Arab News Interview of Minister of Labor on Nitaqat

Published: Aug 13, 2011 17:19 Updated: Aug 13, 2011 17:19
JEDDAH: Since its launch, Nitaqat has caused alarm in the employment sector.
Guest workers and corporate owners have been flooding labor offices with their
queries. Concern has even spread to labor attachés in the Kingdom who must
respond to the scores of questions posed to them by their worried nationals.
What is Nitaqat? What is its impact on us as individuals, organizations,
employed, unemployed, qualified and unqualified? How will Nitaqat achieve the
much-needed differences in comparison to earlier Saudization attempts? Will it
be able to accommodate all industries? Just how plausible is Nitaqat? Looking
for answers, Arab News met with Minister of Labor Adel Fakeih at his office,
Thursday afternoon. During the meeting the amiable minister highlighted various
aspects of the program. Here is the interview:
What is Nitaqat?
Nitaqat (Ranges) is a program designed by the Ministry of Labor to boost the
nationalization of private sector jobs. This direct intervention initiative aims to deliver
quick results and give Saudi nationals a better standing in the labor market. The
program evaluates private sector establishments based on the percentage of its Saudi
work force and subsequently gives them codes: Red, Yellow, Green and Premium.
Depending on the code such entities will either receive incentives — in the form of new
services and facilities — or be deprived from ministry services and face punitive
measures. Previous nationalization programs — dubbed “Saudization” — required all
sectors to have a blanket quota of 30 percent Saudis, although only a third was
achieved after many years of implementation. The new Nitaqat system, in contrast, is
more dynamic and derives its nationalization quotas from the actual performance of
private businesses that varies according to their line of business as well as the size of
work force.
To make such quotas realistic as well as practical the ministry segmented the labor
market into 41 commercial activities and further categorized companies into five sizes
— according to work-force size from very small (0-9 employees) to giant (3,000+
employees). It is worth noting that very small businesses (0-9 employees) are exempted
from the Nitaqat program so this leaves us with a new 164 different nationalization
quotas for business entities (41 activity x 4 sizes). The program was designed so that
50 percent of the companies in any of the 164 classifications — i.e. entities that share
similar size and similar type of economic activity — are in the Green and Premium
zones.
What kind of incentives and restrictions will companies face once the program
goes on full gear?
Green and Premium companies will be able to hire from any part of the world, get new
visas with open professions, and change professions of workers even to restricted
categories, except jobs such as employment officials, receptionists, government liaison
officials, treasury staff, and security officers. Premium and Green companies will be also
allowed to recruit employees of Red and Yellow zones; and to transfer their visas
without their employers’ consent. Yellow companies will not be able to apply for new
visas, visa transfers or change of workers professions starting Sept. 10. However,
Yellow companies will be allowed to renew their workers’ work permits provided they
haven’t completed more than six years in the Kingdom.
Red companies will be deprived from basic ministry services such as renewal of
employees’ working permits, change of profession, transfer of visas, issuance of new
visas and opening files for new business branches. However, Red zone companies will
be allowed to renew the work permits of their workers until Nov. 27, 2011, when the
Nitaqat program will be fully implemented. Both Yellow and Red companies will in time
lose control over their workers who will be allowed to seek employment at companies in
the higher Green and Premium categories.
Which phase of Nitaqat are we in now?
Starting from June until September all private companies were asked to update their
employees’ information both at the General Organization for Social Insurance (GOSI)
and the Ministry of Interior for the calculation of their national and foreign workers
respectively. The period could also be utilized by Red and Yellow entities to hire more
Saudis and increase their nationalization levels. The Ministry of Labor has also allowed
all private sector entities to rectify their workers’ professions. The ministry provides
periodic information and counseling to companies on the Nitaqat website
(www.emol.gov.sa) to assist companies in conforming to the program’s guidelines.
We’ve noted that the website is only in Arabic. Is there any intention of making it
bilingual?
Yes, someone is working on making an English version and hopefully in less than three
months it will be up and running.
Why did the Labor Ministry choose to launch the program now?
The drive to nationalize private sector jobs is not a new measure in the labor market.
The ministry launched its nationalization programs in the mid 1990s. Saudi Arabia has a
young population and this exerts pressure on the labor market due to the increased
numbers of young Saudis coming into working age. Unemployment is a serious issue
with diverse negative implications that could affect the country’s socioeconomic stability.
How will Nitaqat affect the lives of expatriates in the Kingdom?
