Abstract
The Kingdom of Saudi Arabian (KSA) has been experiencing dramatic shift and transformation from the simple migrant lifestyle that was pretty synonymous to the KSA society to the current day contemporary lifestyle. The labor market KSA has been heavily reliant on foreign workforce. The expatriate workforce in KSA constitutes two-thirds of the total Saudi Arabian employee base. According to report that was presented by the Saudi Arabia Monetary Agency (SAMA) in the 2008, the expatriate population in the Saudi Arabian private sector constitute to more than 88 % of the total workforce of KSA. The increasing degree of unemployment among the local Saudi citizens, which currently ranges from 10 % to 30 %, has resulted in the KSA government to launch a new policy of employment localization, alternatively popular as the “Saudization.” The current research aims at understanding the most critical HR challenge that the KSA is currently facing – workforce localization and the several challenges that this issue is posing to the KSA government.
Introduction
The Kingdom of Saudi Arabian (KSA) has been experiencing dramatic shift and transformation from the simple migrant lifestyle that was pretty synonymous to the KSA society to the current day contemporary lifestyle. This transformation demanded massive degree of efforts, proposals and guidelines during the past century to create a society that is adaptive to change and that is open to participating in the process of change.
The labor market KSA has been heavily reliant on foreign workforce. The expatriate workforce in KSA constitutes two-thirds of the total Saudi Arabian employee base. According to report that was presented by the Saudi Arabia Monetary Agency (SAMA) in the 2008, the expatriate population in the Saudi Arabian private sector constitute to more than 88 % of the total workforce of KSA. The increasing degree of unemployment among the local Saudi citizens, which currently ranges from 10 % to 30 %, has resulted in the KSA government to launch a new policy of employment localization, alternatively popular as the “Saudization.”
In addition to the introduction of the above policy, the Saudi government had also made a lot of efforts in terms of expanding the employment opportunities for the citizens of Saudi, as part of the government’s strategic goal of expanding the domestic labor force and creating a robust and strong human capital that would surely help the nation in filling the huge gap of skilled labor in the nation’s existing projects both private and public.
Apart from filling the labor shortage, the Saudization would also bring down the amount of money that is currently moving out of the country. An estimated amount of 20 Billion SAR is fleeting the country with respect to hiring expatriates.
The current research aims at understanding the most critical HR challenge that the KSA is currently facing – workforce localization and the several challenges that this issue is posing to the KSA government.
Aims and Objectives of the Study
The current study aims at understanding the following:
understanding the labor market issues that KSA is currently facing,
the high degree of reliance on foreign workforce by the KSA,
the need for workforce localization,
the efforts that are being put in by the government of KSA towards Saudization,
the plethora of challenges that are posed by this issue and lastly,
The ways in which such challenges can be handled.
Literature Review
A number of global economies today, are working towards transforming themselves into knowledge-based economies that would make them increasingly responsive, swift in action, and also secure in a number of ways. According to a number of relevant studies that were conducted in the past, in order for prospective knowledge-based economies to succeed, there is an intense need for effective utilization as well as also high degree of participation from the human capital of the economy.
Saudization – apparently a new term that has become popular in the recent few years and is essentially being recognized in only a few Middle East economies. A vast amount of literature – both management and economic, categorize such initiatives like Saudization as localization of the workforce in Saudi Arabia.
The academic literature on this particular topic is however very scarce. There are a wide range of definitions used for defining human resource management (HRM) are available. Yet, a rather simple definition to this given by Byars (2006) is that HRM essentially deals with the management of personnel or workforce. According to the minimal literature that is available on Saudization, it is pretty much apparent that there is a massive shortage of documentary research with relevance to this particular issue. As a result of this huge shortage in manpower, there is a heavy dependence on policy documentation.
The little amount of literature pertaining to Saudization that is available readily is largely from a government viewpoint and the same addresses the issues of unemployment in KSA. Also, the same is heavily subjective in nature. The current study however intends to maintain a thoroughly objective and be as logical as possible throughout the whole research process rather than being influenced by any sort of policies or by any policymakers.
With an aim of generating increased amounts of employment opportunities in the country by way of assimilation, i.e. replacing the current expatriate personnel working in KSA with the citizens of Saudi Arabia, the government of KSA had parentally commence a new initiative called ‘Saudization’ in the year 1994 and the same was implemented aggressively as part of the Kingdom’s Sixth Development Plan between the year 1995 and 1999.
This new initiative of the Saudi government primarily focuses on creating quotas that details the number of Saudi nationals that each company of the Saudi Arabian private sector should employ and eventually aims at boosting the employment opportunities for the Saudi nationals in the Kingdom’s private sector.
