How does the localization policy of the Kingdom affect the construction sector?
The government of Saudi Arabia is determined to pursue the path of holistic development for its citizens. To implement it in letter and spirit, the government began a localization initiative to empower Saudi citizens by enabling them to take ownership of their country.
What is the purpose of localization?
Launched as part of Vision 2030, the core purpose of the initiative is to preserve and enhance the capabilities of public sector institutions in particular and the economy in general by employing the capabilities of local human resources through:
Is there a difference between ‘Localisation’ and ‘Saudization’? Or are they two sides of the same coin?
Many often confuse the terms ‘Saudization’ and ‘Localization.’ They are two fundamentally different sets of policy initiatives.
The principle of localization is based on the full and optimal use of the national workforce because it concerns the quality and position of specific job titles with a requisite academic degree and a set minimum wage.
Whereas ‘Saudization’, an initiative that began in 1975, was a check and balance mechanism deployed to limit the control of expatriates over the various business sectors in the Kingdom.
Saudization was implemented by maintaining a certain employment quota for Saudi nationals in local businesses, regardless of their skillset or academic qualification.
How the Localisation Initiative Impacts the Kingdom’s Construction sector?
The construction sector is the second largest non-oil sector in terms of revenues and the highest in terms of people employed in the Kingdom. The sector faces great challenges, despite the initiatives launched supporting localization.
Several top government agencies, including the Saudi Contractors Authority, the Ministry of Labor and Social Development, the Ministry of Housing, the Human Resources Development Fund (Hadaf), and the Council of Saudi Chambers, have joined forces to promote sustainable localization in the construction sector.
Localization of technical and leadership positions is spearheaded by attracting qualified national cadres to work in the construction business. The government has also offered to reduce the financial burden of contracting companies as an inducement for the first two years.
The initiative adopts a precise mechanism to reach its objects through:
How does the initiative support employers/businesses?
The initiative provides full support represented by:
As for the workforce, the initiative supports it through the following:
However, despite the array of initiatives to support the localization of the sector, it was difficult to reach the desired percentages of employment. It uncovered challenges facing the localization of the construction sector in the Kingdom, which was divided into:
2. Obstacles related to the owners of establishments in the private sector:
The success of localization depends on the belief of the owners of private sector businesses in its desired goals, as it:
Here is a quick overview of the Localisation rate in the Kingdom based on the colors and what they symbolize:
To obtain the query service and calculate the localization percentage coefficient for all business entities, one must visit the Human Resources and Social Development website or the (Qiwa) platform using the interactive ranges calculator.
How can construction businesses address their inability to localize the sector?
There are several ways construction businesses can find a solution to address this issue:
Adopt Technological Advancement
There is a direct relationship between the need to adopt modern construction techniques and the increase in the workforce in the sector at all stages of work, starting from the design stage through manufacturing and ending with on-site assembly.
These technologies require new technical skills with a higher level of complexity. They are less manual than traditional construction techniques, attracting well-educated Saudi employees and thus improving the chances of localization in the sector.
A Win-Win Policy
The private sector business owners’ perception regarding the negative effects of localization needs to be assuaged. They must be convinced that employing local workers is in their best interest. And this can only be done if the private sector readily finds a competitive local workforce equally efficient and at the right price.
Efficient and eager workers are ready to be hired, and businesses have a pool of local workers to choose from at competitive rates. Only a win-win situation for workers and businesses can help intensify the localization initiative in the Kingdom.
The Aramco Initiative As a Model for Localisation
There is no better example of localization than the Saudi Aramco initiative, which launched the (ektefa) program to enhance its supply sector. It aimed to regulate the practice of self-employment in the Kingdom and create distinguished job opportunities for Saudi citizens by granting the self-employment document that Provides unique and supportive services.
The program created a supportive business model that consolidated partnerships between local business sectors and major international companies. It also facilitates the recruitment and training of Saudi nationals and prepares them to occupy key positions in the industry.
As for the localization of the contracting sector, Aramco was able to train 400 Saudi youth in Jizan in the construction sector in the fields of plastering, carpentry, and blacksmithing. To implement the plan across the Kingdom’s various regions and develop a Saudi workforce for the construction sector.
As the Aramco use case shows, the success of the sector’s localization initiative depends on the concerted efforts of both business owners and Saudi citizens since it is a joint responsibility, especially when the government has spared no effort to make it a success.