Saudi Arabia is a juvenile prosperous country with many social and economic problems. Although it is a wealthy country, the much younger population is jobless. This nation extremely depends on one asset that is oil. Saudi Arabia counts on bringing in labor to meet the demand of economic growth to provide for the development of the country. After identifying the systematic mistake, it came out with the policy of “Saudization”, a way to control the damage with Saudi workers to resolve the unemployment issue.
Saudi Arabia has 25% of the world’s manifested oil reserves and so it has raised the economy by over $140 per barrel for record oil prices. This category in oil accounts for 75% of Saudi’s budget earnings.
Although Saudi Arabia was growing steadily with unbeatable profit and was the only major country to export oil, like the entire world this country also took a toll because of the Covid-19 pandemic. It suffered a severe blow in the year 2020.
As many as thousands of employees strayed off their jobs in various sectors because of the lockdown and also the crack in oil price. The Gross Domestic Product (GDP) shrank by 4.1% in 2020, as in line with the evaluation of the Saudi General Authority of Statistics (GASTAT).
But early 2021 has shown better accomplishment for the Saudi economy. The GDP has now gone from 11.7% in Q1 2021 when compared to 12.6% recorded in Q4 2020 as issued by GASTAT on its latest count for the unemployment rate.
To clarify how it got declined for the unemployment we will look at the reasons behind:
Price of oil doubled:
When they launched the Kingdom Vision 2030 in the year 2017, Saudi Arabia has quickened its steps to make oil its major source of income. Although it didn’t plan as its only source of income in the year 1930, later it escalated its vision to make it its major source. But the economic evolution demanded more years to develop and succumb to its fruits. The kingdom is still a beneficiary and is oil-dependent.
In June 2020, the average oil basket price was USD 37.05. The prices have still then continued to rise and were priced at USD 74.84 in the year July 2021. When the prices became higher, it supported the government to pick up their spending, funding its current project and inaugurating many more.
The government spent a lot to strike the big job market. They generated many jobs in the past months. Some initiatives are The Line, The Saudi Green Initiative, The Middle East Green Initiative, etc. The major advantage of creating this job is also in retaining the old employees. They have cut many layoffs to minimum levels. Saudi treasury makes sure that there is enough cash in banks and has more liquidity, therefore enabling the private sector to get acclaimed for the support and continue growing.
Introducing a new sector for women in the Saudi Army and also other security organizations will bring more labor which can help women to explore alternative career paths and ensure female employment.
A recent survey shows that the unemployment rate of Saudis females risen to 21.2% during the initial stage in 2021 and later it increased to 24.4% in the next quarter.
The Saudi plans of encouraging more women to the job market have had a significant effect on this self-governing segment. The Saudi women are well known for their loyalty and committed work more than the financial side.
Internal Public Investment:
The Saudi Public Investment Fund has pledged to infuse USD 40 billion into a new stake annually until 2025 with a plan called VRP2 (The 2nd Vision Realization Program). It is fascinating to know that the PIF will fund 5.7% annually of the Saudi Gross Domestic Product (GDP), which was evaluated at USD 70 billion by the end of 2020.
The PIF is working in two directions:
- To fulfill the local settled companies’ expansion and growth plans, the government is purchasing stakes and dividends.
- Setting up new ventures
The government has taken measures to bring out the unemployment problems by introducing local companies along with the Ministry of Human Resources and Social development and choose to include many sectors like Custom approval, Cinema Professions, Driving schools, engineering operators, telecommunications, & private schools. Also, many sectors are localized based on the availability of locals and replace the workforce from migrants.
By introducing fees for businesses that hire migrants, officials have restricted the workforce to only Saudis.
It is claimed the origin of the problem can be traced to the action that has to be transformed from an agricultural to an industrial society. It has to be noted that relying on only oil and setting up a divided economy has led to the current situation where locals had less participation in the economy.
But the government had learned a hard lesson and so now they have taken steps to eradicate it and bring locals into the development of the country’s economy.