability for a range of jobs, from the low to the highly paid.

Annual entrants to the Saudi labour market averaged 220,000 between 2004-09, and the public sector, traditionally the absorber of many of these employees, is no longer in a position to play this role. Joblessness, meanwhile, is rising. The kingdom’s official unemployment rate for nationals rose in 2009 to 10.5 per cent from 9.8 per cent the year before. This year it may be even higher.

The Saudi economic boom has collided with a youth bulge that has stilted the job creating impact of high oil prices. More than 40 per cent of Saudis are under the age of 14, and almost 60 per cent are under the age of 25. Yet according to the Saudi Arabian General Investment Authority (Sagia), fewer than 18 per cent of nationals are actively employed.

This represents both a challenge and a major opportunity for the kingdom’s private sector, confronted with a large, untapped labour pool on its doorstep. Structural imbalances in the labour market are preventing employers from recruiting suitably qualified locals, with salary demands of Saudis at least three times higher than that of the expatriate population.

Saudisation strategies can play a role in increasing the recruitment of nationals, but the approach fails to address the key underlying problem: The lack of staff with skills suitable for the local employment market.

The government is aware of the problem. King Abdullah bin Abdulaziz has placed education and training at the heart of his long-range economic development programme.

More than half the total spending envisaged under the latest five-year plan for 2010-14 announced in August is geared toward manpower development. The plan is create the capacity to educate 5.3 million schoolchildren and 1.7 million university students by 2014, building 25 new technical colleges and 50 vocational colleges. Some SR200bn ($53.3bn) will be spent on higher education over the five years.

But even the best-intentioned investment plans will not resolve the labour shortage in the near term. Although Saudi nationals are heavily represented in retail positions among local banks, there is a lack of representation in the more senior roles. Management and investment banking functions demand a greater skills-set than is currently available.

Firms in the kingdom recognise that despite the billions of riyals being pumped into state-backed education and training programmes, they will need to engage their own initiatives if they are to recruit Saudis to fill key positions.

Job training initiatives in Saudi Arabia

Some of the most prominent local family-owned conglomerates are taking the lead. Abdul Latif Jameel, a Jeddah-based business empire that is now the world’s largest independent distributor of Toyota cars, has embarked on an ambitious programme to improve the skills of the local population and prepare them for the modern labour market. It has designed a specific programme, known as Bab Rizq Jameel (BRJ), that focuses on job creation.

Since 2003, BRJ has offered a direct employment programme that matches employers with jobless entrants to the labour market. The initiative is simple: BRJ analyses the various job opportunities available in the market and then defines the qualifications necessary for each of these opportunities.

“We receive applicants looking for jobs, we evaluate them and direct them to the proper vacancies available in our records,” says Abdurrahman al-Fehaid, director of job creation at BRJ. “Then we arrange the interviews for short-listed candidates with the employer representatives.”

The aim is not simply to provide training: Each recruit is trained up with a particular job in mind.

“All of our trainees secure their contract of employment prior to their starting in the training programmes,” says Al-Fehaid.

From its inception in Jeddah, BRJ has now spread across the kingdom, with 24 centres nationwide. It says it has created more than 145,000 jobs over the past seven years. In November 2010 alone, 3,678 work placement were created as a result of BRJ’s efforts, with 972 of these via the direct employment programme, including administrators, heating, ventilation, air-conditioning and cooling technicians, salesmen and cashiers.

“Training that ends with employment programmes have the most effect for the workforce, as it helps the new generation into a clear career path,” says Al-Fehaid.

Funding support for job training in Saudi Arabia

The direct employment programme is one of a series of labour market projects offered by BRJ. Some schemes provide interest-free loans to small businesses and to women who want to generate income from home. BRJ is working in partnership with the kingdom’s largest bank, National Commercial Bank (NCB). The bank has allocated SR10m, to be managed by BRJ, for interest-free loans for small projects owners who have graduated through the training schemes.

BRJ has also tapped into a range of funding support for its training initiatives, including from the Human Resources Development Fund (HRDF), the Saudi Credit & Savings Bank, and the Labour Ministry. HRDF allows companies to access financial support for indigenous vocational training to a maximum of SR1,500 a month during training, and up to SR2,000 a month upon employment for a period of up to two years. 

BRJ is just one of a growing number of private sector-led job creation initiatives in the kingdom. Food and supermarket giant Savola has created a retail-focused training programme through which more than 1,000 locals have passed.

For foreign investors eager to pursue business opportunities in Saudi Arabia, the ability to provide training as part of a wider package is becoming increasingly important. A prime example is one of the kingdom’s largest training organisations, Saudi Development and Training (SDT), set up under the UK Offsets initiative.

The company, established in 1993, is a joint venture with the UK’s BAE Systems that trains Saudi nationals for skilled support work in the Royal Saudi Air Force and other aviation sector employers. Under its longer-term programmes, it trains around 500 people a year.

The organisation is now aiming is to branch out of the aviation sector. “Now we are looking at the training needs of a range of major companies in Saudi Arabia, such as in the oil and gas sector and other industries that require high-quality technical training,” says SDT’s training academy principal, Abdulkarim al-Nujaidi.

Staff retention in Saudi job market

Investment in training is essential for a balanced, functioning labour market. But another crucial element is retention.

Improving staff retention has become a major issue for the Saudi private sector in recent years, made worse by the skills shortage. The worry is that firms will hold back from investing in training if the end-result sees better qualified staff moving on to better paid jobs elsewhere. With financial services firms competing for a limited pool of talented Saudis, loyalty to one firm cannot be guaranteed.

“We hired staff and taught them, but after one year they would move to other companies,” said Hesham Abu-Jamee, chief investment officer speaking at the Saudi brokerage house Bakheet Investment Group, at a Reuters Middle East Investment Summit in Riyadh in October.

The solution is not to abandon training programmes, but to redouble efforts so that over time there is a much larger pool of suitably qualified employees from which to recruit.

With an estimated 65 per cent of undergraduates in the kingdom studying liberal arts and religious studies, there is also a need to redirect students towards subjects more relevant to the labour market. “These are all noble subjects, but you also need to have the engineers, architects and physicists,” says John Sfakianakis, chief economist at the local Banque Saudi Fransi.

If Saudi Arabia is to move from a hydrocarbons economy into a service-oriented one, then each sector needs a steady supply of young Saudis with strong job skills and an understanding of customer service. Despite the initial efforts by the private sector, the challenge ahead is huge and much more needs to be done to draw locals to the private-sector labour force.