Risky business

Saudi Arabia is anxious for its citizens to have jobs and tackle the social pressures that come with unemployment, but a big job-creating private sector push is so far unlikely to yield positive results.

Facing an increasingly younger and larger population, the world's No. 1 oil exporter is spending an estimated $130bn, or nearly 30 percent of its annual economic output, in government handouts to quell any grievances that could result in a challenge to the conservative kingdom's status quo.

"The main challenge facing Saudi Arabia is unemployment and youth unemployment in particular and that is the main source of instability going forward," said Farouk Soussa, Middle East chief economist for Citi.

"What we have seen since the packages were announced is a greater urgency to confront the labor market distortions."

A jobless rate of around 10.5 percent is a pressing issue for the country, as the Saudi population grows at an average 2 percent every year, five times the rate of the developed world.

Saudis make up 69 percent of the total population of 27.6 million people, while the rest are foreign workers. Almost 70 percent of Saudis are under the age of 30.

Despite its massive oil wealth  Saudi Arabia owns a record $468bn in foreign assets - the country has found it hard to trim unemployment.

That is because of an outdated school system focused on religion producing graduates without the skills to compete for private sector jobs, a shortage of cushy government jobs and companies preferring cheaper and skilled imported labor.

Dozens of university graduates and teachers staged rare protests in two Saudi cities in April, demanding jobs and better wages in the kingdom, where dissent is quickly stamped out.

Popular uprisings in Tunisia and Egypt, and protests sweeping through neighboring Bahrain, Oman and Yemen, have emboldened those seeking change in the kingdom with minor sporadic protests seen in March and April.

In a bid to ease tensions, King Abdullah unveiled in March and February measures including a new $533 monthly unemployment benefit, higher public sector salaries, the creation of 60,000 security positions and construction of 500,000 new houses.

The Saudi Labour Ministry has announced a plan to hire 1,000 inspectors to enforce an updated system of quotas for Saudi employment in private companies, which classifies firms by how they fulfill the rules and sets penalties for laggards.

However, analysts doubt authorities would be able to effectively monitor some 1.2 million registered businesses in the kingdom, especially smaller ones.

"It's creating an additional burden on the private sector ... and it could end up as being another failure," said John Sfakianakis, chief economist at Banque Saudi Fransi. "You could see side-stepping of the rules ... and additional corruption."