The specter of unemployment, coupled with the younger generation's higher education levels, especially amongst females, has also brought about some change in social attitudes toward job expectations and acceptance of what was before deemed menial jobs. The degree of success in generating sustainable levels of new employment will be the central measure by which any future Saudi administrative and economic reforms will be judged. Saudization can be a two-edged sword however. The government's natural desire to replace foreigners with Saudis to resolve a growing unemployment problem needs to be a tempered with the long-term consequences to the private sector. These might include reduced efficiency, lower productivity, higher costs and economic slowdown should Saudization be unwillingly enforced. The model has to be more of a "partnership", exemplified by the commendable results of the Saudi banks' Saudization experience. Both foreign bank partners and the Saudi community benefited in terms of profitability, skill transfer, productivity and product innovation. The higher echelons of Saudi banking is now dominated and run by professional and extremely capable Saudis. This process took time though, but unfortunately time is not a luxury that Saudi Arabia now faces in job creation.
The issue of foreign workers and how they are treated and replaced must be approached with care and caution and could become one of the most contentious issues in the years ahead. The potential economic implications should the policy of Saudization be mishandled is not to be underestimated. A rushed policy of Saudization could bring about a reduction in national income. If expatriate workers feel threatened and begin to voluntarily "withdraw" part of their labor input, they could create economic inefficiencies.
It is difficult to speak of a Saudi Arabian labor market, in the sense of a unified, open market where a single price is paid for a specific amount of labor. Instead, the Saudi Arabian labor market is characterized by segmentation into nationalities. Within such groups, pay scales are determined relative to labor markets in their country of origin. As such, unrestricted labor mobility is a necessary prerequisite for a free labor market that eliminates pools of unemployed expatriates in the Kingdom. At the same time, the labor market experiences market price distortions because of the arrival of further expatriate workers, under the current sponsorship “kafeel” system. It is this aspect that is distorting the Saudization process today. There is a debate on whether current Saudization pressures, or the allowing of a freer market supply and demand force to operate, as Bahrain did last August, can assist Saudi Arabia.
The Kingdom has never accepted as permanent the immigrant communities in their midst; they have always planned that labor imports would be a temporary phenomenon. Saudi Arabia hopes, eventually, to repatriate all foreign nationals, although the Kingdom accepts the inevitability of some selective immigration and naturalization. The Saudi authorities do not seem to have been caught off balance by the large numbers of foreign workers present in the country, and the Kingdom has shown a remarkable capability in managing this large flow of migrant labor.
Foreign workers were meant to fulfill their obligations, receive their payment and return to their homeland. At no point, over the past four decades, did Saudi Arabia feel totally overwhelmed by the expatriates, or feel that they had lost control of the management and administration of this mass of people. Instead they have focused on the refinement of the sponsorship iqama (residency) system. Because the Kingdom is intensely concerned to preserve its unique cultural identity, they have also stressed the social aspects of the immigrants' presence.
This relationship sometimes puts a strain on the expatriate work force. Most of them are in a temporary situation. They feel like they are in a hotel; they can never entertain the illusion of being at home. This feeling of isolation is magnified by the security threats faced by some Western communities, following domestic bombings and acts of terrorism. National groups stick together, even though, with some exceptions, they did not know each other before. Together they are a collection of solitudes.
The entry of Saudi Arabia into the World Trade Organization and stricter adherence to International Labour Office (ILO) regulations will bring about some changes to current labor policies. Until then, the expatriate labor market will be open to abuse and some exploitation. It is not surprising that some sections of the Saudi private sector are reluctant to replace foreign workers with nationals on various pretexts.
And what of the expatriates who return after a "stint" of duty in the Kingdom - ranging from the shortest possible contract of two years to several decades for many workers? They often face problems when they return to reclaim their place in the societies they left. They find that their friends and associates back home don't understand or appreciate the things they have experienced. For those that do settle, their expanded experiences, the higher degree of responsibility they had assumed and the new technologies they learned, make expatriate labor more valuable to the home country. For others that do not settle, there are a host of problems. They are forced to forget a whole area of their lives or to meet with other former expatriates, like veterans of campaigns. Some cannot make the adjustments and return overseas to become defacto career expatriates, moving from job to job around the world like nomads, maintaining contact with friends they have made along the way.
The presence of these expatriates has undoubtedly brought about much of Saudi Arabia's material benefits. Many Saudis have argued that expatriate workers are valued guests and will be protected as such, but in a climate of rising unemployment, their voices are in the minority. This appreciative spirit needs to be nourished, if a successful and willing handover of responsibilities and technical skills to Saudi labor is to occur as part of the "Saudization" process. At the same time, any significant exodus of skilled expatriate labor will bring forward the day when qualified Saudis take responsibility in their own country, either through skill transfer or "learning by doing". It is a difficult choice for any country to make, especially for one that is diversifying its economic base into new areas where more, rather than less, professional expatriate labor will be required in the short term .
Expats will be in Saudi Arabia for a while yet, despite strident calls to rush through ill-thought out whole scale Saudization programs whether in the fish, vegetable, jewelry, lorry drivers or retail sectors. Productivity, efficiency, skills and work ethics should be the guiding principles for hiring, with preferences given to Saudi nationals that meet these criteria, but also without setting artificially high barriers for nationals to meet before employing them...
(Mohamed A. Ramady is a former banker and currently a visiting associate professor of Finance and Economics at King Fahd University of Petroleum and Minerals, Dhahran.)