In 2011 the Kingdom of Saudi Arabia’s Ministry of Labour passed Ministerial Resolution no. (4040) and announced a new so-called Saudisation initiative known as the Nitaqat Programme. This programme introduced a more prescriptive system for encouraging the employment of Saudi locals, particularly women and youths, with set rewards for those who do comply and harsh punitive measures for those who do not.
According to a briefing document drawn up by law firm DLA Piper last June (copy of which available here), the “Nitaqat system creates a market for Saudisation where companies are judged against their peers and challenged to lead the field in a particular sector or to suffer disadvantages as business”.
DLA Piper added: “Whereas a quota system is hard to enforce where no one can comply due to skill shortages in the labour market, a system that creates a “race” to Saudisation will drive the changes that are needed in that labour market over the long run. A real economic incentive has been created to become a market leader in this area.”
It is the punitive measures which are however causing some concern currently, with fears that many companies fall into the highest category of non-compliance – “Red” – where the companies will have, among other things, the “inability to obtain or renew foreign employees’ work permits”.
Saudi Arabia is not the only Gulf State which uses measures such as these to encourage the employment of its nationals. Just last week the Kuwaiti government announced plans to reduce the number of expatriates working in the country by 1 million over ten years, reducing the number by 100,000 each year. This programme appears to be beginning in the public sector where it was announced earlier this month that 30,000 expatriates face the sack.
