Saudi's Project Commitment

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BY SIMON WEST SAUDI’S PROJECT COMMITMENT GCC Country Still Expects Grand Development

audi Arabia’s grand plan to have been slated for new industrial shake-up is a nationwide policy open up its crude-dependent projects, with breakbulk and project designed to boost the role of male and economy over the next decade cargo movers already in the thick of female Saudi nationals in the private Sis forging ahead, despite a deep the action. sector, dubbed Saudization. recession caused by the double blow Moataz Hussein, regional project More far-reaching than other of Covid-19 and the oil price collapse. and energy manager for logistics and local content initiatives in Gulf Coop- Saudi Vision 2030, unveiled freight forwarding firm Expeditors, eration Council, or GCC, countries, by Crown Prince Mohammed bin said the current crisis is unlikely to Saudization in one form or another Salman four years ago, is seeking to knock long-term Saudi construction has been around since at least the diversify the nation away from oil plans off course. 1980s, but the policy gained momen- and usher in a new era of economic “It might still have its effect on tum following the oil price crash six sustainability. The government’s pushing back some of the projects or years ago and the launch of Vision National Industrial Development at least pushing back the deadlines a 2030. and Logistics Program, launched last bit, but at the end of the day I think A focus on upping private-sector year, is leading the charge to boost all the plans in place are going to opportunities for Saudi citizens – and the GDP contribution of industry, go forward,” Hussein said. “Once reducing an over-reliance on foreign mining, logistics and energy to 1.2 the pandemic is over I expect Saudi workers – is seen as a surefire way to trillion Saudi riyals, or about US$320 Arabia will go full throttle on the tackle local unemployment, which in billion, by 2030. direction of that Vision 2030.” this year’s first quarter stood at 11.8 Billions of dollars of investments Running parallel to the economic percent.

42 BREAKBULK MAGAZINE www.breakbulk.com ISSUE 6 / 2020 Saudization hiring policies affect five or more employees in engineering breakbulk and project cargo companies professions, and aims to create at least operating in the Kingdom. 7,000 new positions. CREDIT: SHUTTERSTOCK The majority of businesses operating in Saudi Arabia are ranked in “safe color zones,” according to the labor ministry, but those that pay scant attention to Nitaqat targets inevitably face problems. “Red being the lowest rating, companies in this zone face challenges in terms of ease of doing business,” said Rafael Vicens, head of global projects and industry solutions, Middle East and Africa, for Germany-based logistics specialist DB Schenker. “If you are in the green or the platinum zone, you will get easier access to government permits, for example, to move cargo on the roads. One has the facility to hire expats, therefore their visa procure- ment process is easier.” Operators in the red zone may also have trouble opening new branch facilities with the labor office, changing the occupations of their foreign employees and securing pre-qualification for government contracts. According to Vicens, multinational project logistics firms typically employ Saudi nationals to manage functions such as accounting, sales and adminis- trative roles, which require strong local knowledge. Expats on the other hand are either hired as skilled labor or in executive positions. Companies operating elsewhere In line with the economic MEETING REGULATIONS in the GCC, such as the United Arab reforms, authorities are hoping that Saudization hiring policies, which Emirates, Qatar and Bahrain, where the Saudization drive will create 1.6 affect breakbulk and project cargo non-nationals make up the bulk of million new jobs across a range of companies operating in the Kingdom, the labor force, often encounter skills industries by 2030, reducing unem- are regulated by Nitaqat, a system that shortages for many professions. Either ployment to 7 percent over the same gauges the number of Saudi employees education systems are not up to scratch, period. in a firm’s workforce against the num- or poor training leaves candidates “The Saudi government has a ber of non-nationals. unprepared for private sector careers. long-standing goal to bring its large Companies are given colored rat- Not so in Saudi Arabia, Hussein native population into the private ings based on their compliance with said. sector so that its economy can the labor ministry’s local content “Saudi is not short at all with the effectively function when peak oil targets – which vary from industry to local talent. When project logistics demand takes hold and the Saudi industry – with red the lowest, then look to hire the right people, the right government is no longer able to low green, medium green, high green talents are there in the market, people provide a generous welfare state and finally platinum. who have the skills, the knowledge and for its citizens through public jobs A government decree in August for the qualifications to meet the positions. and direct subsidies,” said Ryan example ruled that 20 percent of all And I think Saudi Arabia’s Vision 2030 Bohl, Middle East and North Africa private sector engineering jobs from is just making sure to open the doors analyst at U.S.-based consultancy 2021 must be given to Saudi nationals. and giving this local talent an oppor- Stratfor. The quota applies to private firms with tunity.”

