India expresses concerns to Saudi Arabia over 'Nitaqat'

April 30, 2013

India has expressed its concerns to Saudi Arabia over the possibility of job losses of a large number of Indian workers in the kingdom because of a new labour law (Nitaqat).
Both the nations have set up a Joint Working Group (JWG) which will deliberate on framing a Memorandum of Understanding, which is to be a comprehensive document guiding all aspects of India-Saudi labour relations.
What is Nitaqat?

The Nitaqat is a new policy being placed by the Saudi government in order to reduce the unemployment rate among Saudi citizens.
This policy makes it mandatory for Saudi Companies to reserve 10 percent of jobs for Saudi nationals.

Why Saudi Arabia is implementing such a policy?

Saudi Arabia’s economy depends heavily on the existence of a large proportion of expatriates working for various establishments in the private and public sector.
However, unlike the other states of the Gulf Cooperation Council (GCC), Saudi Arabia has large number of unemployed citizens, which creates a state of resentment among those citizens.
As per estimates, the unemployment rate among Saudi nationals has reached 12%. More than 6.5 million non-Saudis are working in the private sector of the Kingdom compared to 7,00,000 Saudis.

Is this type of policy a new concept?
No. This is not a new concept. Initially in 1994, the Saudi government had started a system called ‘Saudization’ with the same purpose of reducing unemployment of its citizens. The programme required the appointment of Saudi citizens of the total workforce of all the establishments existing in the Kingdom. However, due to several reasons, the system could not be implemented. This percentage varied in accordance to the activity of the establishment. However, due to several reasons, the system did not achieve the desired objectives.
How will Nitaqat work?

‘Nitaqat’ which means ‘Ranges’, divides the Saudi labor market into 41 activities and each activity into 5 sizes (Giant, Large, Medium, Small and Very Small) to have in total 205 categories.

It classifies establishments into following ranges:

Excellent : establishments which have highest localization ratio in their workforce
Green: establishments which have high localization ratio
Yellow : low localization ratio
Red : lowest localization ratio

Effects of classification on different ranges:

Those establishments which will be in Excellent and Green ranges will have advantages and rewards while those in Yellow and Red will be on the receiving end.

Some key advantages to Excellent or Green ranges:

Eligibility to issue work visas for the development of new business
Ability to contract with non-Saudi workers from the establishments of the Red and the Yellow ranges in the Saudi market.
This will result in granting the establishments that have achieved high rates of localization the opportunity to appoint non-Saudi workers with no need to issue new work visas, which helps to rationalization the recruitment and employment of additional non-Saudi labor.

Main disadvantages to Red and Yellow ranges:
They will be forced to expedite the localization of the jobs within the establishments to upgrade their range to the Green or the Excellent range to maintain the expats they have. Otherwise, the establishments located in these ranges – Red and Yellow ranges – will be denied from obtaining new or alternative visas, lose control over the non-Saudi workers in the establishment as they will have the freedom of contract with a new employer and will not be allowed to obtain new work visas to appoint new-non-Saudis workers or to set up a new subsidiary or branch.
Recent addition in Nitaqat law:

Expatriate worker should work only under his sponsor and the worker is not meant to perform any job other than the one mentioned on his job card have raised much panic among the expatriate workers.

What are India’s concerns over this policy?

At present over 2 million Indian nationals are working in Saudi Arabia. Implementation of this law will lead to job losses and reduced job opportunities for Indians too.

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