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K i n g d o m o f t h eU n e m p l o y e d

p h o t o g r a p h S b y

zalmai

For fun, saudi youth head to the desert and spin the wheels on all-terrain vehicles. At right, riyadh Polytechnic Institute aims to give students marketable skills.

Saudi arabia’S rulerS are trying to buy peace—and maintain their hold on power— by creating jobS for the two-thirdS of the population under 30.by d o n n a a b U - n a S r

When the three Saudi men met each other in school 11 years ago, they dreamed that by the time they had reached their mid-20s, each would have a well-paid job, a house, a new car and maybe a wife.

Today, all three still live at home, get pocket money from their parents and are jobless in Riyadh, capital of the world’s largest crude oil exporter. Now in their mid-20s, the three men say they feel resentment when they see the shops along major highways packed with the latest electronics, furniture and designer clothes, the showrooms displaying shiny sedans and the res-taurants offering delicacies prepared by French and Italian chefs. Most of the facilities are run by expatriates who re-turn home often able to afford a house, car and a wife—apparently benefiting more from the kingdom’s wealth than some of the locals do.

“Wherever I go, companies say they want someone with experience, but I don’t have it,” Hussein al-Ghamdi, 25, says. “So they bring in foreigners with expe-rience and deny us the chance to get a

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start and prove ourselves. That upsets me very much.”

Under-30s such as al-Ghamdi and his friends make up 66 percent of the Saudi population—a group that also has the highest rate of unemploy-ment. About 27 percent of the Saudi la-bor force aged 20 to 29 is unemployed, according to data from the Central Department of Statistics and Informa-tion. That’s almost on a par with Spain, where 36.4 percent of 16- to 29-year-olds were unemployed in the fourth quarter of 2011, the highest rate in the European Union. For years, the gov-ernment has been trying to address the issue with its “Saudization” quota sys-tem that requires companies to employ Saudis for at least 30 percent of their positions. So far, only a third of the tar-get has been achieved, according to the Labor Ministry. In a country of 28 mil-lion people, about 8.6 million are for-eigners, who make up most of the labor force. Just 4.3 million of the almost 19 million Saudis were in the workforce in 2009, according to the most-recent sta-tistics agency data.

Saudi unemployment has acquired a new urgency following popular up-risings that have toppled regimes in

informal efforts to create activities ranging from impromptu comedy clubs to a girls’ basketball league, Saudi youth have few sanctioned outlets where they can have fun, exacerbating frustrations over unemployment. “You are talking about the risk of this frustration go-ing into political activism,” says David Butter, regional director for the Mid-dle East at the London-based Econo-mist Intelligence Unit.

If political unrest got out of hand, it could threaten the oil industry and its exports, Butter says. The kingdom’s proven oil reserves of 263 billion bar-rels are the world’s largest. In February, the country produced 9.68 million bar-rels a day—about a third of the total for the Organization of Petroleum Export-ing Countries, according to data com-piled by Bloomberg.

Any instability in Saudi Arabia would also create ripples throughout the Mid-dle East. As the birthplace of Islam and home to its two holiest sites, in Mecca and Medina, the country wields im-mense sway in the Muslim and Arab world and maintains influence in coun-tries such as Lebanon and Bahrain and in the Israeli-Palestinian conflict.

Saudi Arabia is unlikely to have its

Tunisia, Egypt, Libya and Yemen and have shaken Syria and Bahrain, which is linked to Saudi Arabia by a causeway. In all of those countries, high levels of idle young people helped spark the turmoil. “Youth unemployment is a time bomb for Saudi Arabia,” says Jean-Francois Seznec, a professor at Georgetown Uni-versity’s Center for Contemporary Arab Studies in Washington.

King Abdullah responded by an-nouncing in 2011 a $130 billion plan to create jobs, build subsidized housing

and support the religious es-tablishment that had backed the government’s ban on do-mestic protests. Labor Min-ister Adel Faqih in May 2011 announced a program to re-duce unemployment called Nitaqat, or Ranges, that for the first time rewards com-panies that employ a higher percentage of Saudis. “What they’ve done to slow any re-action to the Arab Spring is to throw money at people, with some success,” Seznec says.

Persistent unemployment could have broad repercus-sions. Though there are some

king abdullah, shown here, has to balance the quest for modernity with religious strictures.

idle yoUthPeople under the age of 30 make up two-thirds of Saudi Arabia’s population and have the highest unemployment rate. Among Saudis, total joblessness is 10 percent.

