A Targeted Industry Approach for Raising Quality Private-Sector Employment in Saudi Arabia for More Information on This Publication, Visit
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C O R P O R A T I O N SHANTHI NATARAJ, HOWARD J. SHATZ, LOUAY CONSTANT, MATTHEW SARGENT, SEAN MCKENNA, YOUSUF ABDELFATAH, FLORENTINE ELOUNDOU NEKOUL, NATHAN VEST, THE DECISION SUPPORT CENTER A Targeted Industry Approach for Raising Quality Private-Sector Employment in Saudi Arabia For more information on this publication, visit www.rand.org/t/RRA536-1. About RAND The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. To learn more about RAND, visit www.rand.org. Research Integrity Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Published by the RAND Corporation, Santa Monica, Calif. © 2021 RAND Corporation is a registered trademark. Library of Congress Cataloging-in-Publication Data is available for this publication. ISBN: 978-1-9774-0584-5 Cover composite design: Rick Penn-Kraus Images: Dusan Petkovic/Shutterstock (food), shaadjutt/Getty Images/iStockphoto (flag) Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions. Preface The Kingdom of Saudi Arabia is striving to develop its private sector and generate quality employment for Saudi citizens. Quality employment means more than just a private-sector job; it includes a decent salary and benefits, training opportunities, and opportunities to advance in a career. Many of Saudi Arabia’s efforts to develop its private sector, before and after the issuance of Vision 2030 in 2016, have focused on upgrading the skills and education of Saudis and on legal reforms to improve the business environment. This report takes a third approach, focusing on the development of a specific industry: food manufactur- ing. In September 2018, researchers from the Decision Support Center of the Royal Court and from the RAND Corporation set out to explore how Saudi Arabia has developed industries successfully in the past and how it could develop a target industry that can provide quality private- sector employment. Ideally, the findings based on researching a spe- cific industry can be applied to other industries, especially those high- lighted in Vision 2030, and the economy as a whole. This study was undertaken by RAND Education and Labor, a division of the RAND Corporation that conducts research on early childhood through postsecondary education programs, workforce development, and programs and policies affecting workers, entrepre- neurship, and financial literacy and decisionmaking. This study was sponsored by the Decision Support Center of the Royal Court, King- dom of Saudi Arabia, which seeks to support decisionmaking in the Kingdom of Saudi Arabia and enhance its efficiency by implementing research and studies based on extensive data and by monitoring and analyzing current or future topics and events that may influence the iii iv Raising Quality Private-Sector Employment in Saudi Arabia country. The primary audience for this report is policymakers in Saudi Arabia who are working to reform and advance Saudi Arabia’s econ- omy. This report will also be of interest to all Saudi citizens; research- ers, analysts, and policymakers in the Middle East, given the impor- tance of Saudi Arabia to the region; and anyone interested in economic reform and private-sector development. More information about RAND can be found at www.rand.org. Questions about this report should be directed to Howard J. Shatz at [email protected], and questions about RAND Education and Labor should be directed to [email protected]. Contents Preface ............................................................................. iii Figures, Tables, and Boxes ..................................................... ix Summary .......................................................................... xi Acknowledgments .............................................................. xxi Abbreviations .................................................................. xxiii CHAPTER ONE The Challenge of Creating Quality Private-Sector Employment Opportunities ................................................................ 1 Taking an Industry Approach .................................................... 5 Methods and Data Sources ....................................................... 8 Organization of This Report ....................................................14 CHAPTER TWO Saudi Government Reforms for Private-Sector Development ...........15 Labor Force Participation and Saudization of the Private Sector ...........15 Training and Skills Development Programs ..................................17 Reforms Targeting Working Conditions and Labor Market Flexibility ....18 Reforms Targeting the Business Environment ................................19 Policies Toward Expatriate Workers ........................................... 22 Conclusion .........................................................................25 CHAPTER THREE Overview of Employment Trends ............................................ 27 Saudi Firms Rely on Expatriate Labor ......................................... 28 The Proportion of Saudis Who Participate in the Labor Market Is Low but Increasing .................................................................29 v vi Raising Quality Private-Sector Employment in Saudi Arabia Many Saudis Who Enter the Labor Market—Especially Saudi Women—Find It Challenging to Get Jobs ...............................33 Saudis Who Do Find Jobs Are Concentrated in the Public Sector and in Certain Private-Sector Industries .......................................37 Summary ...........................................................................39 CHAPTER FOUR The Development of Successful Industries in Saudi Arabia .............41 Selection of Comparison Industries .............................................41 Saudization in the Financial Service Activities (Banking) Industry ....... 44 Saudization in the Telecommunications Industry ............................49 Implications for Other Industries .............................................. 56 CHAPTER FIVE Profile and Challenges of the Food Manufacturing Industry ...........59 Selection of Food Manufacturing as the Candidate Industry ...............59 Food Manufacturing in the Economy ..........................................63 Food Manufacturing in Policy, Reforms, and Recent Documents .........72 Saudization in the Food Manufacturing Industry ........................... 77 Potential Evolution of the Food Manufacturing Industry ...................83 Implications for Other Industries .............................................. 86 CHAPTER SIX A Case Study of Switzerland’s Food Manufacturing Industry ..........89 Selecting the Case-Study Country ..............................................89 Overview of Manufacturing in Switzerland .................................. 90 The Food Manufacturing Industry in Switzerland .......................... 92 Policies That Have Fostered Growth .......................................... 97 Conclusions ...................................................................... 106 CHAPTER SEVEN Saudi Views of Working in the Private Sector and Employer Perspectives ................................................................ 111 Saudi Perceptions and Expectations Toward Work ........................ 112 Employers’ Views ................................................................ 123 Summary ......................................................................... 127 Contents vii CHAPTER EIGHT Policies for Developing the Food Manufacturing Industry and Creating Quality Private-Sector Jobs ................................. 131 Overcoming Challenges of Industry Characteristics ....................... 135 Bringing Capital into the Equation ........................................... 136 Changing Jobs into Careers .................................................... 138 Moving Saudis into Food Manufacturing Industry Jobs ................... 141 Training for Quality Employment