Understanding Saudization and the Impact on Foreign Workers

Saudization, officially known as the Saudi Nationalization Program or Nitaqat, is a government initiative aimed at increasing the employment of Saudi nationals in the private sector while reducing the country’s reliance on foreign workers.

Implemented by the Ministry of Human Resources and Social Development (MHRSD), this policy is a cornerstone of Saudi Arabia’s Vision 2030, which seeks to diversify the economy and foster sustainable growth by empowering local talent.

Background and Objectives

Saudization was first introduced in 1985 as Saudi Arabia’s economy expanded, attracting large numbers of expatriate workers. The government recognized the need to ensure that Saudi citizens, particularly the young and growing population, had access to employment opportunities in both public and private sectors.

By the early 2000s, it became clear that reliance on foreign labor was unsustainable, especially as the number of Saudi job seekers increased and unemployment among nationals became a pressing issue.

The primary objectives of Saudization are to:

• Reduce unemployment among Saudi nationals.
• Enhance the skills and employability of the local workforce.
• Diversify the economy by increasing Saudi participation in key industries.
• Ensure long-term economic and social stability by reducing dependence on expatriate labor.

How Saudization works

Saudization operates through a quota system, where companies are required to employ a certain percentage of Saudi nationals based on their industry, size, and the type of business activity.

The Nitaqat program categorizes companies into tiers: Platinum, High Green, Mid Green, Low Green, and Red, based on their compliance with these quotas.

Companies that meet or exceed the required quotas are rewarded with incentives such as preferential access to government contracts, while those in the Red category face penalties, including restrictions on hiring foreign workers, fines, and difficulties in renewing essential business documents.

Certain roles are exclusively reserved for Saudi nationals, such as customer service, sales, human resources, and several technical and managerial positions. For example, in companies with more than nine employees, at least one must be a Saudi national; for larger companies, the Saudization rate can be as high as 30% or more, depending on the sector.

Expansion and recent developments

In recent years, the scope of Saudization has expanded significantly. As of 2025, the MHRSD has extended the policy to cover 269 professions, including dentistry, pharmacy, accounting, and engineering.

Sectors such as project management, procurement, sales, shipping, freight brokerage, decor, and women’s tailoring have also been included. This expansion reflects the government’s strategic push to diversify the economy and increase Saudi participation in a broader range of industries.

The MHRSD provides procedural guides and incentives through the Human Resources Development Fund (HADAF) to support companies in meeting Saudization targets. Training and development programs are also encouraged to help Saudi nationals acquire the skills needed for these roles.

Saudization impact on foreign workers

The implementation of Saudization has had profound effects on foreign workers in Saudi Arabia. The policy has led to a reduction in available positions for expatriates, particularly in roles now reserved for Saudi citizens.

Thousands of expatriates, especially from countries like India, have lost their jobs or seen their employment prospects diminish as companies prioritize hiring Saudi nationals to meet quotas.

For example, in the retail and hospitality sectors—traditionally dominated by foreign workers—positions such as customer service executive and accountant are now exclusively reserved for Saudi nationals.

In supermarkets and catering establishments of certain sizes, up to 50% of managerial roles must also be filled by Saudis.

This shift has caused significant disruption for expatriate communities, particularly those from South Asia, who have long relied on employment opportunities in Saudi Arabia.

The financial implications for companies are also notable. Saudi nationals often command higher minimum wages compared to expatriates, which increases operational costs for employers. This wage disparity, coupled with the requirement to invest in training and development for Saudi employees, can make hiring foreign workers less attractive for businesses.

The policy has had a pronounced impact on Filipino workers, who have long been a significant part of Saudi Arabia’s expatriate labor force, particularly in sectors like healthcare, hospitality, and domestic services.

With the expansion of Saudization to cover 269 professions—including many roles previously dominated by foreign workers—Filipinos have faced increased competition for jobs, reduced opportunities in newly reserved positions, and heightened job insecurity.

Many have been compelled to seek alternative employment within the Kingdom, often shifting to less-regulated or lower-paying roles, or returning to the Philippines if they are unable to secure new work permits.

In response, Filipino workers and recruitment agencies have adjusted by focusing on upskilling, targeting sectors with lower Saudization quotas, and exploring opportunities in emerging industries or roles that still accept foreign labor.

Challenges and criticisms

Although Saudization has achieved some success in increasing employment among Saudi nationals, it has also presented challenges. Many companies struggle to find qualified Saudi candidates for technical and specialized roles, leading to skills shortages in certain sectors.

The rapid expansion of Saudization targets has placed additional pressure on businesses to adapt their workforce strategies, sometimes resulting in operational inefficiencies or reduced competitiveness.

For foreign workers, the policy has created uncertainty and instability. Many expatriates have been forced to return to their home countries after losing their jobs or being unable to renew their work permits.

The dual impact of the COVID-19 pandemic and lower oil prices has further exacerbated job losses among foreign workers.

Broader economic and social implications

Saudization is part of a broader effort to transform Saudi Arabia’s economy and society. By increasing the participation of Saudi nationals in the workforce, the government aims to create a more inclusive and self-reliant economy.

The policy is expected to boost local consumption, increase the share of income generated by Saudi nationals, and reduce the outflow of remittances to foreign countries.

However, the transition has not been smooth for all sectors. The retail industry, for example, has experienced staff shortages as demand for Saudi workers often exceeds supply. Employers are increasingly offering higher salaries and better benefits to attract local talent, which can drive up costs and affect profitability.

Conclusion

Saudization, as embodied by the Nitaqat program, is a transformative policy that is reshaping Saudi Arabia’s labor market. By prioritizing the employment of Saudi nationals, the government aims to reduce unemployment, diversify the economy, and create a more sustainable future for its citizens.

While the policy has created new opportunities for locals, it has also led to significant challenges for foreign workers and businesses that rely on expatriate labor.

As Saudization continues to expand and evolve, companies and foreign workers must adapt to the changing landscape, balancing compliance with the need to maintain operational efficiency and competitiveness in Saudi Arabia’s dynamic economy.