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* Saudi Arabian citizens. Sources: Bloomberg, Central Department of Statistics and Information of Saudi Arabia

59%

32%

27%Unemployed

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28 Million SaU d i C i t i Z e n S

66%Under 30

ag e 2 0 –2 9

tota l l a b o r fo r C e *

4.3 Million

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own Arab Spring anytime soon, social activist Abdullah Hamidaddin says. For one thing, he says, there isn’t a critical mass of people in economic pain, be-cause strong family networks ensure financial support for the unemployed. And the Saudi government’s largesse means that people have an interest in maintaining the status quo, he says. For instance, the government is now

paying 2,000 riyals ($530) a month to more than 700,000 unemployed Saudis for a year while helping to train them to find work. “People here feel that the government is a cash cow that should be preserved,” Hamidaddin says.

Even if there were dissent, political

is 78—making succession a potentially contentious issue. There’s no obvious candidate to rule the country among Abdul-Aziz’s grandsons. The Allegiance Commission, made up of 35 represen-tatives of founder Abdul-Aziz’s descen-dants, is charged with selecting a king or crown prince if either dies or be-comes incapacitated. It’s in the ruling family’s interest to avoid conflicts over the transfer of power, says Theodore Karasik, director of research at the

parties are banned, so the country lacks networks to mobilize people. An ab-solute monarchy, Saudi Arabia is the least democratic country in the Middle East, according to the Economist Intel-ligence Unit’s 2011 Democracy Index.

The country’s rulers are aging—King Abdullah, a son of the country’s founder, King Abdul-Aziz Al Saud, is 88 this year, while Crown Prince Nayef

Dubai-based Institute for Near East and Gulf Military Analysis. “Almost everybody recognizes that keeping a smooth succession process guarantees stability,” he says.

The Al Saud family remains in con-trol with the blessing of religious lead-ers. The kingdom follows an ascetic strand of Islam that emerged in the 1700s based on the doctrines of cleric Muhammad bin Abdul-Wahhab. Key religious positions are still held by Ab-dul-Wahhab’s descendants, allowing them to influence policy. Because of that pact, the ruling family finds itself constantly playing a balancing act in its quest for modernity.

At times, the balance can tip into the incongruous: Until recently, for in-stance, laws forbidding women to work in mixed-gender malls meant that they had to undergo the embarrassment of buying lingerie and makeup from men. Seeing salesmen stretching panties to show how widely they can fit, arguing with women about bra sizes, suggest-ing flimsy nightgowns and thongs or smearing hairy wrists with eye shadow was jarring amid the kingdom’s strict gender segregation rules, which re-quire women to cover themselves in public with black cloaks called abayas.

In June, King Abdullah decreed that salesmen should be removed from stores that sell “women’s necessities,” opening up employment opportuni-ties for women that were unthinkable 10 years ago.

“This job is fantastic,” says Lulu al-Mihdar, 23, who was recently hired by Nayomi lingerie store at a mall in Jed-dah. Across from Nayomi, six female vendors at cosmetics store Mikyajy huddle together, cutting each other off in midsentence in their eagerness to talk about their new careers. A “Fam-ilies Only” sign on the window indi-cates men unaccompanied by women are banned from the premises. “Dur-ing training in Dubai, my trainer used to say I should raise my voice, but I was too shy,” Laila Sultan, 29, says. “Now, people across the hall can hear it.”

saudi arabia last year banned men from selling ‘women’s necessities’ such as lingerie, opening up the jobs for women.

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With an unemployment rate of 55 percent for women aged 20 to 29, it’s not surprising that Sultan and her friends jump at the few chances offered to them. Keeping their male cohorts happily employed is trickier.

The under-30 generation faces a big gap between expectations and job pros-pects, says Ibrahim Warde, adjunct pro-fessor of international business at the Fletcher School of Law and Diplomacy at Tufts University. “Young Saudis feel that they are not getting their rightful share of the national wealth,” Warde says. “They have been relatively pam-pered by a generous welfare system and

will not take just any job.” At the same time, he says, “Their anger is stoked by the fact that they are surrounded by wealth and all its manifestations.”

