Originally Published 2013-07-08 08:46:50 Published on Jul 08, 2013
Saudi Arabia's Nitaqat system has achieved some early success. It has been able to generate jobs for the Saudi population. But its long term success is open to question. It remains to be seen whether 'Saudization' will be successfully implemented long term through quotas and threats of punishment.
Nitaqat Law: Will it solve Saudi Arabia's unemployment problems?
The Kingdom of Saudi Arabia has been facing the challenge of growing unemployment for some time1 . Its economy is dependant, to a large extent,on the presence of expatriates 2. These expatriates work for various establishments in the private and public sector. The high rate of unemployment among Saudi nationals has resulted in feelings of resentment in the Kingdom and that has made it necessary for the Saudi government to take some steps. The phenomenon of unemployment in Saudi Arabia is not a new one. This problem has plagued the country for quite some time and measures taken by the government to handle this situation have met with little success. It was in 1994 that the government first applied a system called 'The Saudization' to reduce unemployment rate by localization of jobs3 . It was done so by the appointment of around 30% of Saudi citizens in the total labour force4 . This system was unable to produce the desired results for the government. Therefore, the Saudi government has taken other steps to reduce the rate of unemployment among Saudi nationals. As one of the steps, a new system called 'Nitaqat' was introduced by the Saudi Ministry of Labour in June, 2011. This system will impact not just the Indian nationals working in Saudi Arabia but also the expatriates of many other countries. This law has raised concerns among Indians living in Saudi Arabia about their future and the future of their families. Hany Kenawi, in his article, 'Nitaqat, the New Localization System for Jobs in the Kingdom of Saudi Arabia', explains "the name Nitaqat means Ranges in Arabic, which actually represents the main idea of the new system as the main obstacles faced the previous system that it was not practical to apply one fixed percentage, regardless of the particular circumstances of each activity, such as the availability of the qualified manpower for certain activities." 5 He further explains the mechanics of this system, "Nitaqat divides the labour market into 41 activities and each activity into 5 sizes (Giant, Large, Medium, Small and Very Small) to have in total 205 categories. The performance of the establishment in the localization of the jobs is to be evaluated compared with the similar establishment's activity and size in order to have fair standard for the evaluation. After the evaluation, Nitaqat classifies these establishments into ranges (Excellent, Green, Yellow and Red) based on the ratio of the citizens working in the establishment. The Excellent and Green range, which are the ranges with the highest localization ratios, will be rewarded, while the system deals firmly with the Red range, which is the range with the lowest localization ratio and gives more time for the Yellow range to adjust their positions, being the medium range" 6 . The new system is practical and organised. It also takes into consideration the existing employment patterns and has formulated the quotas accordingly. There are also many perks offered to establishments that keep high localisation ratios. By offering benefits in the form of convenience for the Excellent and Green ranges for issuance of work visas, recruiting employees from the Red and Yellow ranges without the permission of their employers and benefiting from their experience, the Saudi government has provided these establishments with good reasons to cooperate with the government and keep their localization ratios high 7. In contrast, the Red and Yellow ranges are forced to accelerate their process of localization of jobs otherwise they are denied new work visas for their non Saudi employees and also risk losing their existing non Saudi workers to the Excellent and Green ranges 8. Therefore, the 'Nitaqat' law aims to gradually replace the existing expatriate workers with Saudi workers by processes involving quotas and threats of punishment and also, tackles the issue of rising unemployment among Saudi nationals. Impact on Indian workers The implementation of the Nitaqat law in Saudi Arabia has had a significant impact on Indians working there. As a result, thousands of Indians are set to return to India. At present, 75,000 Indians are set to return back home, but this number could still go up 9. Indian External Affairs Minister Salman Khurshid, who was recently on an official visit to Saudi Arabia, has said that the State Governments have been "forewarned" so that this situation does not become "unmanageable"10 . The deadline for expatriates who are in Saudi Arabia without valid paperwork is July 3, 2013 11. Once this grace period ends, all expatriates who are present in Saudi Arabia without valid paperwork will be heavily penalised and even jailed 12 . Mr Khurshid said "the issue is that we have three months of grace period during which whatever needs to be done has to be done and the numbers are very large." 