SAUDIZATION AND THE SAUDI ARABIAN KINGDOM DEVELOPMENT Essay

SAUDIZATION AND THE SAUDI ARABIAN KINGDOM DEVELOPMENT - Essay Example Saudization was an initiative from Saudi Government to encourage the participation and employment of Saudi Nationals in the private sector of the country. This was started during 2006 which were started in order to ensure that local Saudis get jobs in private sector. Government made the condition that if private sector companies do not hire the locals, they will fail to get the government contracts. Initially government set the level of 75% wherein 75% of the employees will be locals however, in actuality, the figures are relatively low. Human resource development (HRD), according to Harbisson and Myers (1964, cited in Abdulai, 2000), is the process of increasing the knowledge, skills and the capacities of all people in society. Therefore, when there is an increase in the level of skills possessed by individuals, an economy will invariably benefit and develop faster. In case of Saudization, this is more critical because it requires a completely new and strategic approach towards HRM in order to ensure that the locals are engaged and employed by the local firms in order to upgrade their skills and reduce the dependence of country on foreign workers. This essay will discuss as to how the process of Saudization can help to create jobs and support the national economy of Saudi Arabia, a country in the Middle East. Also, the issue and its relationship to the development of the economy will be discussed, as well as challenges that may be faced. Recommendations will therefore be made based on the research findings. Saudi Arabia and its Economy The Kingdom of Saudi Arabia has a centrally planned economy. It’s an oil-based economy with steady government control over major economic activities. The country owns 25% of the world’s confirmed petroleum reserves and ranks as the world’s largest petroleum exporter (OPEC, 2009). The petroleum sector of the Saudi economy accounts for roughly 75% of budget revenues, 45% of the gross domestic product (GDP), an d 90% of export earnings. Approximately 4 million foreign workers play an important role in the oil and service sectors, contributing to the Saudi economy (Gianos & Lusignan, 2003). In the earlier years, discussions were focused on the extent to which Saudi Arabia is prepared to increase market admittance for foreign goods and services and the length of time to become fully compliant with World Trade Organization (WTO) obligations. In April 2000, therefore, the government established the Saudi Arabian General Investment Authority to encourage foreign direct investment in Saudi Arabia, and as of November 2005, Saudi Arabia was formally permitted to join the WTO (Al-Asmari, 2008). The Saudi Arabian economy is flooded with family businesses which constitute the backbone of the economy. According to Davis et al. (1997) the family organisations constitute 90% of the trading activities in the Gulf region and 95% of the total organizations in the country. This percentage is relatively high because in other regions of the world, the percentage is between 65% and 80% (Davis et al., 1997). Also, according to the Saudi Arabian Monetary Agency (SAMA) (2006), the overall number of such family organizations is estimated to have reached