Some 90 percent of the private-sec-tor workforce in Saudi Arabia is for-eign. It’s rare to find a laborer, waiter or construction worker who’s Saudi: They tend to prefer desk-bound managerial positions. Mohammed al-Mushayqeh, one of the three former schoolmates in Riyadh, quit his job as an admin-istrative assistant in a private com-pany two years ago because his career wasn’t moving forward. With only a high school degree, al-Mushayqeh, 25, was offered two positions at a govern-ment-organized job fair: cashier in a store or shelf stocker in a supermarket.

“They were silly offers,” he says. “I want something prestigious.” Despite the embarrassment of being financially dependent on his parents, he’s holding out for a better offer.

So is Abdul-Rahman Abdullah, 27, who quit his job as a supervisor at a tele-communications company three years ago because he couldn’t put up with the 10-hour shifts. “There wasn’t any time left to do anything else,” he says. “For-eigners come here without their fami-lies just to work and make money. But Saudis have family obligations.”

Abdullah, who has a high school di-ploma, says he has been offered “bad” jobs: as a waiter, security guard and ca-shier. “In my previous job, I used to sit at a desk in my own office,” he says. “I want the same standard of work.”

The Labor Ministry is trying to make hiring Saudis, even those without skills, more attractive to employers. Under the new Nitaqat Saudization program, companies will get a rating based on whether they meet their quotas for hir-ing local workers. Those rated “green,” or excellent, will be able to benefit from various ministry services, such as the transfer of visas and issuance of new visas. Those rated “red” won’t. While previous programs imposed a blanket quota of 30 percent Saudis on all com-panies, Nitaqat bases the quotas on the

type of work, the number of job seekers and the size of the business.

“Nitaqat is an improvement on pre-vious efforts,” says Paul Gamble, head of research at Riyadh-based Jadwa In-vestment. “It’s unreasonable to as-sume the same quota for construction and financial services, as was the case previously.”

Labor Ministry officials consulted business executives before announc-ing the new quota system. In the past, “people that did reach the quota didn’t get anything in return,” says Lama al-Sulaiman, vice chairman of the board of directors at the Jeddah Chamber of Commerce and Industry. Now, she says, the government is offering executives a deal: “Employ Saudis and see how much better your life is going to be with all government agencies.”

To make employing locals more pal-atable, the government is also helping pay for companies to train Saudis for new jobs—in some cases positions they never dreamed of taking. Before joining Riyadh Polytechnic Institute last year,

‘Employ Saudis and see how much better your life is going to be,’ says lama al-sulaiman of the Jeddah Chamber of Commerce.

growth withoUt jobSExpansion in gross domestic product and exports hasn’t helped reduce unemployment among young Saudi citizens.

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5

6 %

4

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2007

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Sources: Bloomberg, government data

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Abdul-Karim al-Saeed, 24, thought his only job option was being boss at a pri-vate company. Then he learned weld-ing at the institute and discovered he enjoyed it.

Abdallah Obeikan, chief executive officer of Obeikan Investment Group, a maker of packaging and educational products, set up RPI in 2009 in part-nership with the government’s Tech-nical and Vocational Training Corp., which provides infrastructure and accreditation. Another government institution, the Human Resources De-velopment Fund, financed by fees com-panies pay to bring in foreign laborers, pays 75 percent of the training costs and salaries. OIG covers the remaining 15 million riyals a year in costs.

The two-year program targets C-average students, who start with intensive classes in English and com-munication skills. Eight months into the program, they choose from among eight specializations needed at OIG’s 18 factories, such as printing and packag-ing, sales and finance. The trainees are considered company staff.

Moayyed Hisham was hired in

October 2010 although he had no qual-ifications and no clue what kind of work he’d like to do. Obeikan pays him 1,500 riyals a month, plus benefits, and en-rolled him in RPI, where he’s now study-ing electromechanics, which could lead to a job as a machine operator or a qual-ity or maintenance technician.

“I started with zero English and nothing in terms of skills,” says Hisham, a slim, 20-year-old man dressed in the institute’s navy-blue uniform. “To-day, I feel I have a future.” Hisham and al-Saeed both say they’ve gotten per-sonal benefits from the English classes, too. Al-Saeed can now watch Amer-ican movies without subtitles, while Hisham can now speak with strangers abroad in English.

Obeikan says his company has now exceeded its Saudization quota of 20

percent and is starting to see the ben-efits in the form of less bureaucracy. “If you are in the red zone, you lose all your non-Saudi employees because they will not renew their residencies,” he says. “You shut down.” Of Obeikan’s 3,600 employees in the kingdom, 34 percent are Saudi.