The Ministry of Labor recognizes and appreciates the role of guest workers in the
development of the Kingdom. We understand that the new program will have direct and
indirect effects not only on the guest workers inside the Kingdom but also on labor
markets of all countries that send workers to Saudi Arabia.
Nitaqat is not designed to threaten the livelihood of guest workers; however, the ministry
understands the cautionary perception, which many guest workers might have of the
program. We believe the program is fair to all stakeholders, including guest workers.
Furthermore, foreign workers can play an important role in making their current
companies more stable if they start encouraging their employers in recruiting more
Saudis. There will be certain change of employment preferences following the
implementation of Nitaqat and some sectors will be affected by the program more than
others, but even if we provide jobs for all unemployed Saudis, the private sector will still
be in need of millions of guest workers.
Nitaqat’s noncompliant businesses, i.e. Red or Yellow private enterprises, are subject to
restrictions including the inability to renew work permits for their workers. This does not
mean that their employees will necessarily have to leave the Kingdom; on the contrary
Nitaqat offers workers at Red and Yellow zone companies’ greater job mobility by
allowing them to seek employment with other businesses provided that these potential
employers fall within the Green or Premium zones. In addition job switching will take
place without the consent of their initial “noncompliant” employer and through a
regulated mechanism to safeguard the rights of workers and owners.
Nitaqat is said to enable employment mobility for ‘guest workers’, what is the
duration period for this? How long would an employee have to look for a job,
apply and land a job?
The ability of an employee to move from one organization to another will be effective
only as of Muharram next year (December 2011) and we’re currently doing the final
reviews of these detailed period and steps and relationships between when the visa
expires, vs. when the work permit expires vs. when the residence permit expires, this
aspect spans across the Labor Ministry and Interior Ministry. Details should be
announced before the end of Ramadan. Additionally all employees will not be asked to
leave the country as long as their work permit is still valid. Second, we will stop
renewing work permits for expats in Red entities as of 1st of Muharram 1433. So expats
working for Red entities will not be able to renew after this date, so they have to find
another Green entity or Premium if they wish to renew their work permit by then. Last,
for expats working in Yellow entities, they will not be able to renew after 1st of Rabie II
(March 2012) so they have to find a Green entity or Premium by then if they wish to
renew their work permits. Again, I am repeating, they will not be asked to leave after the
above dates, so they can stay as long as their work permits are valid, but they will not
be able to renew after above dates with their current noncompliant company.
How will Nitaqat work vis-à-vis the rising recruitment trends?
Nitaqat is not designed to slam shut recruitment doors but rather to rationalize the
issuance of recruitment visas which has soared in the past years due to robust public
sector spending on infrastructure projects and the subsequent expansion of the private
sector. The ministry believes that there is an oversupply of labor in the market and that
what people have come to term as “loose labor” is living proof that such rationalization
steps should be taken. Nitaqat program encourages internal recruitment as an
alternative, especially since internal recruits usually have better work experience and
more local knowledge compared to fresh recruits.
What are the new regulations that the ministry plans to announce to foreign
labor?
The ministry cares about, and protects the interest of, private sector workers whether
they are local or foreign. While Nitaqat comes to cater for national labor, the ministry
has new initiatives for guest workers in the pipeline. Before year’s end, the ministry will
announce a number of new regulations, programs and services for guest workers. This
will include a new framework for recruitment agencies, wage protection system,
mandatory insurance policy for domestic labor, and emergency 24/7 multilingual hot
lines for complaints.
The new recruitment agencies will handle the hiring of foreign workers and become
responsible for providing a proper work environment, ensuring foreign workers’ financial
well being, and rights. In parallel, the ministry is working to establish a direct hotline
service in multiple languages to provide information, assistance and help to foreign
labor. These two initiatives are of particular importance for domestic and low-skilled
workers. A service offered to domestic labor in its first operational phase. The ministry is
also developing an electronic system for wage protection. The new system will ensure
that salaries and wages are duly paid, hence reducing potential labor disputes and
disagreements.
How will Nitaqat affect the overall Saudi labor market?
Nitaqat has the potential to introduce much-needed market adjustments to enhance the
efficiency of the private sector. The program aims to increase the share of national work
force in the private sector and amend the imbalances of the labor market’s work force
ratio where national labor constitute only 10 percent of the private sector’s eight million
workers. These levels are unacceptable especially since unemployment is estimated at
12 percent and tends to exponentially rise due to a young population and the gradual
increase in the number of job seekers. Apart from increasing the number of national
workers to economically sustainable levels, Nitaqat will have other implications on the
local labor market such as accelerate women’s employment, training for job seekers,
establishing minimum wage and creating healthier work environments for employees.
