Saudi human capital could generate $5bn annually
The recently announced budget for Saudi Arabia for 2017 is both future-thinking and prudent. In line with Saudi Vision 2030, it prioritises the diversification of the Saudi economy, the increase in self-sufficiency, and the maximisation of human capital. The budget, however, does not recognise the potential returns from Saudi Arabia’s most valuable asset – its citizens. Research by Oxford Strategic Consulting (OSC) found that Saudi citizens could potentially generate $5bn annually, which covers nearly 10% of the projected budget deficit.
The Kingdom of Saudi Arabia has long recognised that its most important and valuable national resource is not oil but rather its people. The government itself ‘owns’ around 4.2m of these precious resources in the form of government employees. Rather than reducing public sector employment (essentially cutting a valuable asset), an alternative would be to utilise these employees to generate income. If only 10% of the current 4.2m government employees could generate, on average, $1000 per month, then that would raise over $5bn per annum. This would account for 9.47% of the government’s projected fiscal deficit for 2017.
OSC recommends the following three steps to nurture the country’s human capital and generate additional revenue:
First, promote the right type of entrepreneurship. Less than 10% of entrepreneurs significantly contribute to growth, and most start-ups never hire more than one or two employees. In-house government incubators can help identify high potential entrepreneurs, known as gazelles. Oxford University Innovation, which is fully-owned subsidiary of the University of Oxford, performs a similar role by finding start-up funding and support for professors and students in return for a healthy portion of future profits. The Saudi Ministry of Labour, for example, could build a similar in-house incubator for employees.
Second, identify department expertise and build semi-commercial companies around key skills. Saudi government departments possess critical skills that transfer directly to commercial operations within the country. This creates various opportunities to transform departmental expertise into semi-commercial companies. For example, government employees could set up a finance company to manage expatriate remittances.
Third, leverage government employees to provide contract resources to the private sector. Rather than create new companies, the government can also subsidise contracts and second public employees for specific projects. This process represents a smoother transition than forcing Saudis into undesired private sector roles. Additionally, more nationals are likely to perform unpopular jobs if they are working for the government or a prestigious organisation within the country.
Saudi Arabia’s citizens possess the potential to raise significant revenues for the country at a time when new revenue streams are needed more than ever. Therefore, more discussion and research about maximising the potential of citizens is needed to help balance budgets and achieve strategic targets without negatively affecting the well-being and happiness of Saudi citizens.