Saudi Ara­bia job cre­ation dries up

The Pak Banker - - 6BUSINESS -

Saudi Ara­bia's plans for eco­nomic re­form fore­see wind­ing down ' jobs for life' in the state bu­reau­cracy and re­plac­ing them with new ca­reers in a dy­namic pri­vate sec­tor.

That's the the­ory, at least. But in the short term, there is a prob­lem: 2016 is set to be an abysmal year for job cre­ation. Pub­lic spend­ing is be­ing slashed and growth fore­casts for oil and non-oil por­tions of the pri­vate sec­tor are gloomy. A tough mar­ket awaits first­time job seek­ers in the world's largest oil ex­porter, where ' em­ploy­ment week' fairs are cur­rently help­ing to pitch some 400,000 grad­u­ates to prospec­tive em­ploy­ers.

For Nez­zar, 26, who will fin­ish a mas­ter's pro­gramme in com­puter sys­tems at a US univer­sity in May, the scale of the prob­lem be­came ap­par­ent when he re­ceived a phone call from home in Jed­dah. There were no jobs this year, his father told him, of­fer­ing the ad­vice: ' Don't come home'.

Saudi net em­ploy­ment rose by only 49,000 in 2015, its slow­est an­nual in­crease since records be­gan in 1999. That is far short of the 226,000 jobs that the econ­omy must cre­ate each year to ac­com­mo­date new en­trants to the labour mar­ket, ac­cord­ing to a Fe­bru­ary re­port by Riyadh-based Jadwa In­vest­ments. The num­ber of workingage Saudis out­side the labour force also rose by 85,000, most of them young peo­ple, said the Jadwa re­port. That was nearly dou­ble the num­ber en­ter­ing the labour force, rep­re­sent­ing the first drop in the par­tic­i­pa­tion rate since 2009.

"Govern­ment hir­ing has slowed down due to aus­ter­ity mea­sures, while at the same time the pri­vate sec­tor has started to stag­nate," said St­ef­fen Her­tog, an aca­demic at the Lon­don School of Eco­nom­ics.

"There's just a short­age of jobs," he said. In a coun­try where na­tion­als gen­er­ally count on steady govern­ment pay­checks to sup­port them, Saudi cit­i­zens have so far been largely shel­tered from the ef­fects of pro­longed low oil prices.

Even as the oil slump pushed the king­dom into a SR367 bil­lion ($97.89 bil­lion) deficit last year, hefty pub­lic spend­ing kept govern­ment salaries flow­ing and propped up the non-oil pri­vate sec­tor, which de­pends heav­ily on state sub­si­dies and con­tracts. Con­sumer de­mand barely budged.

But as the econ­omy has slowed and the govern­ment has be­gun tight­en­ing its purse strings, signs of strain in the labour mar­ket have started to show.

The govern­ment hired 10,000 fewer Saudis in 2015 than it did the year be­fore, adding only 93,000 new em­ploy­ees to the pub­lic pay­roll com­pared to 103,000 in 2014.

Mean­while, the num­ber of Saudis em­ployed in the pri­vate sec­tor in 2015 fell for the first time since the Ni­taqat labour mar­ket re­forms be­gan in 2011, in­tro­duc­ing tar­geted hir­ing quo­tas for pri­vate com­pa­nies to make their staffs more Saudi.

Even as the non-oil econ­omy con­tin­ued to grow over­all, prompt­ing com­pa­nies to add some 369,000 non-Saudis to their pay­rolls in 2015, ex­pan­sion slowed to its low­est rate since 2009.

They hired 43,000 fewer Saudis than they did the year prior. Hir­ing prospects are likely to shrink even fur­ther in 2016, as pro­posed govern­ment spend­ing cuts to­talling some SR135 bil­lion ($36.01 bil­lion) take their toll. The govern­ment's 2016 bud­get in­cluded ex­plicit pledges to rein in state spend­ing on 're­cur­ring ex­pen­di­tures' like salaries and ben­e­fits, which means cur­tailed pub­lic sec­tor hir­ing. Eco­nomic growth is widely ex­pected to slow, with the IMF pro­ject­ing GDP growth of 1.2 per cent, only slightly lower than the cen­tral bank's own ex­pec­ta­tions of around two per cent.

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