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HE Adel Fakeih, KSA Minister of Labor


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HE Adel Fakeih, Minister of Labor, KSA, Presentation at the GCF2012

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HE Adel Fakeih, KSA Minister of Labor

  1. 1. Addressing Unemployment in the Kingdom of Saudi Arabia Global Competitiveness Forum Presentation January 2012 Riyadh
  2. 2. Saudi Arabia’s labor force more than doubles in next 20 years 1 Includes currently employed and unemployed 2 Range of 2-3 million female labor market entrants indicate different assumptions on future female labor force participation 3 Overall analyses is based on conservative estimates: the KSA government ’s development plan projects 11.8 million Saudi employees by 2024 SOURCE: McKinsey estimates 2030 total est. national labor force 3 Increased female participation 2 Demographic growth of labor force 2008 Saudi labor force 1 + + =
  3. 3. ‘ New paradigm for employment’ Initiatives of Ministry of Labor SOURCE: Moll Saudis: Qualify nationals for targeted jobs Expats: Implement better controlled expat manage-ment system Efficiency: Create more vibrant, liquid internal labor market … create incentive system and matchmaking support 2 … expand and improve quality of vocational training 1 … offer preferential treatment for nationals 3 … increase overall price for expat labor, focusing on sectors where nationals are well-equipped to compete with expats 4 … introduce a differentiated sponsorship system 5 … create market-based incentive systems to reduce leakage into the internal sector 6 … establish robust and accurate labor market information system 7 … lobby to reduce gap in attractiveness between public and private sectors 8 … encourage mobility and reduce termination rigidity 9 … ensure a social safety net for nationals 10
  4. 4. Three key policy areas to increase Saudi participation in the Kingdom’s labor force <ul><li>MARKET CLEARANCE MECHANISMS </li></ul><ul><ul><li>Create mutually reinforcing system for Nationals </li></ul></ul><ul><ul><ul><li>Career counselling </li></ul></ul></ul><ul><ul><ul><li>Matchmaking support </li></ul></ul></ul><ul><ul><ul><li>Training measures </li></ul></ul></ul><ul><ul><ul><li>Financial benefits </li></ul></ul></ul><ul><ul><li>Rigid market structure </li></ul></ul><ul><ul><ul><li>Limited secondary market for expats </li></ul></ul></ul><ul><ul><ul><li>Termination rigidity </li></ul></ul></ul><ul><li>LABOR SUPPLY </li></ul><ul><ul><li>8 million expatriate workers </li></ul></ul><ul><ul><li>~SR 100 billion remittances into home countries </li></ul></ul><ul><ul><li>Facing stagnating wages </li></ul></ul><ul><ul><li>Declining in productivity </li></ul></ul>Source: Team analysis <ul><li>JOB DEMAND </li></ul><ul><ul><li>Saudi workforce 4 million (2010) </li></ul></ul><ul><ul><li>Unemployment 450k </li></ul></ul><ul><ul><li>Hafiz registration >2 million </li></ul></ul><ul><ul><li>Increase vocation and technical PPPs, and reduce drop-out rates </li></ul></ul><ul><ul><li>Investments to education up, from SR 9.5 billion (2006) to SR 18.5 billion (2009) </li></ul></ul>
  5. 5. Overall reform roadmap Source: Team analysis Job placement centers Introduce public-private partnerships to register and counsel job seekers, address capability gaps, then match to vacant positions Istiqdam Provision of expat and national labor through ‘temporary worker agencies’, providing access to flexible, project based labor Strategic partnerships in vocational training Scaling up the successful model of high-quality 2-year vocational degrees through strategic employer partnerships from currently 10k to 250k students e-Training Simple and easy training modules for job seekers online Virtual Labor Market Automated job search engines, accessible to everybody through the Internet Labor Inspection System reinforcement Collaboration with ILO to make labor inspections in line with international standards Nitaqat Classification system of Saudization performance along sector and company size SME reform 37 specific initiatives identified to stimulate entrepreneurship and growth of small and medium size enterprises Hafiz program Support program for > 2 million job seekers, including job search support, match-making, training, financial benefits
