Saudi Presentation in the G20 Meeting of Labor and Employment Ministers in Washington

Chairperson
Ladies and Gentlemen

In this session, which is devoted to discuss improving the quality of jobs and social protection, I would like to present some of what Saudi Arabia has undertaken in this field with emphasis on Human Resources Development Fund.

The impact of the global financial crisis:

Employment in various countries of the world was influenced as an important repercussion of the global financial crisis. The acuteness of this influence differs from one country to another, and although the world economy started to recover, many countries are still suffering more than others.

Saudi Arabia is considered to be among the least affected countries by the crisis, due to:

• the boom which the country witnessed since the year 2004,
• the policies adopted to build financial surpluses and reserves, which strengthened the ability of the economy to face challenges,
• the structural reforms,
• the large development projects implemented

Saudi Arabia continued its efforts to enhance growth of its national economy through high government investment expenditure. In this respect, around 70 billion dollars were allocated in 2010 for development projects. In addition, expenditure in the current budget reached about $144 billion (SR 540 billion). Saudi Arabia also declared during the G20 Summit in November 2008 that government expenditure will exceed 400 billion dollars in the next five years.

Impact on employment:

Regarding the negative effects of the global financial crisis on employment, the Impact on the Saudi workforce has been minimal as shown by some indicators including:

No layoffs of large numbers of Saudi workers have been observed as a direct result of the global crisis. Only a few cases of layoffs were noted including dismissal of 371 workers by several private firms in 2009. In this respect, a working group has been set up in the Ministry of Labor to follow-up any impact of the crisis and monitor any cases of layoffs of Saudis in the private sector. The purpose is to assess the causes of any layoffs - if they occur- and to ensure that those who lose their jobs are transferred to other businesses which have employment opportunities suitable to their experiences and specialties.

The demand for labor by the private sector continued. This is reflected by the fact that about 144,000 Saudis were employed by this sector in 2009. A large number of foreign workers were also recruited in this year as more than 982,000 work visas were issued for private establishments, 61,000 visas issued for the public sector and 496,000 visas issued for domestic (household) workers.

Unemployment rate of Saudis declined from its levels before the crisis. The rate of unemployment was 12% in 2006 and 11.2% in 2007. Although this rate increased from 10% in 2008 to 10.5% in 2009, yet it still remains less than before the crisis. Therefore we don't see a direct link between the unemployment rate and the global financial crisis, as the said rate is believed to be a reflection of the structural nature and type of unemployment in the country. However, this rate is considered high in a country hosting large numbers of foreign manpower, and the government is exerting continuous efforts to solve this problem.

Type of unemployment in Saudi Arabia:

Unemployment in Saudi Arabia is a structural in nature. It is not resulting from slowdown of the national economy to generate work opportunities. Rather, it is the result of other factors including:

• Mismatch between the private sector requirements and some of the education and training graduates.
• Low wage levels as a result of influx of expatriate workers to the labor market.
• Dependency of the private sector on expatriate workers.
• Preference of large numbers of Saudis to work for the government sector in which employment opportunities have decreased in recent years.

This reality indicates that solving the unemployment problem in Saudi Arabia requires actions to correct the structural deficiencies of the labor market by intensifying efforts in two main areas:

1. To support training and qualifying of job seekers with the purpose of enhancing their employability in the private sector by providing them with the necessary skills and improving their productivity.
2. To support recruitment of Saudis to motivate and enhance the ability of the private businesses to attract and hire job seekers in stable remunerative jobs.

These two areas are among the most important elements of the Saudi employment strategy approved by the Council of Ministers in July 2009 which focuses on:

• increasing supply of highly skilled national manpower;
• continuous improvement of the national labor productivity to reach the highest possible levels as well as training, re-training and improving the skills and qualification of the workforce in accordance to the real needs of the labor market;
• to recruit qualified Saudis to achieve economic diversification by gearing the diversification efforts to be realized through policies and mechanisms aiming at increasing the gross domestic product and value added through the participation of more Saudi workforce in this process.

These trends and targets conform with the subjects we are discussing in our current meetings, particularly in this session which is concerned with improving the quality of jobs and social protection.

In Saudi Arabia, we consider social protection as more than paying subsidies or compensations to unemployed citizens. As most of the unemployed are new entrants to the labor market, and to avoid creation of a state of reliance on such subsidies, Saudi Arabia adopted a policy of paying subsidies (grants) to job seekers provided that they join training through the programs of Human Resources Development Fund in order to prepare and assist them to obtain suitable jobs in the private sector.

Human Resources Development Fund (HRDF):

HRDF was established as a result of a strategic policy objective whose achievement has posed unprecedented challenge in Saudi Arabia. This objective is Saudization in the private sector.

The Fund has become an important mechanism that supports preparation and training of qualified Saudis who are expected to precipitate the achievement of this objective in a fast developing economic environment and a labor market with some unique features.

The Fund's efforts in this field integrate with the efforts of the Ministry of Labor and the National System for Joint Training (NSJT) as well as other concerned organizations, in addition to the efforts that have been made to develop general and higher education.

HRDF General Objectives:

HRDF was founded to serve the general objectives of supporting the efforts to prepare a national workforce and help Saudis to be employed in the private sector through:

• Offering grants to those involved in the preparation, training, and employment of national workforce,
• Sharing the expenses of preparing, training, and employing the national workforce,
• Paying a percentage of the salary of the trainees who are hired by private firms after they finish their training, as well as a percentage of the salary of any new recruit hired directly under a support contract between the Fund and a firm.
• Providing loans to private firms that prepare and train national manpower to work in the private sector,
• Offering financial assistance to field programs, plans and studies that are aimed to employ Saudis and help them to replace the expatriate workers.

