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Saudization, officially known as Saudi nationalization scheme, or Nitaqat system in Arabic, is the newest policy of the Kingdom of Saudi Arabia implemented by its Ministry of Labor, whereby Saudi companies and enterprises are required to fill up their workforce with Saudi nationals up to certain levels.
As part of the Vision 2030 reforms, announced in 2016, reducing the number of unemployed Saudi nationals is a key element of the plan. Previously the private sector was largely dominated by expatriate workers from Pakistan, India, Philippines and Arab countries such as Lebanon or Egypt.
The Saudi Government took the decision to reduce unemployment among native Saudis, under the slogan 'Let's Put the Saudi in Saudization'. Companies which "fail to comply" with Saudization regulations have been warned that they "will not be awarded government contracts". While the "Saudi political elite" is agreed on the importance of Saudization, Saudi businesses have complained of its implementation and sought ways to avoid it.
in 2017, updates to the Saudization percentages were announced, differing the number of Saudi nationals required depending on industry and company size.
While many Saudi native men found employment with the government, there were not enough government jobs as over 65% of the population is of working age. "Saudization" the workforce has been a goal of the kingdom since at least the Fourth Development Plan (1985-1989) which called for replacing foreign workers with Saudi natives as one of its objectives. Immigration was tightened and many undocumented foreign workers were deported, but the program was only a marginal success.
A Saudization goal for 2003 was that at least 30% of employees of companies with 20 or more workers should be Saudi natives, (although only 300,000 people were employed by companies of this size).
In June 2006, negotiations between business executives and senior government leaders, including King Abdullah, led to reductions of Saudization targets in some work sectors from 30 percent to 10 percent, and full waivers from Saudization in the case of two Chinese companies, according to discussions between US ambassador James C. Oberwetter and Saudi executives.
In 2014 the Saudi Gazette reported that one of the targets of the kingdom's Ninth Development Plan (2010-2015) -- to "bring down the unemployment rate to 5.5 percent and revive the Saudization strategy"—had not been realized.
Currently the plan targets Saudi youths as well as the women workers for the growth of the kingdom's economy. The Shura council (a consultative body) dictated that as of 2007, 70 percent of the work force were Saudi. Between 2011 and 2013, the transportation and communication sectors 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 transportation 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.
For companies in Saudi Arabia, there are a number of challenges with implementing Saudization. Firstly, there are a lack of recruitment companies specializing in Saudi talent so when it comes to hiring for a role and going through the Nitaqat  process, companies don't have the knowledge or the support they require.
The turnover for Saudi talent is high as companies widely recognize and value the skills and abilities of Saudi nationals and can easily offer a candidate a more attractive package. A solution for this is to ensure that you are offering not only competitive packages for the role but also long term training plans to support Saudi nationals in their careers. Saudi graduates are often western educated, choosing to complete their university degrees in the UK, US and Europe.
Saudi women are a key element to teams and companies have long seen their value, the previous challenge of women not being able to transport themselves around the Kingdom is coming to an end with women being able to drive from 2018.
The first phase of Saudization went into effect from September 2018, wherein car dealerships and sellers of clothing, furniture and household utensils would employ locals in approximately 70% of sales job. The reform is expected to create 60,000 jobs for Saudis. However, the demand is of 700,000 positions by 2020. The Saudi private sector is still in a very difficult phase, being dominated mostly by foreigners.
What is Nitaqat
Nitaqat is a program of Saudization, increasing the employment of Saudi nationals in the private sector. The program classifies the country's private firms into six categories: Platinum, High Green, Mid Green, Low Green, Yellow and Red. Platinum is the highest percentage category followed by High Green and so on, the Yellow and Red categories being the lowest.
Nitaqat requires employers in the private sector with over 9 employees to hire a certain percentage of Saudi nationals, depending on the company’s industry and the number of employees in the company. Companies with less than 10 employees are exempt from the zoning system but are still required to hire at least one Saudi national.
The classification of other companies is based on the Saudization percentage (% of Saudi employees) and the total number of employees. The companies with less than 10 employees are exempt from the program, but still need to employ at least one Saudi citizen. Rapid visa services are available only to businesses that are in the platinum category of the Nitaqat system to improve employment for Saudis.
The initiative was announced in June 2011, when the Ministry of Labour passed Ministerial Resolution no. (4040). The implementation deadline for the program was in 2013. Nearly 90,000 Indians left Saudi by the end of October 2013. About 466,689 Indian workers have renewed their iqamas (resident permit) over the last five months of the grace period, 359,997 workers have transferred their sponsorship and 355,035 workers changed their job titles to legalize their status (e.g.: profession change, sponsorship change etc.) reports the Financial Express. More than 200,000 private firms were closed down in 2014 for failing to meet the conditions set within the Nitaqat nationalization program aimed at reducing unemployment among Saudis.
Male and female are now equal when being taken into consideration for Saudization percentages. Previously a female Saudi employee was counted as two male Saudis for Saudization purposed but this is no longer the case. Also taken into consideration for Saudization percentages is a non Saudi national employee, male or female, who is currently married to a Saudi national.
Misuse of Nitaqat
An official at the Ministry of Labour said inspection teams from the ministry are closely monitoring companies who have been exploiting people with disabilities in order to encourage their Saudization rates. The officials check on employees with disabilities during inspection rounds to identify the nature of the work, their presence at the job, and the type of arrangements and services provided to them, noting that the number of people with disabilities employed at a facility cannot exceed 10 percent. If employees with disabilities in a firm exceed more than 10 percent of the total number of Saudi employees, then each disabled worker is calculated like any other Saudi. “It is unfortunate that there are some companies and individuals who exploit people with disabilities to pump up their Saudization rates,”and Saudi workers with disabilities who are able to work are counted as four employees in the Saudization ratio. They must be paid a minimum monthly wage of 3,000 riyals and should not be counted as part of the Saudization ratio of another establishment. To recent reports which reveal that companies have been hiring Saudis with disabilities in order to boost Saudization rates as these disabled employees count as 4 employees, thus saving the company from hiring able-bodied Saudi employees at higher salaries. An executive at a private company said there are some people with disabilities who present themselves to the companies for employment in return for salaries, bonuses, and benefits. Companies are thus paying less to a disabled employee who is equal to four Saudis than they would if they hired four Saudis with salaries of more than SR 20,000 each. They offer their services. Some companies accept, refuse, others added. The Ministry of Labour and other agencies work together regarding the issue of employees with disabilities, noting that the Ministry of Labor determines the nature of disability upon interviewing the employee. They currently posted a draft to the disability employment legislation on the “Together We Improve” portal for discussion before making a decision to amend the definition of disability work and conditions for employment stipulated in Article 13. Disabled employee to count as more than one employee in Nitaqat, the individual must hold a license or identification card from the Ministry of Social Affairs or Ministry of Labor indicating the type and degree of disability. Further, work conditions and systems must be acceptable and suitable for employees based on the type of disability, and establishments should ensure all services are in place before the employee begins work.
Four million expatriates regularise their status
Saudi Arabia has completed regularisation of nearly four million foreign workers in the second quarter of 2013 as part of its `Nitaqat` programme, with 1.18 million expats choosing to change their profession.
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