Growing youth population in Saudi offers economic potential
Growing youth population in Saudi offers economic potential
Fifty percent of Saudi Arabia’s population is below 25 years, a figure set to increase further in the future, leading to a phenomenon widely referred to as a “youth bulge”.
Economists debate whether Saudi’s burgeoning youth population will be a burden or advantage to the country.
Such a large number of young people brings with it enormous opportunity for growth through the generation of innovative, new ideas, and a sufficiently large work force to power these ideas into practice.
However, if not managed appropriately, a rapidly growing population of young people could lead to an increased rate of unemployment amongst 15 to 25 year olds, a figure which already stands at around 30 percent.
The IMF Saudi Arabia Country Report found that a large number of young people will enter the local job market over the next decade, and that creating a sufficient number of rewarding jobs will be a challenge.
However, generating jobs is not the only difficulty the Saudi government faces.
Around 2 million new positions were created in the Kingdom between 2008 and 2012, but three quarters of these jobs were filled by non-Saudis, suggesting the local workforce needs to become more productive and competitive in the face of mounting competition from expatriate workers.
The Saudi Arabian Government has recognized the importance of harnessing the potential of its young people through education.
More than SR204 billion from the 2013 budget was channelled into education, a staggering 25 percent of the Government’s annual spending, and around 10 percent of its GDP.
Saudi Arabia is now ranked as the world’s highest spending nation on education.
Such initiatives have had a positive impact on the learning outcomes of individuals in the country, with the literacy rate among adults currently standing at around 97 percent, according to World Bank data, up from 30 percent in 1970.
The number of individuals completing school and tertiary education is also on the rise.
Mark Andrews, Pearson’s director of qualifications in the Middle East, says that these educational developments are instrumental in addressing the skills shortage the Kingdom faces.
Andrews says that providing young Saudi nationals with an education that will lead to placement in a rewarding job is not only important for the Kingdom’s youth, but also to the Saudi economy.
“Saudi Arabia’s youth bulge offers enormous opportunities in both Saudi and wider region. It has the potential to increase economic growth and living standards, and help realize the government’s goal of greater economic diversification,” he said.
Andrews said: “However, as the IMF report makes clear, equipping young people with effective education and training is critical to ensuring the youth bulge becomes an asset — and not a liability. Education and training needs to focus on preparing young people for the workforce.
Pearson’s research in the Gulf region indicates many local employers believe that the education system does not always prepare school and university leavers with essential employability skills.” Andrews added:
“Employers tell us they want candidates with 21st century skills, such as communication, collaboration, responsibility and problem-solving.”
Pearson’s 2009 global study into the links between education and employment, detailed in the Effective Education for Employment report found that skills gaps exist for both new employees and more experienced workers.
Gaps around leadership, teamwork, creativity and innovation continue to present employers with difficulties in training and development. And this is a problem not only for Saudi Arabia, but countries right around the world.
Andrews believes that giving young Saudi nationals the right workplace skills will help this growing demographic group enter and succeed in employment and contribute to the long term prosperity and stability of the country.
“Giving young Saudis an education that allows them to enter the workplace, and contribute meaningfully in their careers will not only help reduce youth unemployment,” he said.
“Making young Saudis more effective and productive in their jobs will also foster economic growth and raise the standard of living in the Kingdom. Saudi Arabia’s vast youth population has the potential to become an economic powerhouse in the region, but it is a matter of channelling that potential into positive and productive outcomes,” he added.
Saudi insurance stocks soar as female drivers take to the road
LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.