13 There is also the issue of rehabilitation of people that will come back. The Indian government is concerned with the pace of the Saudi authorities who are issuing 500 exit permits per day14 . With the large number of Indian workers present there and the deadline getting nearer, this becomes a cause of concern for the Indian government. According to official reports, out of the total 56,734 processed applications, 21, 331 are of Indians belonging to Uttar Pradesh and 3,610 are of Indians belonging to Kerala15 . Extensive rehabilitation plans have been discussed by the Non-resident Keralites' Affairs (Norka) and different State Government Departments will coordinate to implement these plans 16. The implementation and deadline of this law has met with criticism from many political parties in India. They demanded that Saudi Arabia halt its implementation. Addressing India's concerns over this law, Saudi Arabia's Foreign Minister Prince Saud Al-Faisal has said that steps are being taken in "best interest of Indian workers" as the ones without official paperwork would always "remain at the mercy of those who brought them here"17 . With this, only those who do not have appropriate paperwork will be affected. 'Emergency certificates' are being issued to Indians who have registered with the Indian Embassy in Riyadh and the Consulate in Jeddah to be sent back to India 18. As per Saudi Arabia, the Nitaqat law will encourage only legally employed foreign nationals to work in the country. The Nitaqat law has highlighted concerns over the future of Indians working in Saudi Arabia. It has become an issue of great significance in terms of its criticality. Assessing this situation, A.R. Ghanashyam, Joint Secretary in charge of Saudi Arabia, recently said, "There is nothing to be paranoid about. Definitely, we should be concerned but not paranoid."19 Mr A.R. Ghanashyam also noted that a similar crackdown was implemented by the UAE on illegal foreign workers in 2007 which had resulted in over 50,000 Indians returning home. Implications for Saudi Arabia The Nitaqat system has achieved some early success as it has been able to generate jobs for the Saudi population. But its long term success is open to question. It remains to be seen whether 'Saudization' will be successfully implemented long term through quotas and threats of punishment. There are other issues that will affect the implementation of this law. One such issue is the high cost of Saudi manpower as compared to foreign nationals. Private sector makes significant profit from cheap labour provided by Non Saudi workers. There are also some social and cultural perceptions that make Saudis reluctant to pursue certain kinds of jobs like in restaurants, hotels, barber-shops and other direct services to customers. Other issues include control and discipline exerted over expatriates by their employers which cannot be achieved with Saudi workers, the reluctance of local populations to integrate into multi-cultural work environments, issues of mobility of Saudi workers, etc20. It would be interesting to see how the above mentioned issues are incorporated by the Saudi government with the implementation of the Nitaqat law and the impact it has on its long term success. Lastly, it is important to note a possible conflict this law might cause between twin policies of liberalisation and Saudization. This law might be seen as aggressive and negative by foreign companies that prefer to operate in a more open labour market.21 It is too early to gauge the full impact of this law on the economy and liberalisation policies of Saudi Arabia, but it is safe to say that it has had a profound impact on the lives of many Indian nationals in Saudi and that the Government of India has its work cut out with rehabilitation concerns of the Indian nationals set to return home. (The writer is a Research Intern at Observer Research Foundation, Delhi) 1.     The unemployment rate in Saudi Arabia among the Saudi citizens is estimated to be around 10.7% (2012). Saudi Arabia Unemployment Rate, Index mundi, http://www.indexmundi.com/saudi_arabia/unemployment_rate.html (accessed 30 May 2013). 2.    Hany Kenawi, Nitaqat, the New Localization System for Jobs in the Kingdom of Saudi Arabia, Lex Arabiae,July 2011, http://lexarabiae.meyer-reumann.com/issues/2011-2/vol-xv-%E2%80%93-issue-3-july-2011-%E2%80%93-articles/nitaqat-the-new-localization-system-for-jobs-in-the-kingdom-of-saudi-arabia/ (accessed 30 May 2013). 3.    Ibid 4.    Ibid 5.    Ibid 6.    Ibid 7.    Ibid 8.    Ibid 9.    Saudi's 'Nitaqat' law: 75,000 Indians set to return; numbers could go up, NDTV, May 24, 2013, http://www.ndtv.com/article/india/saudi-s-nitaqat-law-75-000-indians-set-to-return-numbers-could-go-up-371112, (accessed 30 May 2013). 10.    Ibid 11.    Ibid 12.    Ibid 13.    Ibid 14.    Ibid 15.    Ibid 16.    Arun Jayan, Nitaqat: Government set to launch rehabilitation scheme, The New Indian Express, May 26, 2013, http://newindianexpress.com/states/kerala/Nitaqat-Government-set-to-launch-rehabilitation-scheme/2013/05/26/article1606409.ece (accessed 30 May 2013). 17.    Saudi's Nitaqat law: Procedures implemented in Indian workers' interest, says Finance Minister Al-Faisal, NDTV, May 25, 2013, http://www.ndtv.com/article/india/saudi-s-nitaqat-law-procedures-implemented-in-indian-workers-interest-says-finance-minister-al-faisa-371314 (accessed 30 May 2013). 18.    Ibid 19.    Elizabeth Roche, India concerned over Nitaqat policy in Saudi Arabia: ministry, Live Mint & the Wall Street Journal, April 04, 2013, 20.    Ibid 21.    Ibid REFERENCES http://www.livemint.com/."India concerned over Nitaqat policy in Saudi Arabia: ministry." 2013. http://www.livemint.com/Politics/97NhC6kTe26dtPYAvolvUN/India-concerned-over-Nitaqat-policy-in-Saudi-Arabia--minis.html (accessed 30 May 2013). 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