Saudization reforms to raise costs for private sector: SICO

Saudi Arabia’s job nationalization program Nitaqat and its new amendments, along with regulations such as the recently introduced expat levy, will result in higher operating costs for the country’s private sector, investment bank SICO said in a recent report.

Last month, the Kingdom started the implementation of new requirements under Nitaqat, with retail and finance sectors facing tighter Saudization requirements.

The amendments change visa issuance limits, allowing only those companies that hold “platinum” or “high green” status to apply for new visas to hire expatriates. The revision also alters the minimum Saudization requirements and introduces the “Saifi” intern training initiative.

The Saifi program makes it mandatory for any private company with more than 25 employees to provide training to Saudi students interning at the firm.

Following the revised requirements, the real estate and mining sectors have improved to the platinum status with Saudization levels above 60 percent, while manufacturing and construction sectors improved to yellow with 18 percent and 6 percent Saudization levels respectively, SICO said.

Meanwhile, the retail, accommodation, and food services sectors have the lowest Saudization levels, ranked at the red Nitaqat level, it added.

“The wholesale-retail sectors and the financial sector have seen an increase in minimum requirements for Saudization levels in the ‘high green’ zone,” the report said. “This has significant implications for the ability of companies within these sectors to apply for visas for new expatriate workers.”

According to the bank, one of the main challenges of hiring Saudi nationals in private sector is the increase in costs. Saudi citizens would likely draw higher wages; additionally, a company is also expected to bear training costs.

Under the Saifi training scheme, each intern is entitled to SAR 1,500 per month as stipend.

The Saudization initiative forms part of the country’s national transformation plan (NTP), which plans to increase Saudization levels and reduce unemployment among Saudi nationals to 9 percent by 2020.

Another NTP objective is to bring the percentage of Saudis employed in the private sector to 50 percent by 2020, by creating 3 million new jobs in the private sector.

According to 2016 data on the labor force published by the General Authority for Statistics, Saudi private sector employees accounted for 12.2 percent of total employed Saudis in the labor force – which is the lowest level for the past five years.

On a year-on-year (YoY) basis, however, the number of Saudi nationals working in the private sector increased by 3.3 percent in 2016.