Oil is no gold mine for jobs in Saudi

The kingdom must find work for almost two million people from now until 2030 to keep up with growth.

More than 80 per cent of Saudi jobs are held by expatriates, many in the oil industry.

JEDDAH // The next 20 years will be challenging for Saudi Arabia as it seeks ways to keep the growing populations of its cities employed.

City planners will need to provide about 100,000 jobs yearly between now and 2030 in Riyadh and Jeddah, the kingdom's two largest cities, to meet the rise in the size of their populations, studies show. Almost one-third of those job creations would be needed in Riyadh. Saudi Arabia, the world's largest oil producer, is hoping the private sector can grow a more diversified economy. Presently, with oil the main source of state revenue, Riyadh and Jeddah find it difficult to provide jobs for Saudi nationals and the the task is becoming more difficult as the two cities are also the main attraction for the non-Saudi job-seekers who constitute the majority of the kingdom's labour force, local economists argue.

"The issue here is not only how many migrants come to the main cities or the amount of jobs being created, but the jobs that are created for Saudis," said John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi. "This is important because the economy is simply not creating enough jobs for Saudis. The economy is creating jobs but for foreigners." Mr Sfakianakis said the number of foreign workers in the kingdom over the past three years has increased to 7.5 million from six million. And Jeddah and Riyadh are the main destinations for job-seekers in the largest economy in the Middle East.

Jeddah's municipality said in a study it made on the city's economy last summer that there is an imbalance in its labour market since 82 per cent of jobs are occupied by expatriates. According to official records made public on Sunday by the Riyadh Development Authority, the population of Riyadh is growing at an annual rate of 4.2 per cent and will exceed eight million by 2030. Jeddah's population is growing at a rate of 2.5 per cent per year, according to a study last year by the Jeddah municipality.

Despite all the effort the Saudi government is making to diversify its income away from oil and to spur growth in the private sector, the state is still providing more jobs and spending more on public-private partnerships to create jobs outside of the government. Mr Sfakianakis, who was among a team of economists that drafted the eighth five-year development plan for the kingdom, said the public sector cannot hire all the people needed and this major task was being transferred to the private sector.

"The public sector is already over-employed and is unproductive. The oil sector will not be able to create the jobs," he said, but the services and tourism sectors will be an important component of a diversified economy. Saudi Arabia has recently begun focusing on developing its religious tourism sector and is opening up the country to non-Muslim travellers, especially to the Madaan Saleh historical site, a Unesco world heritage site.

In a report issued in December on the Saudi 2010 budget, Banque Saudi Fransi said a surge in public sector hiring, especially in 2008, when the number of civil service employees (not including the entire government sector) rose by 8.4 per cent has kept the wage line-item of its budget up. Mohammed Fahd al Qahtani, a professor of economics at the Riyadh-based Institute of Diplomatic Studies, said the high level of expatriates in Jeddah and Riyadh is becoming an obstacle for employing nationals. However, he said, unbalanced development is the cause of the problem in the country.

"For years we were building universities and large health facilities in main cities; this is what caused people from rural areas to move to the big cities and put an extra burden on their poor infrastructures. The infrastructure is improving, but it can't keep up with the rapid population growth." Mr al Qahtani said more jobs should be created outside the major cities to ease the pressure on their infrastructure and services.

The government is responding to the trend by allowing the vertical expansion of cities rather than the pervious horizontal expansion, but building higher residential buildings is not enogh, he said. One suggestion, which the kingdom is already acting on, is building more universities away from the major metro areas. [e-mail]