April 3 (Bloomberg) -- When the three Saudi men met each other in school 11 years ago, they dreamed that by the time they had reached their mid-20s, each would have a well-paid job, a house, a new car and maybe a wife.
Today, all three still live at home, get pocket money from their parents and are jobless in Riyadh, capital of the world’s largest crude oil exporter.
Now in their mid-20s, the three men say they feel resentment when they see the shops along major highways packed with the latest electronics, furniture and designer clothes, the showrooms displaying shiny sedans and the restaurants offering delicacies prepared by French and Italian chefs.
Most of the facilities are run by expatriates who return home often able to afford a house, car and a wife -- apparently benefiting more from the kingdom’s wealth than some of the locals do, Bloomberg Markets magazine reports in its May issue.
“Wherever I go, companies say they want someone with experience, but I don’t have it,” Hussein al-Ghamdi, 25, says. “So they bring in foreigners with experience and deny us the chance to get a start and prove ourselves. That upsets me very much.”
Under-30s such as al-Ghamdi and his friends make up 66 percent of the Saudi population -- a group that also has the highest rate of unemployment. About 27 percent of the Saudi labor force aged 20 to 29 is unemployed, according to data from the Central Department of Statistics and Information.
That’s almost on a par with Spain, where 36.4 percent of 16- to 29-year-olds were unemployed in the fourth quarter of 2011, the highest rate in the European Union.
For years, the government has been trying to address the issue with its “Saudization” quota system that requires companies to employ Saudis for at least 30 percent of their positions. So far, only a third of the target has been achieved, according to the Labor Ministry.
In a country of 28 million people, about 8.6 million are foreigners, who make up most of the labor force. Just 4.3 million of the almost 19 million Saudis were in the workforce in 2009, according to the most-recent statistics agency data.
Saudi unemployment has acquired a new urgency following popular uprisings that have toppled regimes in Tunisia, Egypt, Libya and Yemen and have shaken Syria and Bahrain, which is linked to Saudi Arabia by a causeway. In all of those countries, high levels of idle young people helped spark the turmoil.
“Youth unemployment is a time bomb for Saudi Arabia,” says Jean-Francois Seznec, a professor at Georgetown University’s Center for Contemporary Arab Studies in Washington.
King Abdullah responded by announcing in 2011 a $130 billion plan to create jobs, build subsidized housing and support the religious establishment that had backed the government’s ban on domestic protests.
Labor Minister Adel Faqih in May 2011 announced a program to reduce unemployment called Nitaqat, or Ranges, that for the first time rewards companies that employ a higher percentage of Saudis.
“What they’ve done to slow any reaction to the Arab Spring is to throw money at people, with some success,” Seznec says.
Persistent unemployment could have broad repercussions. Though there are some informal efforts to create activities ranging from impromptu comedy clubs to a girls’ basketball league, Saudi youth have few sanctioned outlets where they can have fun, exacerbating frustrations over unemployment.
“You are talking about the risk of this frustration going into political activism,” says David Butter, regional director for the Middle East at the London-based Economist Intelligence Unit.
If political unrest got out of hand, it could threaten the oil industry and its exports, Butter says. The kingdom’s proven oil reserves of 263 billion barrels are the world’s largest.
In February, the country produced 9.68 million barrels a day -- about a third of the total for the Organization of Petroleum Exporting Countries, according to data compiled by Bloomberg.
Any instability in Saudi Arabia would also create ripples throughout the Middle East. As the birthplace of Islam and home to its two holiest sites, in Mecca and Medina, the country wields immense sway in the Muslim and Arab world and maintains influence in countries such as Lebanon and Bahrain and in the Israeli-Palestinian conflict.
Saudi Arabia is unlikely to have its own Arab Spring anytime soon, social activist Abdullah Hamidaddin says. For one thing, he says, there isn’t a critical mass of people in economic pain, because strong family networks ensure financial support for the unemployed.
And the Saudi government’s largesse means that people have an interest in maintaining the status quo, he says. For instance, the government is now paying 2,000 riyals ($530) a month to over one million unemployed Saudis for a year while helping to train them to find work.
“People here feel that the government is a cash cow that should be preserved,” Hamidaddin says.
Even if there were dissent, political parties are banned, so the country lacks networks to mobilize people. An absolute monarchy, Saudi Arabia is the least democratic country in the Middle East, according to the Economist Intelligence Unit’s 2011 Democracy Index.
The country’s rulers are aging -- King Abdullah, a son of the country’s founder, is 88 this year, while Crown Prince Nayef is 78 -- making succession a potentially contentious issue. There’s no obvious candidate to rule the country among the founder’s grandsons.
The Allegiance Commission, made up of 35 representatives of founder Abdul-Aziz’s descendants, is charged with selecting a king or crown prince if either dies or becomes incapacitated.
It’s in the ruling family’s interest to avoid conflicts over the transfer of power, says Theodore Karasik, director of research at the Dubai-based Institute for Near East and Gulf Military Analysis.
“Almost everybody recognizes that keeping a smooth succession process guarantees stability,” he says.