  6. 6. Deep dive: Nitaqat system 1 SOURCE: MOL Vision going forward <ul><ul><li>Account for quality of employment by taking wage bill into account </li></ul></ul><ul><ul><li>Differentiate by qualifications of expats </li></ul></ul><ul><ul><li>Establish tailored system to take into account multiple policy objectives (e.g., ‘point system’) </li></ul></ul>Changing the paradigm From ‘arbitrary’ to ‘fact based’ 1 From ‘one-size-fits-all’ to ‘tailored’ 2 Comparison only to what other companies in the same business have already accomplished 3 From ‘ aspiration ’ to ‘best in class’ Complex analytics to compute average Saudization level for each segment Differentiation by business activity and size of company
  7. 7. Deep dive: Vocational training 2 SOURCE: MOL Vision going forward <ul><ul><li>Massive scale-up - Increase PPP model from currently 10k to more than 200k by 2015 </li></ul></ul><ul><ul><li>Innovative ideas </li></ul></ul><ul><ul><ul><li>Making model attractive to small employers </li></ul></ul></ul><ul><ul><ul><li>Ensure financial sustainability </li></ul></ul></ul><ul><ul><ul><li>Create incentives for training providers to take employment risk </li></ul></ul></ul><ul><ul><li>TVTC transformation - Reform existing institutes in terms of quality of trainers, program design, governance </li></ul></ul>Changing the paradigm From ‘government-led’ to ‘employer-led’ 1 From ‘inefficient’ to ‘targeted’ 2 Bring on board truly globally leading providers and quality assurance 3 From ‘ok’ to ‘great’ Program design directed by employer needs; Increase students employed in their field of study from 20% to 70-80% Reduction of drop-out rates from an average of 40% to 10-20%
  8. 8. Deep dive: Hafiz 3 SOURCE: MOL Vision going forward <ul><ul><li>Integrated and intelligent system of job seeker support </li></ul></ul><ul><ul><ul><li>Registration and job seeker counselling </li></ul></ul></ul><ul><ul><ul><li>Intelligent match-making through virtual labour market </li></ul></ul></ul><ul><ul><ul><li>Training and capability building – online and through public private partnerships </li></ul></ul></ul><ul><ul><ul><li>Financial incentives and benefits </li></ul></ul></ul>Changing the paradigm From ‘in line’ to ‘online 1 From ‘isolated’ to ‘integrated’ 2 Full access and benefits to female job seekers 3 From ‘male only’ to ‘all job seekers’ <ul><ul><li>Customer friendly SMS registration </li></ul></ul><ul><ul><li>All interaction s/submissions online </li></ul></ul>Integration of more than 15 government agencies to coordinate, match data, and calculate eligibility
  9. 9. Finding our stride in three areas 1 <ul><li>Private sector leadership </li></ul><ul><ul><li>Service provision largely through private sector </li></ul></ul><ul><ul><li>Creative incentive mechanisms; performance linked rewards </li></ul></ul><ul><ul><li>Quality through competition </li></ul></ul>2 <ul><li>Integration </li></ul><ul><ul><li>Create a KSA Labor Agency as one-stop-shop under HRDF </li></ul></ul><ul><ul><li>Develop coherent and reinforcing policies </li></ul></ul><ul><ul><li>Integrate end-to-end processes </li></ul></ul>3 <ul><li>Technology </li></ul><ul><ul><li>Integration of more than 15 government agencies </li></ul></ul><ul><ul><li>Innovative access solutions (e.g., SMS registration) </li></ul></ul><ul><ul><li>Leapfrog ahead of mature systems </li></ul></ul>
  10. 10. Thank you
  11. 11. BACKUP
  12. 12. The Kingdom’s labor market today Population of Saudi nationals Saudi labor force <ul><li>Saudi employees in the private sector </li></ul><ul><ul><li>Saudis in high-wage jobs </li></ul></ul><ul><ul><li>Saudis in low-wage jobs </li></ul></ul>Saudi employees in the public sector** Total non-Saudis employed 18.1 million Saudis 4.1 million 1.1 million (4 million non-Saudis) 600,000 500,000 2.5 million 4.3 million Total Saudis employed 3.7 million (unemployment of roughly 10%)* * 60% male participation, 10% female ** public sector is the aggregate estimate of health, education, social services, general admin, and defense – numbers triangulated with CDSI employment figures, SAMA reports, ILO, and expert interviews *** defined as GDP output per worker, constant prices 1999 Number of Saudi households 2008 figures Key parameters <ul><li>Average Saudi compensation </li></ul><ul><ul><li>High-wage jobs </li></ul></ul><ul><ul><li>Low-wage jobs </li></ul></ul><ul><li>SR 5,000 monthly </li></ul><ul><li>SR 8,000 monthly </li></ul><ul><li>SR 3,900 monthly </li></ul>SR 107,000 employee/year*** Earned household income for Saudi nationals SR 5,900 monthly 3.1 million (average household size 5.8) Labor productivity