RIYADH: Saudi Arabia is changing tack in its labour reforms, softening the blow to companies with money for subsidies and training while trying to lure Saudis to the private sector with more attractive working conditions.

A draft law would limit working hours at companies to entice new employees and adjustments are being made to recent rules. Meanwhile the government is spending billions of riyals to help pay Saudi workers’ salaries, and is setting aside more money to smooth the path of the most sweeping economic reforms in decades.

Authorities launched labour reforms in 2011 after the Arab Spring uprisings to head off political unrest by reducing unemployment. They also want to lower the cost to the economy of Saudis’ dependence on comfortable but expensive state jobs.

The reforms so far have slowed the economy and slashed profits at some firms, interfering with other policy goals such as diversifying the economy beyond oil. They boosted the number of Saudis in the private sector, but many workers have not been effective or only stayed in their jobs for a few weeks.

So the government is now adjusting its strategy in an effort to improve the system for both companies and employees.

“Our intention is not to harm business — our intention is to get Saudis hired and reform the market,” Ahmed al-Humaidan, deputy minister for labour policies, told Reuters.

“If this involves costs, we are willing to share them.”

Reforms in the past three years have focused on pressing firms to employ more Saudis, by making it harder and more costly to hire foreign staff.

Alongside a population of about 20 million Saudi citizens, roughly 10m foreigners from south Asia and elsewhere work in sectors such as construction, transport and services, receiving salaries that most Saudis would consider too low.

That arrangement is fine when oil prices are high and the government is flush with money to create state jobs for its citizens. But the uprisings elsewhere in the Arab world underlined how vulnerable the country would become if a sustained drop in oil prices left it unable to employ Saudis.

The draft law on working hours aims to make private companies more attractive by limiting the working week to 40 hours, down from 48 in many firms, and increasing the weekend to two days from one. State workers have a 35-hour work week plus generous pensions and health benefits.

Any reform effort in Saudi Arabia involves overcoming a sluggish, conservative state bureaucracy. So the government’s determination to proceed with labour reform has been striking — a sign that it views the issue as one of long-term survival.

Since 2011 the reforms have been led by Labour Minister Adel Fakieh, a former chairman of private Saudi food maker Savola Co who has a reputation for finding his way around bureaucratic obstacles.

But prominent Saudi economist Abdulwahab Abu Dahesh said the latest measures marked a recognition among officials that the “electric shock” approach of the initial labour reforms, although effective, needed to be softened.

Published in Dawn, September 5th, 2014