How will the program deal with special cases?
The program is dynamic and can be further developed and enhanced. The ministry
officials have met with, and listed the concerns of the labor market’s stakeholders from
the program’s design stage. The program has also taken social and humanitarian
factors into consideration, for example foreigners married to Saudi women as well as
children of Saudi mother will be counted as a Saudi equivalent in the new job program.
The ministry is currently reviewing other wider social considerations.
How will Nitaqat gain a wider public appeal from stakeholders?
The objective of any program design is to offer creative and feasible solutions and to
minimize glitches and problems and Nitaqat works according to these parameters. We
are neither claiming that Nitaqat is the sole remedy for unemployment nor have we said
that it is a rigid nonadjustable program. We hope to create a public consensus over the
importance of job nationalization with job owners, workers, job seekers, media and
other government and nongovernmental bodies. We have to understand that investing
in the future of Saudi youth pays back. Providing nationals with decent job opportunities
means more demand on products and services which in turn leads to a robust
economy.
Employers are discouraged from nationalizing their work force because they feel
that labor regulations do not serve their interests, regarding hiring and firing
Saudis. So in regards to contractual aspects and labor regulations, what
modifications can employers look forward to? Will there be changes?
Well, the labor law articles are being studied in depth. We’ve asked the chambers of
commerce to give us all their concerns and to raise their points like the ones you’ve
suggested i.e. the case of terminating Saudis and many other concerns that they had.
We’ve asked the labor committees representing employees’ views to see what their
concerns are. Also other government committees were formed, headed by HRH Prince
Naif, which led to recommendations which were then issued as part of a royal decree
that was directed to us to review some articles — for example working hours, minimum
wages. All of these topics are being currently reviewed in detailed sessions. I hope we’ll
be able to finish our reviews soon. And then as you know these are not internal
regulations in the ministry, these are regulations at a country level so they would have
to go through the proper due process.

What about organizations that cater to international clientele or international

products where international staffing is mandatory? How do they fit in with
Nitaqat such as international schools?
I’d asked a Nitaqat committee to specifically look into it. International schools have been
given very low Saudization requirements: 10 percent for small schools (49 employees
and below), and 15 percent for bigger schools. These percentages do not necessarily
mean teachers! Schools could choose to have 100 percent expats teachers while hiring
Saudis in other jobs to achieve the required Saudization such as accountants, etc. The
international schools that belong to embassies by definition would need to be treated
differently. The dynamics keep on evolving and changing that’s the promise of Nitaqat.
The beauty of Nitaqat is that it promises to be realistic, practical and fair. One of the
comments shared in all the presentations I’ve made to the different chambers of
commerce that previously we had 13 economic activities for which there were only 4 or
5 regulations governing them. Now currently we’ve divided the job market into 41
economic activities, and each activity was divided into 5 categories based on size
leading us to 205 sub segments and for each one of these sub segments we have now
4 levels of regulations. So we moved from 3-4 to about 750. But that’s not the end of it.
Those of you who work in particular industries which let’s say have very special
characteristic that makes it very difficult to employ Saudis, collect your views with other
people working in the same category, organize it through the chambers of commerce
and submit it to the Labor Ministry. And we’ll probably create a new sub category for
you and make new regulations for you.
In Arab News’ Thursday print edition, a front page article “To Survive, Companies Hiring
Unqualified Saudis” talks about Red and Yellow zoned companies rushing to modify
their statuses by employing unqualified Saudis or by the ‘fictitious employment of
Saudis.’ What’s your response to this?
The headline here talks about unqualified Saudis and this is the best thing I heard
because I really believe that the best way for Saudis to become qualified is for them to
work. I don’t believe you have to have qualified Saudis first and then you have to
employ them. The best qualification is experience, it is getting a job and being mentored
and helped by some experienced person who knows the job so I’m not worried about
that. The thing that will minimize the so called fictitious Saudization is that now as of
Muharram next year we will start paying ‘Hafiz’ support to job seekers, a welfare
program approved by the king with an allowance of SR2,000 per month. So if you are a
Saudi and the government will pay you SR2,000 until you get a job you will not ‘sell’
your name to an organization for a few hundred riyals just to fix their problem cause this
will make you ineligible for ‘Hafiz.’ So this welfare program that will be running in parallel
will work as a balancing act. It will make it more difficult to find those willing to sell their
names. Most reasonable business people will not pay people SR2,500 or SR3,000 then
have them stay at home. They will turn the unqualified person, he or she, to a qualified
person through working. Well then, that’s good news.