The Al Saud family remains in control with the blessing of religious leaders. The kingdom follows an ascetic strand of Islam that emerged in the 1700s based on the doctrines of cleric Muhammad bin Abdul-Wahhab.
Key religious positions are still held by Abdul-Wahhab’s descendants, allowing them to influence policy. Because of that pact, the ruling family finds itself constantly playing a balancing act in its quest for modernity.
At times, the balance can tip into the incongruous: Until recently, for instance, laws forbidding women to work in mixed-gender malls meant that they had to undergo the embarrassment of buying lingerie and makeup from men.
Seeing salesmen stretching panties to show how widely they can fit, arguing with women about bra sizes, suggesting flimsy nightgowns and thongs or smearing hairy wrists with eye shadow was jarring amid the kingdom’s strict gender segregation rules, which require women to cover themselves in public with black cloaks called abayas.
In June, King Abdullah decreed that salesmen should be removed from stores that sell “women’s necessities,” opening up employment opportunities for women that were unthinkable 10 years ago.
‘This Job Is Fantastic’
“This job is fantastic,” says Lulu al-Mihdar, 23, who was recently hired by Nayomi lingerie store at a mall in Jeddah. Across from Nayomi, six female vendors at cosmetics store Mikyajy huddle together, cutting each other off in midsentence in their eagerness to talk about their new careers.
A “Families Only” sign on the window indicates men unaccompanied by women are banned from the premises.
“During training in Dubai, my trainer used to say I should raise my voice, but I was too shy,” Laila Sultan, 29, says. “Now, people across the hall can hear it.”
With an unemployment rate of 55 percent for women aged 20 to 29, it’s not surprising that Sultan and her friends jump at the few chances offered to them. Keeping their male cohorts happily employed is trickier.
The under-30 generation faces a big gap between expectations and job prospects, says Ibrahim Warde, adjunct professor of international business at the Fletcher School of Law and Diplomacy at Tufts University.
“Young Saudis feel that they are not getting their rightful share of the national wealth,” Warde says. “They have been relatively pampered by a generous welfare system and will not take just any job.”
At the same time, he says, “Their anger is stoked by the fact that they are surrounded by wealth and all its manifestations.”
Some 90 percent of the private-sector workforce in Saudi Arabia is foreign. It’s rare to find a laborer, waiter or construction worker who’s Saudi: They tend to prefer desk-bound managerial positions.
Mohammed al-Mushayqeh, one of the three former schoolmates in Riyadh, quit his job as an administrative assistant in a private company two years ago because his career wasn’t moving forward.
With only a high school degree, al-Mushayqeh, 25, was offered two positions at a government-organized job fair: cashier in a store or shelf stocker in a supermarket.
“They were silly offers,” he says. “I want something prestigious.”
Despite the embarrassment of being financially dependent on his parents, he’s holding out for a better offer.
So is Abdul-Rahman Abdullah, 27, who quit his job as a supervisor at a telecommunications company three years ago because he couldn’t put up with the 10-hour shifts.
“There wasn’t any time left to do anything else,” he says. “Foreigners come here without their families just to work and make money. But Saudis have family obligations.”
Abdullah, who has a high school diploma, says he has been offered “bad” jobs: as a waiter, security guard and cashier.
“In my previous job, I used to sit at a desk in my own office,” he says. “I want the same standard of work.”
The Labor Ministry is trying to make hiring Saudis, even those without skills, more attractive to employers. Under the new Nitaqat Saudization program, companies will get a rating based on whether they meet their quotas for hiring local workers.
Rewards for Complying
Those rated “green,” or excellent, will be able to benefit from various ministry services, such as the transfer of visas and issuance of new visas. Those rated “red” won’t. While previous programs imposed a blanket quota of 30 percent Saudis on all companies, Nitaqat bases the quotas on the type of work, the number of job seekers and the size of the business.
“Nitaqat is an improvement on previous efforts,” says Paul Gamble, head of research at Riyadh-based Jadwa Investment. “It’s unreasonable to assume the same quota for construction and financial services, as was the case previously.”
Labor Ministry officials consulted business executives before announcing the new quota system. In the past, “people that did reach the quota didn’t get anything in return,” says Lama al-Sulaiman, vice chairman of the board of directors at the Jeddah Chamber of Commerce and Industry.
Now, she says, the government is offering executives a deal: “Employ Saudis and see how much better your life is going to be with all government agencies.”
Paying for Training
To make employing locals more palatable, the government is also helping pay for companies to train Saudis for new jobs --in some cases positions they never dreamed of taking.
Said Al-Shaikh, senior vice president and group chief economist at the National Commercial Bank, says there’s a good chance that the government’s efforts to fight unemployment will work because they’re comprehensive.
“However, it will take some time before this issue is resolved,” adds Al-Shaikh, who is a member of the Consultative Council, which is appointed by the king and functions as a parliament.
He identified three areas with the potential to attract thousands of Saudis: construction, wholesale and retail, and manufacturing. Foreign nationals make up 93 percent of the 2.6 million people in construction, 85 percent of the 1.5 million people in wholesale and retail, and 80 percent of the 650,000 people in manufacturing, Al-Shaikh says.