Saudization as a concept deals with replacing the foreign workers who are currently employed in various companies of Saudi Arabia with the proficient and skilled workforce who are Saudi nationals. The policy was designed through a legislative ruling that was passed in the year 1995, according to which “declared that private firms with over 20 employees should reduce the number of non-Saudis by 5 percent annually, implement penalties for non-compliance including denial of access to certain types of government support, enforce a freeze on applications to hire new workers from abroad and on their renewal of existing permits.”
After the initial introduction of this new initiative in the year 1995, the improvement of the various policies pertaining to Saudization was revised and appraised as part of the Seventh Development Plan between the years 2000 and 2004, wherein the target was set at attaining 25% of private sector employment for Saudi nationals by the year 2004. Nevertheless, the above activities were not reaching the targets that were set and the reasons for the same were a result of a plethora of factors that had a heavy influence on the results of the initiatives that were started. The same are listed below:
“the strong public sector where Saudis tend to seek employment as it offers them a three times higher salary compared to the private,
the high unemployment benefits and
The lower efficiency of the Saudi labor compared to the foreigners.”
The current literature pertaining to Saudization, as already mentioned earlier, does not have a theoretical base as a majority of such literature is very narrow in terms of scope as well as also largely descriptive in nature. In addition, the rate of success in terms of Saudization is rarely acknowledge or identified across various industry segments and economies. There also does not exist any form of conclusive research that investigates the role played by HR practices and the influence of the same on the implementation of the Saudization initiatives. Most of the studies have instead made use of their common knowledge and sensible thinking to ascertain the existence of the role and influence of HR practices on Saudization and its eventual success.
Theoretical Framework
The current study aims at considering the institutional theory as the foundation for this research and the same becomes the theoretical basis of this study. The institutional theory that has been chosen as the theoretical basis for the purpose of the current research essentially focuses upon the forces that influence the behavior of organizations and further offers the optimal framework for an exhaustive analysis on all such forces that have an influence upon Saudization in the various multinational enterprises having their presence in KSA and its eventual success. This would become the starting point for the progress of the current study and all pertinent analysis of this study.
The institutional theory has its roots on the premise that institutions either support or enforce limitations on the scope of both workforce as well as on organizations, which are nothing but human agents, through the creation of legal, moral as well as cultural borders. The case of KSA is such that the plethora of guidelines and governmental legislations currently in place as well also the common expectations from the people predominantly emerge from the cultural beliefs and accepted norms.
The definition that Scott has given to institutional is that “it forces which pressure the companies and shape their internal and external behavior,” while the basis considered by Oliver (1991, 1997) clarifies a logic that support such preferences. These definitions and frameworks are of significant value to the current research as they offer a detailed explanation about the success or failure of the process of workforce localization in Saudi Arabia at large, and specifically Saudization. In case of KSA, the multinational corporations operating in the nation are of specific importance to the current study, particularly in view of the success of workforce localization and Saudization.
Methodology
The proposed methodology for this study is a secondary research, and specifically a comparative analysis would be carried out. All pertinent literature related to Saudization would be studied and details, subsequent to which several other sources would be referred in order to gain a comprehensive understanding of what Saudization would mean, along with referring to material pertaining to the evolution of the Kingdom of Saudi Arabia, its cultural beliefs, workplace culture, governmental reforms that have been undertaken by the government of KSA, the labor market and various of its characteristics and the unemployment trends in the Saudi Arabian market.
After gaining a thorough and comprehensive understanding of the labor market dynamics of KSA as well as about Saudization, research would be furthered such that the nationalization policies of various other GCC member countries would be researched which also includes the United Arab Emirates and Sultanate of Oman.
Towards bringing the study to a reasonable conclusion, the primary motive of ways to curb the unemployment rates through the Saudization initiative would be dealt with, for which several pertinent literature would be referred and a critical analysis of the same would be carried out.
Ethical considerations
It is a widely common notion that secondary research and data collection allows researchers to get rid of the burden of ethical approval and applications for their studies and more often than not, avoidance of ethical considerations completely. However, this is not true because the entire research process constitutes of ethical considerations, regardless of any sort of primary data is being collected or not. For any research study, regardless of the form of data collection – either primary or secondary, the concept of ethical consideration commences right at the design phase of the research study, whose primary objective is communal benefit and this carries on till the time the results of the research study are communication whose transparency and reliability are of utmost significance. This research would definitely take into account all research related ethical guidelines into consideration while conducting the study and no form of pressure or force would be applied to any individual in the process of gathering information and all information that might be collected from individuals would be with complete consent.
Bibliography
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