If you have in front of you employers, employees — residents and citizens and
job seekers, what would you want to say to them as a main message for each
category?
Job seekers: My advice to them is don’t be too picky about your first job. What matters
is that if you find a serious employer who is going to give you meaningful work, even if
the salary level is not good if you stick it out and work hard, you’re going to be making
good of your time and sooner or later you’re going to get your worth in the market. And
we’re actually supporting this advice by the public service announcement (PSA) where
we’ll be showing via news, press, TV real life role models of those who accepted to start
working for SR1,000-2,000 and now they’re making five or six times as much only few
years later.
To those currently working my advice is let’s do our best, continue working harder to
prove we’re getting our jobs because we’re worth it and not because we’re Saudis.
We’re adding value.
To employers: I’d say many of us have made it. Nitaqat is based on a realistic
assessment of the market we have no excuse not to be able to reach the Green zone
because it has been achieved by 50 percent of your category, of your size, of your sub
economic activity. It is a very realistic expectation and you should deliver.
To our guest workers: This is not meant as a program against you but you should
understand that our duty first is to our own nationals. It makes no sense that a country
employs six million foreign workers and its own nationals are searching for jobs. You
don’t find this anywhere in the world. You have a role in Saudization too because if you
work well in training Saudis, in attracting and retaining Saudis you’ll help your company
move to Green, therefore you maintain your ability to continue and renew your work
permit. This strategy was designed so that all of us will work together, and synchronize
ways to achieve a goal in which all of us become winners.
© 2010 Arab News
Advisory No. 2011/59
14 July 2011
This is a text of a Q&A on the Saudi Nationalization Policy or Saudization prepared by
the Department of Labor and Employment.
What is Saudization?
“Saudization,” officially known as the Saudi nationalization scheme, or the Nitaqat
system in Arabic, is the newest policy of the Kingdom of Saudi Arabia’s (KSA) Ministry
of Labor, whereby Saudi companies and enterprises are required to populate a larger
portion of their workforce with Saudi nationals. It calls for an increase in the share of
Saudi manpower to total employment and for expanding work opportunities for Saudi
women and youth.
Why is the KSA implementing Saudization?
The Saudization scheme is the Saudi government’s response to improve the
participation of Saudi nationals in employment in the private sector and ultimately
address the Kingdom’s unemployment problem.
How is the Saudization scheme implemented?
To carry out the scheme, the Ministry of Labor is coming up with 41 classifications of its
employment sectors. It will also classify Saudi companies into five categories according
to the number of their workers. Lastly, it will also categorize companies into four zones
or bands—Nitaqat—according to compliance or non-compliance with Saudization
requirements.
What are the five company classifications?

No. of Employees Classification Required

Nationalization
1–10 employees None Exempted
10–49 employees Small 5 – 24%
50–499 employees Medium 6 – 27%
500–2,999 Large 7 – 30%
employees Big 8 – 30%
3,000 or more
 No. of Employees Classification Required
Nationalization
employees
What are the categories or zones of companies according to compliance or non-
compliance with Saudization?
These categories or zones are Blue (VIP category), Green (excellent category), Yellow
(poor compliance), and Red (non-compliant). Blue and Green companies are more or
less already compliant, while Yellow and Red companies are not.
When did the Saudization scheme take effect?
June 11, 2011. From this date, all Saudi companies, estimated to number around
300,000, are required to “nationalize” or populate their workforce with Saudis (for those
who have not done so) or speed up their hiring of Saudis (for those who are slow to
comply or are not complying). Yellow category companies have nine months (June 11,
2011 to March 11, 2012) to improve their compliance, while Red category companies
have six months (June 11 to December 11, 2011) to comply with Saudization.
Has the categorization of companies according to compliance or non-compliance
been completed?
The categorization would be completed on August 30, 2011.
What will happen after August 30, 2011?
Starting September 11, 2011, the Ministry of Labor will provide incentives for compliant
companies and will impose restrictions to those that are not.
What are the privileges of compliant companies?
