Private sector to become main source of new jobs for Saudis: Jadwa

Saudi Arabia’s private sector is expected to become the main source of new jobs for nationals in the future, as the kingdom is seen to witness a slowdown in public sector hiring amid labor market reforms, Jadwa Investment said in a new report.

The Saudization ratio in the private sector fell for the first time since labor market reforms began to 20.7 percent last year from 22.1 percent in 2014. Nearly all sectors within the private economy saw a decline in the number of Saudis employed, as the net job additions offered to non-Saudis rose significantly from 68,000 in 2014 to 369,000 over the period.

The highest number of new jobs offered to nationals came from admin and support (40,000), followed by utilities (14,000), science and technology (13,000), and agriculture (5,000).

However, the report highlighted barriers still remain with regards to the employment of Saudis in the private sector.

“We maintain our earlier view that there is a skill mismatch between private sector needs and Saudi job-seekers, which will continue to be a major obstacle in reforming the labor market,” Jadwa Investment said. “Also, the segmentation between Saudis and non-Saudis in wages, work hours, and skills remain a key factor in the private sector’s tendency to hire non-Saudis.”

Saudi Arabia’s unemployment rate fell to 11.5 percent last year from 11.7 percent in 2014, according to government statistics. However, the drop was attributed to a decline in Saudi labor force participation, rather higher job growth.

Public sector net employment of Saudis rose by 93,000 in 2015, compared to 103,000 in 2014.

The government wants the private sector to become the main engine of job creation for Saudis to ease the burden of public wages.  Public sector wages bill reached SAR 450 billion in 2015, just under half of all government spending.

Many private sector firms have complained that implementation of the labor market reforms have hampered growth in sectors that require specific technical expertise and depend heavily on foreign labor. In response to this, restrictions were eased last year.