Restructure of Saudi Arabia’s job market picks up speed

The military shake-up in Saudi Arabia may be grabbing headlines around the world, but another shift will make a dramatic impact in the longer term.
Thanks to two new economic policies approved last month, an uplift for the country’s lagging private sector economy is on the cards. 
Both rules — one creating a structure for bankruptcy and another allowing women to start businesses without male permission — should incentivize new business startups. Small and medium-sized businesses are the biggest drivers of new jobs in advanced economies and these policies will help to further decentralize the economy, increasing job growth.
The bankruptcy rules create a safety net for the entrepreneur, reducing the enormous risk involved in starting a business. Business owners are, by nature, risk takers, but the chances of failure are high each time a venture is started. For example, in the UK and in Germany, only about 40 percent of businesses started in 2010 survived five years. 
The rules are meant to protect entrepreneurs in case of failure, through formalizing the process by which a failed business repays debt and forgiving some debt. Moreover, this is healthier for an economy than centralized economic planning because the government is not picking winning and losing businesses. Rather, bankruptcy rules set standards for the market.
When failure is less onerous, entrepreneurs are more willing to take chances and investors are more likely to back new ventures. Even though many new businesses fail, private sector entrepreneurship is a primary driver of job creation and the hallmark of a vibrant and balanced economy. In the EU in 2015, 3.9 million jobs were created in 2.6 million new businesses. Small and medium-sized businesses create opportunities for many people in addition to the owners.

Making it easier for women to start and run their own businesses will pave the way for new private sector jobs

Ellen R. Wald

The other economic move — permitting women to start businesses on their own — is a particularly positive sign for the economy, as it will unlock huge potential. The population of educated women in the Kingdom has grown exponentially over the years, especially since King Abdullah committed to sending large numbers of Saudis (men and women) abroad to college. Also, the Saudi university system has grown. 
More Saudi women graduate from university today than men, but Saudi women are five times more likely to be unemployed than men. These educated women need career opportunities to meet their aspirations and fulfill the economy’s demands. As was reported in a recent Financial Times article, Saudi women seeking work have expressed disappointment at the limited availability of positions.
The government recently began efforts to increase the number of Saudi women in the workforce by opening new government jobs for women in passport control, the military and in traffic control. More than 100,000 women applied for 140 news jobs at Saudi Arabia’s passport office within a week of the jobs being listed online. Restrictions have been lifted that hampered women’s ability to work, such as the prohibition against driving and the need to obtain a male guardian’s permission to become employed. However, neither government jobs nor greater freedom are enough to truly take capitalize on the potential female Saudi workforce. 
The new rules permitting women to start businesses on their own will provide a much-needed lift to women’s employment and to private sector business creation. 
A 2016 global survey of entrepreneurs found that female entrepreneurs globally were better at job creation than their male counterparts. Making it easier for women to start and run their own businesses will help bring more women into the workforce and lead the way for new private sector jobs. Women entrepreneurs will, in turn, employ other women (and men), who will gain the skills and experience necessary for long and fulfilling careers.
In a country where the largest employer is the government and so much economic power is concentrated in a select group of large businesses, it is important to ease restrictions on private sector business creation and promote new small and medium-sized businesses. These two new business rules, governing bankruptcy and female business creation, should create opportunities for entrepreneurs and create jobs for a growing economy.
 

• Ellen R. Wald, Ph.D. is a historian and author of “Saudi, Inc.” She is a Non-Resident Scholar at the Arabia Foundation, a Washington, D.C. think tank, and the president of Transversal Consulting. She also teaches Middle East history and policy at Jacksonville University.