World Bank findings and employer concerns put skills transfer, production efficiency and business returns at the centre of Saudi Arabia’s next workforce challenge.
Saudi Arabia’s decision on November 8 to raise the mandatory share of Saudi nationals in 94 private-sector technical engineering occupations to 35% from 30% is placing renewed attention on workforce productivity as the Kingdom enters the final four years of Vision 2030.
The Ministry of Human Resources and Social Development, acting with the Ministry of Municipalities and Housing, set May 9, 2027 as the implementation date. The requirement applies to private-sector entities employing at least five workers in the designated professions, including electrical, mechanical and civil engineering technicians.
The decision follows an October World Bank study highlighting substantial workforce skills gaps. According to published findings from a survey of 3,016 Saudi private-sector establishments conducted in 2024, 61% reported losing potential profits because of insufficient skills, while 55% cited missed business opportunities and 48% difficulties introducing new technologies or products.
The findings describe reported business constraints, not independently measured financial losses, and predate the new localisation decision.
Saudi Arabia’s own Vision 2030 Annual Report provides another measure of the challenge. In 2025, 47.41% of technical and vocational graduates secured employment within six months, below the year’s 56.2% target and the 65% objective for 2030.
Together, the indicators underline the importance of converting investment in education and national employment into practical capabilities that businesses can use productively.
From Education to Operational Competence
Saudi Arabia has invested extensively in developing its national workforce. The overseas scholarship programme launched under King Abdullah in 2005 expanded access to international university and postgraduate education, strengthening the Kingdom’s pool of qualified professionals.
Yet employers continue to distinguish between academic qualifications and experience in technically demanding operations.
A business owner in Saudi Arabia, speaking to The Middle East Observer by telephone on condition of anonymity, acknowledged the progress made in developing an educated national workforce, particularly within government institutions.
He said private businesses nevertheless continued to value experienced expatriate workers for their operational flexibility, ability to handle multiple assignments and responsiveness to performance-related financial incentives.
His observations reflect one employer’s experience rather than evidence of systematic productivity differences between Saudi and foreign workers. Saudi labour legislation also requires eligible overtime to be compensated, regardless of nationality.
The businessman raised a further concern: whether localisation always translates into Saudi nationals performing the technical work associated with their positions.
He described mobile-phone servicing arrangements in which a Saudi employee receives a customer’s device while a foreign technician carries out the repair.
MEO has not independently verified that account. However, Saudi newspaper Al Watan reported comparable arrangements on November 3. Outsourcing repairs does not automatically establish a regulatory violation, and mobile-phone servicing falls outside the 94 engineering occupations covered by the latest decision.
The example nevertheless highlights the distinction between formal employment and genuine technical responsibility.
Significantly, the ministry’s new procedural guide specifies that localisation requirements concern both occupational classifications and the actual work performed.
The Business Test: Quality, Costs and Productivity
The increase to 35% creates different obligations depending on existing workforce composition.
A company employing 51 covered technicians, including 16 eligible Saudi nationals, would need 18 to satisfy the new threshold, assuming its total workforce remains unchanged.
For employers already close to compliance, the adjustment may be limited. Others could face more substantial recruitment, training and operational challenges.
The ministry has announced support programmes covering recruitment, qualification, training, employment and job stability.
But the longer-term economic return will depend on how effectively companies develop technical competence, transfer specialist knowledge and integrate Saudi professionals into productive operations.
Training expenditure and supervision requirements may initially increase costs. Over time, stronger domestic expertise, better employee retention and reduced dependence on imported specialists could improve business resilience and competitiveness.
The appropriate measures extend beyond employment numbers to output per working hour, technical quality, equipment reliability, rework rates and the cost of delivering products and services.
These indicators can help establish whether localisation is strengthening productive capacity rather than simply changing workforce composition.
Vision 2030: Prioritising Production and Economic Returns
Saudi Arabia has already achieved considerable progress in expanding private-sector activity.
Its private sector accounted for 51% of GDP in 2025, exceeding the year’s 47% target and moving towards the Vision 2030 objective of 65%.
However, non-oil exports represented 22.14% of non-oil GDP, below the 2025 target of 38% and the 2030 objective of 50%, illustrating the remaining challenge of strengthening internationally competitive output.
The figures measure different dimensions of economic transformation and do not establish that localisation is responsible for the remaining gaps.
As 2030 approaches, maximising production efficiency, quality and investment returns should take precedence as measures of economic success. Achieving these outcomes requires businesses to retain experienced Saudi and expatriate technical expertise, within applicable employment rules, while systematically closing the workforce skills gaps identified by the World Bank through training, knowledge transfer and the productive integration of Saudi professionals.
This approach would protect existing operational capabilities while expanding the pool of qualified national talent, enabling companies to increase output, improve competitiveness and extract greater returns from their investments in people and technology.
The 35% localisation requirement remains a binding obligation. However, the employment percentage should be regarded as a secondary measure of economic achievement, rather than an end in itself, with greater weight given to demonstrable technical competence, higher-value production and sustainable business performance.
The ultimate test of Saudi Arabia’s progress towards Vision 2030 will be its ability to combine existing expertise with an expanding skilled national workforce to unlock the economy’s full productive potential — raising quality, efficiency, competitiveness and returns while advancing the Kingdom’s industrial diversification and non-oil growth targets.
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