To realize its targets and tasks which focus on training and employment, the Fund developed mechanisms and procedures to render its services in these two fields by providing incentives and programs as follows:

A. The Incentives:

The Fund provides incentives for encouraging Saudi job seekers to obtain training and good employment in the private sector, including:

• Provision of a monthly remuneration to job seekers who join training and preparation programs;
• Provision of free training and preparation to job seekers (all costs paid by the Fund);
• Considering the trainees as employees and registering them with the General Organization for Social Insurances (GOSI) and paying their social security subscription premiums from the first day they join training;
• Paying part of the salary (up to 50%) for newly employed Saudis in the private sector. This serves two goals: it encourages Saudis to work in the private sector by offering them decent salaries; and encourages the private firms to recruit Saudis as the cost is shared by the Fund for two years.

 
B. The Programs:

The Fund provides several diversified programs including:

Training program at work ending with skills and experience: This program aims at enrolling non-qualified job seekers in a training programs at work in a private firm to help them acquire skills in certain given professions. It also aims at enrolling qualified job seekers in training programs at work to acquire experience in specific professions.

Information technology programs (Get-IT): The program links skill development to information technology (IT). This benefits unemployed individuals whose qualifications are not in harmony with the labor market needs by training them in utilizing (IT) skills for the success of the small-size businesses they intend to establish and manage. The program also aims at bridging the gap between work and technology to assist the youth to understand the link between business challenges and the technical solutions which contributes to the success of their businesses.

The Program of supporting employment stability: This program aims at encouraging job stability of the employees who work in supported firms in a way which allows them to acquire practical experience, develop their skills and abilities and realize work stability. The program includes a financial incentive and a training incentive. The financial incentive includes granting one month salary reward to an employee who completes one year of service with the employer and two months salary to an employee who completes 2 years of service. The training incentive includes training an employee who completes one year of service with a supported firm in a training program at a cost not exceeding $1,334 dollars (SR 5,000), as well as training an employee who completes two years of service in a training program at a cost not exceeding $2,667 (SR 10,000).

The program Maher 12/12 for qualifying the specialized cadres: This program aims at qualifying 12,000 job seekers for work in various professions needed by the labor market by the year 2012. This is a non-employment training program conducted by institutions that have achieved outstanding success in training and employment. The Fund bears all the costs of training as well as the trainee's compensations.

The direct employment program: This program is devoted to the private sector institutions supported and non-supported by the Fund through the implementation of agreements concluded between the Fund and those institutions. Accordingly, job seekers registered in the Fund's data base are directed for work in the jobs provided by the supported institutions. In addition to that the Fund holds direct employment meetings between job seekers and recruitment officials in the non-supported institutions to make interviews and facilitate employment.

The Program on supporting training and qualifying the owners of small-size establishments: This program aims at supporting the training and qualifying Saudis desiring to start their own businesses with the purpose of providing them with the necessary skills to manage their establishments, specify the available investment opportunities, develop effective work plans for their small projects, evaluate the market, and make feasibility studies, as well as gaining other skills related to planning, organizing, accounting, marketing and sales.

Distant work program: This program aims at activating the distant work technique as one of the methods of enhancing employment of Saudi manpower. It specifically aims at supporting women as well as those with special needs (the handicapped) to be employment in the private sector. The Fund incurs 50% of the worker's monthly salary not exceeding $534 (SR 2,000) for 2 years.

Program of the National System for Joint Training: The Fund supports the programs of the National System for Joint Training. This body was established within the Technical and Vocational Training Corporation (TVTC) to carry out training programs in certain professions which have priority in the labor market. It also aims at ensuring the participation of the private sector in training of job seekers to realize the utmost harmony with the real needs of the labor market.

Other programs: The Fund conducts many other programs such as the program of supporting the owners of small size projects, the program of qualifying human resources specialists, the program of providing technical and administrative consultancies to training, and the mechanism of supporting health training.

Some Achievements of the Fund:

The Fund realized some remarkable achievements in the field of training and employment of Saudis in the private sector during the last two years. The most important of these achievements are:

Concluding 1,189 agreements with private firms in 2008 including 59,010 training and employment opportunities. Appropriations for training and employment programs as per these agreements reached $518 million (SR 1,942,644,000).
The number of agreement concluded in 2009 was 1,657, while total employment opportunities in these agreements reached 41,684 jobs. Total appropriations for training and employment amounted to approximately $479 million (SR 1,795,795,329).
 
Conclusion:

In conclusion, I would like to point out that although the impact of the global crisis has been minimal in Saudi Arabia, the country faces a rate of unemployment which is considered high. Combating this problem became a top priority together with Saudization, which is also regarded as a national quest and strategic goal. In attempting to achieve these goals, it became imperative to focus on directing Saudi job seekers to join the private sector. This required emphasis to be laid on training to raise the quality of the national workforce and improve its productivity. HRDF was founded as a mechanism to sustain this objective by means of providing financial support to training and employment activities. The Fund's efforts, which complement the efforts of many other concerned agents in the areas of training and employment, serve a number of purposes: first, enhance the ability and flexibility of Saudi workers to find and occupy good jobs in the private sector; second, help Saudi workers to become more productive which in turn opens new opportunities for them to get better and highly paid jobs; third, motivate and encourage private firms to employ more Saudis as the cost of employment is partially paid by the Fund, and the workers become more productive due to training and re-training efforts.