For the Kingdom’s drive to diversify its economic base and grow a flourishing nonoil business sector, two types of capital are having to be deployed. The first and most obvious is financial. Despite the continuing complaints of smaller companies, that banks prefer to lend to big corporates, there is, in truth, no shortage of funding for the right business plans from the right borrowers.
Moreover, even when funding is available commercially, there are plenty of options, especially for small and medium-size enterprise, to tap government grants and funds, often on more generous terms than those available from the banks.
The second type of capital required for a dynamic Second Sector of the economy, is infinitely more precious and in certain respects, arguably harder to find. Saudi businesses need an abundant source of human capital.
The work that needs to be undertaken by young Saudis now leaving universities and technical institutes — both here in the Kingdom and abroad — covers everything from services, through to manufacturing. Every area of endeavor is important, from the law to medicine, to social services, to business and finance through to manufacturing.
Each job skill will contribute to the growth of our economic diversity. The government has recognized this through the generous support that it gives to students. The most outstanding example of this is the visionary initiative of the King Abdullah Foreign Scholarship Program, on which the government is spending SR 9 billion a year through to 2020, to send thousands of young people from the Kingdom to study overseas.
However, a recent study has demonstrated that there is a worrying mismatch in the skills that the Kingdom requires and those that are being acquired by students. Specifically the number of young people who have decided to focus their careers on manufacturing is remarkably small. Only around 13 percent were planning to earn their living in the business of making things. Instead, the trend was toward study in service sectors, not least business administration.
Now of course, all companies need managers, whose job is to plan and run the physical and financial operations of a business. But they also need engineers and people who understand the almost invariably complex technology behind manufacturing processes, from the purchasing of raw materials right through to the packaging and palletization of the finished products. Automated though many production lines may be, what they make still has to be designed and tested, while the lines themselves have to be operated and adjusted and refined.
Though a production line, once up and running, through its sheer high-speed repetition, may look boring, if not indeed simple, the amount of work that was needed to ensure the process worked so well is considerable and, manufacturers will tell you, often hugely satisfying.
There is a considerable risk for any country the majority of whose graduates choose to ignore manufacturing and the engineering skills. In Europe there is now a serious shortage of engineers. In France and the UK, the time-honored system of apprenticeships broke down because they were considered slow and old-fashioned. Manufacturing has paid the price for this change, because time and again, companies are complaining that they simply cannot find the right workers with the right technical skills. Even in Germany, that powerhouse of manufacturing, there are also problems hiring properly qualified engineers.
Economists of course, will say that the market is at play here. Because they are so scarce, good engineers can already command higher salaries than the average worker. This will induce more young people to acquire these skills which will, after a few years, boost the supply of engineers.
Maybe such a skills market does not yet exist among young Saudi technical graduates, or if it does, it is not visible. Thus it would seem that apart from the government encouraging young people to study for the sort of engineering qualifications that will have an impact on the manufacturing side of our Second Sector economy, we ought to be looking to Saudi companies as well.
At the very least, those young people who choose a career in manufacturing should be recognized for their vision and how it contributes to the Kingdom’s economic diversification. Saudi companies who make things, and there are many of them, should start trumpeting their achievements and let the public know the essential role that they play in the lives of virtually every single person here. Manufacturing firms and the people who work in them should be proud of what they do. Getting that message out will surely then attract young people to join the sector.
Editorial: Manufacturing success
