If you are an expat in Saudi Arabia, you may have heard about the term “Saudization”. In simple words, it refers to a scheme imposed by the KSA authorities to increase and secure employment possibilities for citizens. This might be considered bad news for foreigners, as they can no longer opt to fill certain positions. However, it is essential to know several factors about this policy in order to understand it.
In this article, you will learn the concept of Saudization or Nitaqat. We will analyze how the Saudi government aims to make the country a better place for its nationals and how these decisions will affect working expatriates.
- What is Saudization?
- How is the government helping locals to upgrade their skills?
- Is this change impacting all industries? If not, what are the most important industries and why?
- So, is it all bad news for expats in Saudi Arabia?
1. What is Saudization?
Nitaqat, also known as the Saudi nationalization scheme, was first introduced in 2011 by the Ministry of Labor and Social Development of the KSA. It establishes that businesses must hire a determined percentage of Saudi nationals to preserve the number of employment opportunities for locals.
It is a fact that the Saudization campaign has been active since 1985. Nonetheless, in recent years, the government has implemented new regulations that make certain roles only available for Saudi citizens. These individuals make up at least 63% of the Kingdom’s population.
The primary motivation for the local authorities to establish this policy is to reduce unemployment among nationals. The campaign was originally promoted under the slogan “Let’s Put the Saudi in Saudization”.
According to the Investment Minister, businesses that move their headquarters to the Kingdom will not be subject to this policy. However, local enterprises that do not comply with these regulations are at risk of not being awarded government contracts. At the same time, many of these companies have openly complained about Saudization, discovering new ways to avoid it.
1.1 How does Saudization affect expats in the KSA?
The Expat Dependent Fee has been imposed by the Saudi legislation. Since 2017, employed expats are required to pay an extra fee. This sum started as 100 SAR each month for you and each dependent you had living in the kingdom. However, there was a fixed yearly increase of this fee until 2020, reaching 400 SAR per month.
Unfortunately, this had a negative impact on foreign workers in the country. In 2018, more than eight hundred thousand expatriates left the KSA. This revealed the massive social repercussions of these decisions, reducing the expat population from 8.5 million to 7.7 million over a two-year period.
Nevertheless, the numbers are looking better given the positive future projections for the country with Vision 2030, in addition to the several incentives the country has been offering to skilled foreign workers. The most recent statistics, from 2021, indicate that the current foreign population in Saudi Arabia stands at 13.49 million.
2. How is the government helping locals to upgrade their skills?
There is a total of 72 roles that only Saudi citizens can occupy. This extensive list consists, in great part, of HR jobs, sales specialists and jobs in the financial area. However, most of them are junior positions. Due to this shortage of highly-skilled talent, the Saudi government must look for ways to invest in upskilling local professionals.
This situation is occurring mostly in the most technical positions. In other words, there is a lack of engineers, architects, healthcare experts and IT specialists. To cover this deficit, the KSA implemented new eligibility requirements to onboard young Saudi citizens in the government’s billionaire scholarship program, offering them opportunities to pursue college degrees in prestigious universities abroad.
As an expatriate, you may have seen yourself in a similar situation: an employer approaches you offering a role that you suspect may be exclusive for a Saudi citizen. In this case, the best thing to do is to ask them if they can process an Iqama (work visa) for a non-citizen.
3. Is this change impacting all industries? If not, what are the most important industries and why?
4 out of 12 activities in the retailing and wholesale sectors have now been nationalized by the government. These 4 activities include automotive and motorcycle dealerships, clothing boutiques for men, women, and children, furniture stores for offices and homes, and stores for domestic appliances.
4. So, is it all bad news for expats in Saudi Arabia?
Although Saudization has decreased the number of roles available to expats, there are still many opportunities they can access with an Iqama. Many businesses that offer professional services (in addition to private family groups and certain government positions) have recognized the clear deficit of local skilled professionals, agreeing to accept foreign workers through the issuance of a work permit.
Because the Kingdom of Saudi Arabia is currently aiming to improve all sectors of its economy with the mega strategy Vision 2030, the country can expect to keep generating employment for both nationals and expats. Despite the fact that Saudization is designed to lower the dependence on foreign labor, there will be more opportunities coming as the nation’s economic development continues.
4.1 Saudi Company Formation makes your life easier as a foreigner in the KSA
In a country where the laws are constantly subject to modifications to create room for growth and progress, it can be challenging to keep up with these changes. This is especially true for foreigners, who may not be as familiar with the country’s regulations as a Saudi national can be.
Relying on an experienced partner to put you on the right path is an advantage you will not want to miss. On Saudi Company Formation, we offer you specialized solutions to guide you through any legal proceedings you may need to carry out in the nation. These are:
At the same time, we provide foreign and local investors with a set of tools and resources to thrive in the Saudi market. With our highly professional team, you will always receive tailored assistance with your:
Would you like to contact us to receive more information about Saudization and its implications for expats? Reach out to our team by making a phone call at +971 43 316 688. Email us all your concerns via email at contact@saudicompanyformation.com and our professionals will be glad to assist you.
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