Saudi Arabia Enlists Boeing in Push to Create New Jobs

Yazid al-Shammari has ambitions to land a job at Saudi Basic Industries Corp. (SABIC) when he finishes a two-year vocational training course. Asked what he expects as a starting salary, he names a figure that’s many times what foreign workers doing similar jobs earn now.

“I want to earn 10,000 riyals ($2,700) a month with my diploma,” the 21-year-old said, as he attended lessons with a crowd of fellow students at the Higher Institute for Plastics Fabrications in Riyadh. “The training will help me get a job where I want.”

Al-Shammari and his friends represent a challenge for King Abdullah. The 89-year-old monarch unveiled a $130 billion stimulus plan last year to create jobs for Saudis, and tightened rules on the expatriate workers most businesses depend on. The aim is to ensure that the world’s biggest oil exporter, where about a quarter of citizens aged between 20 and 30 don’t have jobs, remains unscathed by the political unrest that has swept other Arab countries with high youth unemployment.

Boeing Co. and General Motors Co. (GM) are joining a government plan to train young Saudis. The biggest obstacle is that foreign workers are cheaper and in abundant supply: there are more than 8 million in the kingdom. The share of Saudi citizens in the private workforce ranges between 2 and 10 percent, according to government figures.

Wage Gap

To shift the balance, the government imposed an annual fee of 2,400 riyals per expat employee on companies whose workforce is more than half foreign. That should encourage Saudi companies to end the “culture of importing cheap labor,” Deputy Labor Minister Moufarrej al-Haqbani said last month.

Still, the gap between Saudi pay expectations and market wages for foreigners is so large that many employers may prefer to pay the fee rather than hire locally.

“Most big companies will treat it like a tax,” said James Reeve, an economist at Riyadh-based Samba Financial Group. (SAMBA) “They would just say, this is the price you pay for working in Saudi Arabia. In that sense it isn’t really an incentive to hire.”

Higher salaries available for government work and unemployment benefits of 2,000 riyals a month are also disincentives for Saudis to “switch to private sector employment,” he said.

Local businessmen have challenged the fees for foreign employees, saying it will drive up costs. After its introduction, the Saudi stock benchmark dropped to a 10-month low. It’s up about 7 percent this year, less than half the gain on the main Dubai index.

Dropout Rate

Khaled al-Ghefaili, executive director of the institute where al-Shammari is studying, says the government expects salaries for his graduates to be at least 4,000 riyals, sometimes rising to 6,000 riyals. That’s a problem in an industry which “unfortunately is based on expatriates,” he said, citing a typical worker with 15 years of experience earning 800 riyals a month.

The institute offers English and engineering classes and a course on work ethics. It counters non-attenders by making them pay for make-up classes, and monitors the performance of graduates by visiting their employers after six months. The drop-out rate “is maybe 45 percent,” falling to 25 percent among those who complete the first semester, al-Ghefaili said.

Ali al-Ghafis, head of the Technical and Vocational Training Corporation, says his program includes special colleges for women, with 19 already open and a target of 40 in the next three years. He says popular programs at the women’s institutes include beauty, fashion design, computer skills and accounting.

Industrial Response

“We will reduce the number of expat workers and substitute them with Saudis,” he said. “The response from the industrial field is very high.”

Boeing Co. (BA) plans to build a 1,000-person aviation training facility., “We project exponential growth in demand for airline pilots and maintenance technicians,” Ahmed Jazzar, president of Boeing Saudi Arabia, said in response to e-mailed questions. General Motors Co. is participating in a similar program with a capacity of 200.

Saudi Arabian Oil Co., or Aramco, is a sponsor of the 2,500 capacity National Industrial Training Institute in Al-Ahsa. (AADC) Jabal Omar Development Co. (JOMAR), a property company whose shares are up more than 50 percent this year, will help train 8,000 Saudis in hospitality and tourism, according to the training corporation.

‘Deeper Weakness’

Fifteen Saudis finished a training program run by Nestle SA (NESN), the world’s largest food supplier, the Vevey, Switzerland- based company said at a news conference yesterday in Riyadh. The program trains Saudis “with the objective to offer career opportunities,” the company said.

Those numbers compare with a Saudi population of 28.4 million that is growing at 2.9 percent a year. About 70 percent are aged 30 or below. While the $600 billion economy is forecast to expand 5.1 percent this year, growth based on rising oil prices doesn’t always translate into jobs for Saudis.

To create more of them, the government will have to address “a much deeper weakness in the basic skills that underlie technical education, said Crispin Hawes, an analyst at the New York-based Eurasia Group, which monitors political risk. He recalls Saudi pledges to expand the native workforce dating back to the mid-1980s.

‘‘They’re essentially trying to rush to catch up to where they should have been,’’ Hawes said. ‘‘Abdullah has gotten much more serious about addressing employment problems, but it can’t be done overnight.’’

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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