Saudi Arabia has officially begun the process of localizing the consulting industry for foreign firms operating in the Kingdom. Known as ‘Saudization’, this process requires companies to employ a certain percentage of Saudi nationals.
The Ministry of Human Resources and Social Development (MHRSD) announced in April that it had initiated the first phase of localization for consulting firms, which had previously been exempt from Saudization requirements that were already applied in other industries.
The first target set by the MHRSD would see Saudi nationals occupying 35% of consulting industry positions, though the deadline date was not clear. Higher percentages are likely to come into effect at a later stage, with a number of functions already facing Saudization rate requirements of over 50%.
This new regulation will mostly cover the areas of financial advisory, business consulting, and project management. Employers will be required to meet the Saudization targets, with the MHRSD promising to offer incentives and support. Failure to comply will result in “statutory penalties,” according to a statement released.
The process of localizing industries in Saudi Arabia is designed to prevent expatriates from dominating the private sector. The Kingdom is home to large communities of often highly-skilled foreign workers from other parts of Asia and the Middle East. Immigrants make up around 40% of the total population of Saudi Arabia, according to the latest United Nations data.
The plan to increase the number of Saudi nationals in certain industries is ostensibly to promote involvement in the economy from both Saudi men and women, according to the MHRSD. Saudi Arabia has in recent years been loosening some of the stricter rules that impinged on the basic human rights of women in the Kingdom, though serious criticism continues.
However, Saudization has so far not gone very smoothly in other industries. In some cases, companies were unhappy with having to hire unqualified Saudis who reportedly showed little inclination to work and could not be legally fired.
Some companies were found to be gaming the system in a number of ways in order to avoid fines. For example, it was discovered companies were hiring disabled Saudis, who counted as four Saudis in the incentive scheme, in order to pump up their Saudization rates and avoid paying the higher salaries of four qualified professional.
In preparation for the Saudization requirements, a number of the larger foreign consulting groups have already launched recruitment initiatives focused on locals. Boston Consulting Group, McKinsey & Company, Arthur D. Little, and Deloitte, among others, have established hiring programs dedicated to Saudi young professionals, with the hire of young talent classes a relatively effective manner to beef up the share of Saudi headcount.
Sourced from Consultancy.me.com