Before joining Riyadh Polytechnic Institute last year, Abdul-Karim al-Saeed, 24, thought his only job option was being boss at a private company. Then he learned welding at the institute and discovered he enjoyed it.
Abdallah Obeikan, chief executive officer of Obeikan Investment Group, a maker of packaging and educational products, set up RPI in 2009 in partnership with the government’s Technical and Vocational Training Corp., which provides infrastructure and accreditation.
Another government institution, the Human Resources Development Fund, financed by fees companies pay to bring in foreign laborers, pays 75 percent of the training costs and salaries. OIG covers the remaining 15 million riyals a year in costs.
The two-year program targets C-average students, who start with intensive classes in English and communication skills. Eight months into the program, they choose from among eight specializations needed at OIG’s 18 factories, such as printing and packaging, sales and finance. The trainees are considered company staff.
Moayyed Hisham was hired in October 2010 although he had no qualifications and no clue what kind of work he’d like to do. Obeikan pays him 1,500 riyals a month, plus benefits, and enrolled him in RPI, where he’s now studying electromechanics, which could lead to a job as a machine operator or a quality or maintenance technician.
“I started with zero English and nothing in terms of skills,” says Hisham, a slim, 20-year-old man dressed in the institute’s navy-blue uniform. “Today, I feel I have a future.”
Hisham and al-Saeed both say they’ve gotten personal benefits from the English classes, too. Al-Saeed can now watch American movies without subtitles, while Hisham can now speak with strangers abroad in English.
Obeikan says his company has now exceeded its Saudization quota of 20 percent and is starting to see the benefits in the form of less bureaucracy.
‘You Shut Down’
“If you are in the red zone, you lose all your non-Saudi employees because they will not renew their residencies,” he says. “You shut down.” Of Obeikan’s 3,600 employees in the kingdom, 34 percent are Saudi.
The government isn’t just training high school graduates. It has earmarked a total of 169 billion riyals, about a quarter of the 2012 budget, for education and training. The money will be spent to build 742 new schools and 40 new colleges and to create curriculums that produce graduates with marketable skills.
About 20 billion riyals have been allocated for the more than 120,000 Saudi students studying abroad to pay tuition, medical insurance, a stipend and a ticket home once a year. Saudi Arabia’s spending on education is the highest in the Middle East, according to the United Nations Educational, Scientific and Cultural Organization.
Some Saudis say that no matter how comprehensive the plans to ameliorate unemployment, more needs to be done for youth.
No Place for Fun
There are almost no places where they can have fun: Movie theaters are banned, malls are off-limits to men unaccompanied by a female relative on weekends and even restaurants are segregated.
Many youths head to the desert to escape. On a Friday afternoon in the Thumamah Desert outside Riyadh, young Saudi men, some with traditional red-and-white-checkered headdresses thrown over their shoulders, drive all-terrain vehicles across the sand dunes.
Every now and then, they stop and press on the brakes and the accelerator to spin their wheels. The aim is to see who can shoot the tallest fountain of sand into the air.
Though men wear identical white robes in public and women wear the black abayas, Saudis aren’t as homogenous as they first seem. Some are liberals who want more freedom, while others are conservative, pushing for more restrictions.
To survive, liberal youths live in a parallel, underground world, where they can experiment with freedom away from the eyes of the religious police who are charged, among other things, with ensuring the genders don’t mix.
Clandestine Comedy Club
Home cinemas make up for the lack of movie theaters, long phone conversations pass for dating and those who want to mark Valentine’s Day -- which is banned -- can find shops that sell red velvet pillows, cats with hearts dangling from their mouths that meow when pressed and puppies hugging a heart that says “I love you.”
One night in January, about 60 Saudi youths sit on stools, armchairs and a carpet inside an empty pool on the grounds of a Jeddah home, where comedians poke fun at some of the quirks that mark their culture. Standing in the deepest part of the pool, one of the men jokes about how the bare arms, legs and chests of women in magazines are blacked out by censors.
Laughter rises from the bottom of the pool as one comedian says: “I bought a Spice Girls CD, and I was surprised to see they were wearing abayas.”
The Next Generation
Humor has also attracted hundreds of thousands of viewers to online shows such as the two produced by Kaswara al-Khatib, creative chairman of Full Stop Advertising, which satirize government bureaucracy and aspects of daily life such as excessive shopping during Ramadan.
“Instead of being out on the streets, now they have something to do,” al-Khatib, 42, says of his viewers.
At a rooftop restaurant in Jeddah, 29-year-old Khaled Yeslam finds little to laugh about. He blows a cloud of smoke from a pipe whose base is filled with red-tinted water and then launches into a tirade about the restrictions youths face.
Yeslam, who’s studying English in New York, vents his frustrations on Twitter, where his posts have drawn more than 21,000 followers.
“I want to see my kids falling in love, dating, going out with their soul mates,” Yeslam says as the sweet smell of tobacco drifts in the cool air. “I really hope that the next generation will be normal like the rest of the planet.”
To contact the reporter on this story: Donna Abu Nasr in Manama at email@example.com