To help the Kingdom of Saudi Arabia develop its private sector and generate quality employment for Saudi citizens, the authors of this report assess the potential for Saudi Arabia to develop a specific industry—food manufacturing—as a means of increasing the demand for Saudi labor.

A Targeted Industry Approach for Raising Quality Private-Sector Employment in Saudi Arabia

Shanthi Nataraj, Howard J. Shatz, Louay Constant, Matthew Sargent, Sean McKenna, Yousuf Abdelfatah, Florentine Eloundou Nekoul, Nathan Vest, Decision Support Center

ResearchPublished Jul 29, 2021

Cover: A Targeted Industry Approach for Raising Quality Private-Sector Employment in Saudi Arabia
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The Kingdom of Saudi Arabia is striving to develop its private sector and generate quality employment for Saudi citizens, and its efforts to increase Saudization—the share of jobs filled by Saudis rather than expatriates—have focused on upgrading the skills and education of Saudis and on implementing legal reforms to improve the business environment. This report takes a third approach: assessing the potential for Saudi Arabia to develop a specific industry—food manufacturing—as a means of increasing the demand for Saudi labor. 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 specific industry can be applied to other industries and to Saudi Arabia's economy as a whole.

Key Findings

Several factors played a role in the Saudization of banking and telecommunications

  • Banking and telecommunications both have unique characteristics—including profitability and prestige—that contributed to their success in Saudization, which may not be possible to replicate elsewhere.
  • However, other factors that were important in the successful Saudization of these industries may be more broadly applicable, including a strong industry regulator, early buy-in from firm leadership, public and private education and training pipelines, and clear career pathways.

Multiple factors helped Switzerland develop its food manufacturing industry

  • These factors included a focus on high-quality vocational education; the codevelopment of anchor firms, educational institutions, supply chains, startups, and supporting industry associations; a focus on the global export market; and a focus on innovation.

The food manufacturing industry has several aspects that can be leveraged for Saudization efforts

  • Food manufacturing does not have the same advantages of high profitability and prestige as banking and telecommunications.
  • The industry also has a larger share of small firms that cannot afford to provide various benefits that might make employment with them more inviting.
  • However, young employees in food manufacturing were as satisfied with various job attributes as those in banking and telecommunications.
  • The Saudi food manufacturing industry has several anchor institutions, in the form of large, well-established Saudi and international firms, that can help foster Saudization.
  • Food manufacturing includes a wide range of occupations, including middle-skilled jobs with the potential to employ less-educated Saudis with technical or vocational skills, and high-skilled jobs for managers and scientists.

Recommendations

  • Saudi Arabia can foster the creation of quality jobs in the food manufacturing industry through a combination of policies to encourage firms to upgrade job quality, Saudis to upgrade their human capital, and overall industry growth and innovation.
  • Government policies can encourage firm leaders to buy in to Saudization efforts through mandates, education, exhortation, and recognition of successful firms.
  • Policies can assist firms with upgrading equipment and machinery to replace low-skill jobs, leading to more demand for higher-skilled workers to provide maintenance and monitoring.
  • Policies can encourage industry alliances to develop career pathways for the industry, which would be particularly helpful for workers in small firms.
  • Policies can be enacted to help familiarize Saudis with food manufacturing jobs through summer programs or on-the-job training and can highlight production workers' contributions to their families and to Saudi Arabia.
  • Policies can encourage firms to train workers on technical skills and to take on Saudi graduates with arts and humanities backgrounds and train them for business roles.
  • Greater efforts at export promotion could enhance Saudi companies' opportunities to access a broader market.

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Nataraj, Shanthi, Howard J. Shatz, Louay Constant, Matthew Sargent, Sean McKenna, Yousuf Abdelfatah, Florentine Eloundou Nekoul, Nathan Vest, and Decision Support Center, A Targeted Industry Approach for Raising Quality Private-Sector Employment in Saudi Arabia. Santa Monica, CA: RAND Corporation, 2021. https://www.rand.org/pubs/research_reports/RRA536-1.html.
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This study was sponsored by the Decision Support Center of the Royal Court, Kingdom of Saudi Arabia, and undertaken by RAND Education and Labor.

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