Saudis attend the Private Sector Middle East Conference. Unemployment jumped to 12.1 per cent at the end of 2012. Image Credit: AFP

Riyadh: Saudi Arabia, the largest Arab economy, urgently needs to create new jobs in the coming years for the millions of young people expected to enter the kingdom’s workforce, Saudi business leaders and the International Monetary Fund (IMF) said on Tuesday. The IMF and the government are looking to the private sector rather than the state, which traditionally played a strong role in providing employment, to play a bigger part — despite formidable red tape and other challenges.

The need for jobs is outpacing available work throughout Gulf Arab countries, meaning that while the region’s kings and ruling shaikhs have so far ridden out the Arab Spring, demographics and time may not be on their side for very long.

Unemployment, which jumped in Saudi Arabia from 10.5 per cent at end of 2009 to 12.1 per cent at end of 2012, could eventually feed greater dissent and challenges to the monarchy’s tight grip on power. “It’s happening around us and we need to wake up to that reality,” Fatin Bundagji, a Board Member of the Jeddah Chamber of Commerce, said of the protests roiling the Middle East. “There is a need for us to understand that we are measuring the wrong things.” The kingdom is the world’s largest oil exporter and has foreign reserves in excess of $717 billion, but she said those figures do not indicate the society’s well-being. “Are people having access to good education, to health care? Can they afford to buy their homes? Are they happy?” she said. “We can’t afford to continue business as usual.” She said on the sidelines of an event on Tuesday organised by the Council of Saudi Chambers and the IMF about the role of the private sector in job creation. The event, which was attended by Saudi Arabia’s Finance Minister and other top level officials in Riyadh, underscored the government’s acknowledgement of the critical need to address unemployment.

Up to 1.6 million young nationals will enter the workforce in the next five years in the Gulf countries of Saudi Arabia, Bahrain, Oman, Kuwait, Qatar and the UAE, according to a new report by the IMF. But, the body warns that only around 600,000 will find jobs in the private sector by 2018. An expected one million could find themselves without work. Tim Callen, the IMF’s Mission Chief to Saudi Arabia, said in a statement ahead of the event that as youth approach working-age years in the Middle East, economic growth has not been sufficient to create enough jobs and to meet the aspirations of the people. Women also only comprise 22 per cent of the workforce in the region.

“In addition, businesses, especially in the sector of small-and-medium — enterprises face many obstacles to grow,” he said. A nationwide culling of Saudi Arabia’s massive foreign workforce of around nine million people has already sent hundreds of thousands of migrants home in the past two months. Saudi authorities say the jobs left behind can and should be given to Saudis. The kingdom has also implemented a so-called “Saudisation” programme that requires businesses to ensure that Saudi nationals make up at least 50 per cent of the workforce in order for the company to have basics like exit and entry visas for its international staff. The programme has created what Saudis call “tasator” whereby businesses pay salaries to Saudis who do not actually work.

Business owners who do this say that many Saudis are not skilled enough for the jobs they want and so find it easier to do this. Traditionally, Saudis have relied on accessible, stable and well-paying government jobs. The IMF says almost two-thirds of employed Saudis nationals work for the government, but that there is a need to improve education to boost the skills and productivity of workers. Bundagji of the Jeddah Chamber of Commerce says there needs to be financial inclusion that focuses on Saudis who do not have access to funding. “You have to reach out to the people and also give them that hope that they can also dream of having a roof over their head,” she said.