Saudisation forces closure of 200,000 companies

08 August 2014

Over 200,000 companies in Saudi Arabia closed down last year after failing to meet conditions set by the Nitiqat nationalisation programme.

The nationalisation scheme classifies companies into four categories: red, yellow, green and premium, depending upon company size, sector and the ratio of Saudi workers to foreign workers.

The scheme restricts expansion and hiring for red and yellow companies that don’t meet government quotas while rewarding those in compliance with hiring privileges, including easier visa processing.

“As many as 36,951 companies remain in the red and yellow categories of the Nitaqat, as they failed to employ an adequate number of Saudis,” Saudi business analyst Badr Almotawa, told Arab News.

Specifically, there were more than 17,000 companies classified in the red category of the nationalisation scheme, including 16,498 small-sized firms, 786 medium-sized firms, 29 large companies and one gigantic establishment.

Two Chinese construction companies received waivers from the nationalisation programme’s requirements according to a conversation published by whistleblowing site WikiLeaks claimed to be between US ambassador James C.Oberwetter and Saudi executives.

The Saudisation programme was announced in 2011 to reduce unemployment among nationals, which stood at 12% that year, according to IMF estimates. 

By last year, unemployment had dropped only 0.5% to 11.5%.

The Kingdom’s high unemployment rate is blamed upon a mismatch between the skills of young Saudis and the needs of private sector employers. 

Nationals are reluctant to work in the private sector for lower salaries, longer working hours and less attractive benefits compared to the public sector. 

By Danial Naveed
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