Nitaqat: Saudi employment in construction sector impressive

Updated 10 January 2015

Nitaqat: Saudi employment in construction sector impressive

Since 2011, several Saudization initiatives have been launched by the Ministry of Labor; notably the Nitaqat program. This program achieved high levels of compliance in the two years since its launch, with companies classified within the red domain dropping by 75 percent, Jadwa Investment says in its 2015 Saudi Economy Report
“We believe that there is still much room for broader enforcement, given that unclassified companies — mainly small businesses — constitute 86 percent of total companies in the Kingdom,” said the Jadwa economists.
Citing data from the Ministry of Labor, they said that the Saudization rate in the private sector increased from 10.9 percent to 15.2 percent between 2011 and 2013. The growth in employment of Saudis surpassed that of foreigners since the start of reforms by the Ministry of Labor.
Saudi employment growth in the private sector averaged 26.7 percent between 2011 and 2013 , while growth in foreign employment averaged 9.4 percent during the same period, said the Jadwa report.
Between 2011 and 2013, the transport and communications sector recorded the highest improvement in Saudization rates from 9 percent to 20 percent. Manufacturing also underwent a notable improvement in Saudization rates (from 13 percent to 19.3 percent). Saudization rates in the retail and construction sectors also improved from 12.9 percent and 7.2 percent to 18.4 percent and 10.3 percent respectively, said the report.
Taking average growth for the period between 2011 and 2013, improved Saudization rates in the transport sector came mainly as a result of a significant 59 percent growth in employment of Saudis. Average Saudi employment growth in the manufacturing and wholesale and retail sectors was also high, at 25 percent each.
Meanwhile employment growth for non-Saudis averaged just 4 percent and 7 percent respectively. The construction sector — the most labor intensive part of the private sector — recorded an impressive 34 percent average growth in employment of Saudis, while employment of non-Saudis in the sector grew by 14 percent.
The higher growth in Saudi employment in the construction sector is impressive given the particularly high wage differential from non-Saudis. Saudis in the construction sector earned a monthly average of SR3,330 in 2013, while non-Saudis earned only SR1,029.
“Looking ahead, we see that while employment growth of nationals in labor intensive sectors is expected to continue improving as companies in these sectors adjust to new norms, further raising the Saudization rate in high-skilled sectors — mainly manufacturing – remains a challenge,” said the researchers.
“We believe that one of the main impediments to higher growth of Saudi employment in these sectors is the lack of skill-matching between educational achievements and these sector’s requirements; a challenge that we believe is being matched through ongoing initiatives that include significant investments in the education sector particularly on vocational training as well as the ongoing King Abdullah foreign scholarship program,” the researchers added.

Record budget spurs Saudi economy

The budget sets out to lift spending and cut the deficit. (Shutterstock)
Updated 19 December 2018

Record budget spurs Saudi economy

  • “It is a growth-supportive budget with both capital and current expenditure set to rise.”
  • Government spending is projected to rise to SR 1.106 trillion

RIYADH: Saudi Arabia on Tuesday announced its biggest-ever budget — with spending set to increase by around 7 percent — in a move aimed at boosting the economy, while also reducing the deficit. 

However, analysts cautioned that the 2019 budget is based on oil prices far higher than today — which could prove an obstacle in hitting targets. 

Government spending is projected to rise to SR 1.106 trillion ($295 billion) next year, up from an actual SR 1.030 trillion this year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to SR 975 billion. The budget deficit is forecast at SR 131 billion for next year, a 4.2 percent decline on 2018.

“We believe that the 2019 fiscal budget will focus on supporting economic activity — investment and wider,” Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), told Arab News.

“It is a growth-supportive budget with both capital and current expenditure set to rise.”

A royal decree by Saudi Arabia’s King Salman, also announced on Tuesday, ordered the continuation of allowances covering the cost of living for civil sector employees for the new fiscal year.

“The continuation of the handout package will be positive for household consumption by nationals,” said Malik. “We expect to see some overall fiscal loosening in 2019, which should support a further gradual pickup in real non-oil GDP growth.”

World oil prices on Tuesday tumbled to their lowest levels in more than a year amid concerns over demand. Brent crude contracts fell to as low as $57.20 during morning trading.

Malik cautioned that the oil-price assumptions in the Saudi budget looked “optimistic.”

“We see the fiscal deficit widening in 2019, with the higher spending and forecast fall in oil revenue,” she told Arab News.

Jason Tuvey, an economist at London-based Capital Economics, agreed that the oil forecast was optimistic, but said this should not pose problems for government finances.

“The government seems to be expecting oil prices to average $80 (per barrel) next year,” he said. 

“In contrast, we think that oil prices will stay low and possibly fall a little further to $55 … On that basis, the budget deficit is likely to be closer to 10 percent of GDP. That won’t cause too many problems given the government’s strong balance sheet. 

“Overall, then, we think that there will be some fiscal loosening in the first half of next year, but if oil prices stay low as we expect, the authorities will probably shift tack and return to austerity from the mid-2019, which will weigh on growth in the non-oil sector,” Tuvey said.

John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia, said that the targets of the budget were “achievable” and the forecast oil price reasonable. 

“It is an expansionary budget that should spurt private sector activity and growth,” he said. 

“With Brent crude averaging around $68 per barrel for 2018 and $66 per barrel for 2019, the authorities have applied a conservative revenue scenario.”