The government isn’t just train-ing high school graduates. It has ear-marked a total of 169 billion riyals, about a quarter of the 2012 budget, for education and training. The money will be spent to build 742 new schools and 40 new colleges and to create cur-riculums that produce graduates with marketable skills. About 20 billion ri-yals have been allocated for the more than 120,000 Saudi students studying abroad to pay tuition, medical insur-ance, a stipend and a ticket home once a year. Saudi Arabia’s spending on ed-ucation is the highest in the Middle East, according to the United Nations Educational, Scientific and Cultural Organization.

Some Saudis say that no matter how comprehensive the plans to ameliorate

Outlets for youth include job training offered by abdallah obeikan’s company, right; comedy performed in an empty pool at a private home, below left; and women’s basketball team Jeddah United.

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of thousands of viewers to online shows such as the two produced by Kaswara al-Khatib, creative chairman of Full Stop Advertising, which satirize government bureaucracy and aspects of daily life such as excessive shopping during Ra-madan. “Instead of being out on the streets, now they have something to do,” al-Khatib, 42, says of his viewers.

At a rooftop restaurant in Jeddah, 29-year-old Khaled Yeslam finds lit-tle to laugh about. He blows a cloud of smoke from a pipe whose base is filled with red-tinted water and then launches into a tirade about the re-strictions youths face. Yeslam, who’s studying English in New York, vents his frustrations on Twitter, where his posts have drawn more than 21,000 fol-lowers. “I want to see my kids falling in love, dating, going out with their soul mates,” Yeslam says as the sweet smell of tobacco drifts in the cool air. “I re-ally hope that the next generation will be normal like the rest of the planet.”donna abU-nasr covErS middlE EAStErn govErnmEntS At bloombErg nEwS in bAhrAin. dAbunASr@bloombErg.nEtwith ASSiStAncE from dalIah merzaban in dubAi.

To write a letter to the editor, send an e-mail to bloombergmag@bloomberg.net or type mag <go>.

One night in January, about 60 Saudi youths sit on stools, armchairs and a carpet inside an empty pool on the grounds of a Jeddah home, where co-medians poke fun at some of the quirks that mark their culture. Standing in the deepest part of the pool, one of the men jokes about how the bare arms, legs and chests of women in magazines are blacked out by censors. Laughter rises from the bottom of the pool as one co-median says: “I bought a Spice Girls CD, and I was surprised to see they were wearing abayas.”

Humor has also attracted hundreds

khaled Yeslam hopes that his children will live in a Saudi Arabia that’s ‘like the rest of the planet.’

For a snapshot of Saudi Arabia’s economy, type FXIP SAR <Go> on the Bloomberg Professional service and click on the Economics tab. Type OTC SAR <Go> to track the country’s markets. Functions for the Market is a new function that each day displays three stories that dig into market develop-ments. For a story on the relationship of spare OPEC production capacity to oil prices, type FFM <Go> and click on the All Stories button on the red tool bar. Tab in to the NArrOw SEArCh field, enter OPEC, press <Go> and click on the March 14 story to display it. JON ASMUNDSSON

Finding data on Saudi arabia

bloomberg tıps

unemployment, more needs to be done for youth. There are almost no places where they can have fun: Movie theaters are banned, malls are off-limits to men unaccompanied by a female relative on weekends and even restaurants are seg-regated. Many youths head to the des-ert to escape. On a Friday afternoon in the Thumamah Desert outside Riyadh, young Saudi men, some with traditional red-and-white-checkered headdresses thrown over their shoulders, drive all-ter-rain vehicles across the sand dunes. Every now and then, they stop and press on the brakes and the accelerator to spin their wheels. The aim is to see who can shoot the tallest fountain of sand into the air.

Though men wear identical white robes in public and women wear the black abayas, Saudis aren’t as homog-enous as they first seem. Some are lib-erals who want more freedom, while others are conservative, pushing for more restrictions. To survive, liberal youths live in a parallel, underground world, where they can experiment with freedom away from the eyes of the re-ligious police who are charged, among other things, with ensuring the genders don’t mix. Home cinemas make up for the lack of movie theaters, long phone conversations pass for dating and those who want to mark Valentine’s Day—which is banned—can find shops that sell red velvet pillows, cats with hearts dangling from their mouths that meow when pressed and puppies hugging a heart that says “I love you.”

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