Companies categorized as Blue (VIP) will enjoy a number of privileges. They will be
allowed to:
 Hire anybody from anywhere in the world;
 Apply for new visas for foreign workers with open professions through e-services,
provided they remain in the blue category after issuance of new visas;
 Change the professions of their foreign workers to other professions, including
those restricted to Saudi nationals, but except those which have been identified
by the Saudi Council of Ministers;
  Hire foreign workers from Yellow and Red categories without the permission of
their employers;
 Renew work permits of their foreign workers irrespective of their period of stay in
the Kingdom; and
o Apply for replacement visas.
o Companies categorized as Green (Excellent) may
 Apply for new foreign workers’ visas not more than once every two
months;
 Obtain one replacement visa for every two transactions for exit-only
visas;
 Change the professions of their foreign workers to other
professions, except those which are restricted to Saudi nationals;
 Renew work permits of its foreign workers regardless of their period
of stay in the Kingdom; and
 Hire foreign workers from companies in the Red and Yellow
categories without the permission of their employers.
What are the restrictions for companies under the Yellow and Red categories?
Yellow category establishments will NOT be able to:
 Apply for new visas;
 Hire or transfer foreign workers from any of the categories; and
 Change the profession of its foreign workers.
 They will also lose control over their foreign workers because they will be free to
sign contracts with new employers in the Blue and Green categories.
 However, they would still be able to:
o Obtain one replacement visa for every two workers who have left the KSA
for good;
o Renew the work permits of its foreign workers regardless of their stay,
provided the remaining period in their foreign workers’ residence permits is
at least three months on the date of renewal; and
o Renew the work permits of its foreign workers, provided these workers
have not spent a total of more than six years with their employers.
 o Red category companies will NOT be able to:
 Apply for new, replacement, or seasonal visa;
 Change their foreign workers’ professions;
 Hire or transfer foreign workers from any category;
 File application for opening new enterprises (whether they are
branches or entities).
They will also lose control over their foreign workers because they will be free to sign
contracts with new employers in the Blue and Green categories. They will also be
barred from renewing the work visas of their entire foreign staff.
Will Saudization affect the employment of OFWs in Saudi Arabia and up to what
extent?
Yes, if the Saudi government pushes through with a sustained implementation of the
policy.
However, there will be no massive, short-term displacements of OFWs as feared by
some sectors, based on the foregoing incentives for compliant companies and
restrictions for noncompliant companies.
For example, semiskilled, low-skilled, or unskilled OFWs in Yellow and Red companies
who will be most likely affected (particularly if their lengths of stay in Saudi have
exceeded six years and, therefore, whose work permits could not be renewed), could
still transfer their services or be hired by Blue and Green category companies. This can
be done without the permission of their employers.
On the other hand, OFWs in the Blue category companies, who may still face the risk of
being displaced, may change their professions to other professions, even to professions
restricted for Saudi nationals, except those identified by the Saudi Council of Ministers
exclusively for nationals. Those in Green category companies may change their
professions to other professions, except to those restricted for Saudi nationals.
Companies in the Blue and Green professions may also renew the work permits of
these OFWs regardless of the length of their stay in the Kingdom.
Due to this complex process, it is not possible at this time to provide an accurate
number of OFWs who might be affected, pending the completion of the categorization of
companies by the Saudi Ministry of Labor set on August 30, 2011.
The categorization could change the current classification of companies and their status
may also change after the grace periods of nine months and six months, respectively,
given to companies in the Yellow and Red categories to improve their compliance.
Will household service workers be affected?
No. Household service workers (HSWs) are not included in the Saudization
requirements. The announced ban for new-hire HSWs was brought about by the Note
Verbale sent by the Saudi Ministry of Foreign Affairs on March 12 to the Philippine
Department of Foreign Affairs asking the Philippine government to stop the verification
of contracts for new-hire HSWs.
What will the government do to assist OFWs who might be affected by
Saudization?
The Department of Labor and Employment is taking three immediate steps:
1.Deployment of an online registration system to capture accurate data and
information on OFWs affected by the Saudi nationalization scheme.
2.On-site re-employment assistance to facilitate the transfer of the services or
hiring of affected OFWs from Yellow and Red category companies to Blue and
Green category companies.

3.Reintegration assistance for returning OFWs with final exit visas for local
employment or for re-deployment to other foreign markets, or for self-
employment through entrepreneurship and livelihood undertakings.

Source: dole.gov.ph