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LOCAL CONTENT LAWS female workers are joining the sector’s investment and know-how to expand The success of the policy, from a ranks. the private sector into an engine for Saudi standpoint at least, is yet to be King Abdullah Port, a privately growth. seen. Unemployment in the country owned terminal located on the Red Sea “The Saudization program has remains high and is likely to worsen coast and a big handler of Saudi-bound helped and continues to help bring amid the Covid-19 crisis, while many project cargo, said it had broken the more employment opportunities for executive positions continue to be held gender employment mold by hiring only local nationals,” said Haider Hussain, by expats. Deeper structural reforms women to staff its control rooms. a Dubai-based partner at immigra- to Saudi Arabia’s subsidy-laden politi- “More than 80 Saudi women work tion law firm Fragomen. “The labor cal economy may be needed to achieve in control rooms, management, IT and ministry has been in pursuit to balance long-term employment goals, Stratfor’s engineering, the last being one of the that nationalization effort along with Bohl said. final frontiers for Saudi women,” a ensuring that the foreign expertise A much-lauded result of the local- representative at King Abdullah Port also continues to enter the Saudi work- ization drive, however, has been the told Breakbulk. “The vast majority of force.” rise in female employment, especially women hail from the surrounding area, And as the country’s efforts to in industries traditionally dominated a section of Saudi Arabia that for years reform the economy ramp up in line by men. The Saudization of the private has offered little in the way of employ- with its Vision 2030, that expertise will jobs sector has gone hand in hand ment beyond the petroleum facilities be called on to help the buildout of new with the easing of long-standing social located there.” industries. restrictions, such as the right to travel While Saudization has focused abroad without needing permission on boosting opportunities for its citi- RENEWABLES DRIVE from a male guardian, or the govern- zens, the policy is unlikely to close the CONTINUES ment’s headline-grabbing decision two door when it comes to project cargo Although crude still accounts years ago to quash a decades-old law involvement from other nations, with for about two-thirds of government banning women from driving. the success of Vision 2030 hinging on budget revenues, and state-owned And as boundaries disappear, more the kingdom’s ability to lure overseas oil producer Aramco remains one of

King Abdullah Port broke the gender mold by hiring only women to staff its control rooms. CREDIT: KING ABDULLAH PORT

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MARKET SPOTLIGHT

price environment, is expected to cre- which acted as the port agency for ves- “Cities are getting ate up to 750,000 jobs over the next sels delivering the turbines, additional built from scratch, so decade, the U.S.-Saudi Business Coun- cargo for the project is expected to opportunities are going cil said. arrive at Duba by the end of the year. Although solar dominates, the Managing Director Abdulaziz to be there.” expansion of wind power, of more Higgi told Breakbulk that multi- – Moataz Hussein, Expeditors interest to breakbulk movers, is start- national heavy-lift and logistics ing to shape up. specialists were needed to support the the world’s most profitable compa- Saudi Arabia’s first-ever utility- buildout of new industrial sectors in nies, pressure to diversify the nation’s scale wind farm, the 400-megawatt, Saudi Arabia. “Such global companies domestic energy mix is building, with or MW, Dumat Al Jandal project in could be considered as a kind of school the focus on expanding renewable northern Al-Jawf region, is slated to and education place for Saudis to get capacity. start commercial operations in 2022. experience and knowledge about such According to the government, Once completed, the facility, devel- projects in the forthcoming years,” Saudi Arabia is targeting 60 gigawatts, oped by a consortium led by France’s Higgi said. or GW, of installed green energy EDF Renewables and the UAE’s Mas- The country also has plans for off- capacity by 2030, of which 40 GW dar, will be the largest wind project in shore wind development. would come from PV solar plants, 2.6 the Gulf. Last year, Italy’s Saipem and Abu GW from concentrated solar power, In June, a first batch of 20 Vestas Dhabi-based renewables investor 16 GW from wind turbines and the V150-4.2 MW wind turbines arrived Plambeck Emirates signed a memo- remainder from other renewable at Saudi’s Duba Port on the Red Sea randum of understanding to build a sources. coast, marking a milestone for the 500-MW floating wind farm off the Development of a sustainable sec- project. coast of Saudi Arabia. Further details tor, which could intensify amid the According to Saudi shipping com- on the project, including location, have fallout from Covid-19 and the low oil pany Faisal M. Higgi and Associates, not yet been disclosed.

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PROJECTS ABOUND said. “I expect in the next period to its capital expenditure plans this year Aside from renewables, exciting hear about more and more projects and next. opportunities that point to a steady in Neom that companies like us, as Jobs markets have also been stream of contracts over the next project logistics and service provid- thrown into chaos, with the extent decade include an expansion of the ers, will surely be able to add value of the pandemic’s longer-term conse- Two Holy Mosques, a US$800 billion to. Because it is not only about the quences yet to be revealed. plan to double the size of capital city city itself, but also each city like that According to Fragomen’s Hus- Riyadh and the development of so- will require a lot of support industries sain, lockdown restrictions have called smart cities such as Neom on to be around it, such as port facilities, slashed mobility and cross-border the Red Sea Coast. solar parks and desalination plants.” travel, forcing local businesses to Meaning “New Future,” the Like everywhere though, supply temporarily adapt their hiring plans US$500 billion Neom project was chains throughout the region have and to focus more on the local Saudi first announced in 2017, and when been severely hit by the pandemic, workforce to ensure companies keep completed will include towns, ports, causing project delays and bottle- ticking over. enterprise zones, sports stadiums and necks. The crisis has pushed Saudi “It will be interesting to see tourist destinations. The city, sched- Arabia into recession, with the Inter- whether businesses will continue with uled for completion in 2025, will be national Monetary Fund predicting the same strategy once Saudi Arabia built on 5G technology and powered the economy will shrink 6.8 percent opens its doors to the world again,” by renewable energy, and will even- this year. Hussain said. BB tually be home to 1 million people, Aramco, too, is feeling the strain: according to the project’s official the world’s largest oil exporter website. reported in August that its second Colombia-based Simon West is a “Cities are getting built from quarter profits had sunk by 73 per- freelance journalist specializing in scratch, so opportunities are going cent as a result of lower sales. The energy and biofuels news and mar- to be there,” Expeditors’ Hussein crisis has forced the producer to cut ket movements in the Americas.