Saudi Arabia

Someone asked my opinion on the the Nitiqat or Saudization program. This is a penalization and reward system in Saudi Arabia for companies based on the number Saudi employees and other factors. As a good friend (who happens to be Saudi) once said, it is polite to not give opinions unless asked. But as someone who cares about the country and sees potential, since I was asked, here are my humble observations: First, taking decision making power from those actually creating jobs and putting it in the hands of politicians who do not create jobs it is likely a problem. Some economic analysis indicates that the best role of government for economic development is minimal: stay out of the way and allow the people who create jobs do what they do best. One universal law of government involvement in things (other than basic defense of life, property, contracts and borders) is the law of unintended consequences. For jobs to grow an economy needs to grow, this program will slow and harm growth. The best job creators are business owners both small ones and the largest trading families. The major families know what they are doing, they KNOW their industries and the market and have already grown and created jobs. What the Nitiqat effort essentially gambles on is that a tiny handful of politicians know what is best for growth over all the entrepreneurs and CEOs in the Kingdom. It is possible that they do not. Only the actual business owners know best what will grow their business and serve customers. It could be an unwise gamble to second guess them. One should ask when this type of nationalized central planning ever worked in the human history of economics. The fact is, if someone is Saudi and male, he can have a job if he wants it. All the legislation in the world won't change the desire to have that job. The best way to change that desire is to create fulfilling, interesting jobs that people look forward to and which serve their basic human needs. Solutions 1) Give flexibility to those creating jobs -- look at the great trading families and ambitious smaller entrepreneurs and look at what has worked. Give them freedom to grow businesses the way they know is right. 2) Increase options and economic freedom -- one of the great areas of progress in recent efforts is the new employment from the success of allowing women to work in lingerie stores - this was not the type of government action where companies were told by the State what a politician thought would cause growth: it is the opposite, it was where MORE freedom and less restriction allowed growth -- this was great work by the Ministry of Labor and others involved. 3) Look at countries in the world with central planning such as communist countries and those with economic freedom and see what has worked — look at examples of those countries where heavy government intervention has occurred and see the results -- scientifically its likely that an alternative approach would have the best chance of working and those efforts focused on more freedom and less regulation will be those which succeed. 4) Use the principles of free market economics to spur growth and focus on the most positive opportunities. Ask companies what roadblocks are preventing growth and remove those roadblocks. Add no new hindrances. In case anyone reading this doesn't know me, I'm a tireless defender of Saudi Arabia, you can search for my TV appearances and articles to this effect. I also have no personal disadvantage from Nitiquat, I'm not employed in Saudi and unaffected personally-- so I am not criticizing because I dislike the Kingdom, on the contrary I only criticize because I was asked my opinion and because I care so much and see so much potential for this great country that I've grown so fond of. I also don't mean any offense to Saudis involved in the process. In my home we often speak frankly and in a way that might be considered offensive on matters of economics and politics. My intent is not to offend anyone.

• published: 08 Aug 2013
• views: 6442