Saudi Arabia’s monumental efforts to transform and future-proof its labour market continue to reap benefits for the economy. Government reforms, in line with the country’s strategic Vision 2030, are helping remap and redefine KSA’s workforce to produce a more productive, vibrant, technology-driven digital economy that promotes entrepreneurship, competition and foreign investment.

With a high proportion of young people perfectly placed to develop skills at breakneck speed, Saudi Arabia is harnessing its human capital to drive further productivity among a demographic for whom technical and digital skills come easily. Like other GCC nations, the median age of KSA’s population (below 30) compares favourably to developed Western economies such as the UK and Japan, where it’s over 40. Out of Saudi Arabia’s population of just under 35 million, 15 million are digital-native young Saudis poised to enter the workforce in the next decade in a country that already has an impressive 99% social-media penetration.

Current and  emerging trends

Combined with government initiatives such as Nitaqat, or Saudisation – a policy to increase Saudi employment in the private sector –  various national upskilling programmes to transform and invigorate KSA’s labour market have helped over 2 million extra Saudi nationals enter the private sector. That’s encouraging, as strategic plans for productivity include streamlining government spending in a country where the state employs two-thirds of working-age Saudi nationals. And that wage bill makes up over 40% of government spending.

Last year, Saudi Arabia boasted the second-highest number of female entrepreneurs anywhere in the world, reflecting a wider overall growth in female workforce participation. As of last year, it stood at over 35%.

But can these initiatives alone create the kind of productivity and growth the government is aiming for?

SME ecosystem: retooling the economy and  workforce for digital entrepreneurship

As the country begins to move away from an economy dependent on hydrocarbons, diversification has underlined the need for a vibrant and productive SME ecosystem, and one that mirrors the success stories of neighbouring jurisdictions such as the UAE. Innovative public investment funds, coupled with heavy investment into the Kingdom’s cutting-edge digital infrastructure, is helping to invigorate a growing startup ecosystem.

By pursuing initiatives such as the LEAP conference, supported by the Ministry of Communication and Information Technology, Small and Medium Enterprises (SME) General Authority, as well as the Entrepreneurship World Cup (EWC), the government has implemented a range of policies to promote both the tech industry and the broader SME ecosystem. The country’s global startup and SME forum, Biban, works in tandem with these initiatives to foster collaboration between Saudi and international entrepreneurs and investors.

The SME sector has received further support with the formation of the Council of Economic Affairs and Development and the SME Bank, as well as economic free zones and reforms to company law.

If we needed any indication as to how important a thriving SME ecosystem is to Gulf economies, we need look no further than the UAE; its 500,000 SMEs now employ more than 40% of the country’s workforce, and the UAE government plans to increase that number to around 1 million by 2030. It’s clear that, considering they already account for around two-thirds of the nation’s non-oil GDP, SMEs will form the backbone of GCC economies in the decades to come.

In pursuit of a similar success story, the Saudi government’s National Strategy for Data and  AI offers a host of incentives for digital startups, in recognition of the fact that digital technology and AI will likely form the backbone of its own SME ecosystem development. Its ambition is to create a USD 20-billion AI sector within the next five years through a mixture of private and public investment. The Public Investment Fund has backed a tech-specific Saudi fund called Alat, with a USD 100 million investment to bring KSA’s ambitious AI programme to fruition.

Digital technologies: upskilling, training and  education drives workforce productivity

In response to this, the government announced earlier this year the creation of a new AI-driven National Skills Platform to equip its workforce in the areas of digital tech and AI. And in a move that reflects this new demand-driven model, the training provided on the new platform will, according to industry insiders, be tailored to local employers’ needs and with an eye on global labour trends. With a plan to upskill at least 3 million workers, the new platform is supported by the Waad National Training Campaign and the Skills Accelerator Programme, forming part of a strategy across the whole Kingdom to modernise its workforce into a globally competitive force.

The Waad National Training Campaign has already enabled more than 1 million training programmes since 2023, with ambitions to top 3 million in its second phase. Meanwhile, the Skills Accelerator Programme has delivered industry-specific upskilling to more than 300,000 workers in finance and energy. In recognition of the need to focus re-training on specific industries and sectors, around a dozen skills councils, comprised of over 200 private- and public-sector organisations, have been established to help deliver on strategic, industry-specific workforce plans.

Female participation: a key pillar of success

Moves to empower women in the workforce have driven female participation to record levels. In fact, KSA has seen the most dramatic increase anywhere in the GCC, with female participation exceeding 35% in 2023, surpassing the country’s Vision 2030 target. That represents a rise of 140% over the last 25 years. As a Bain and Co. report on gender equity in the GCC recently noted, “Saudi Arabia’s Vision 2030 plan—with goals to include 30% of Saudi women in the workforce and create 1 million new jobs for women—has spurred a platform of national policies that have elevated women’s workforce participation to a degree never before seen in the Kingdom of Saudi Arabia”. Comprehensive training such as the Human Capability Development Program and the Quality of Life Program have been introduced, as well as government measures to increase access to childcare and transport. As a result of these initiatives, Saudi Arabia has delivered on its 2030 Vision plans more than seven years ahead of schedule.

Rewiring for productivity

Around 500,000 Saudi nationals enter the labour market every year, and almost everybody accepts that, with the vast majority of Saudi nationals under the age of 35, the government can’t sustainably employ everybody. As Saudi Arabia’s Vision 2030 rightly points out, “The future of our nation will be determined by our young people, and we are prioritising them, their skills and their empowerment”.

But although government efforts to redefine the labour market are already delivering major improvements, sustained international collaboration will be key to achieving its ultimate ends. After all, isolated national initiatives will be less effective in today’s interconnected global labour market without collaboration and corresponding action.