Education, Employment and Energy: A Conversation with Amr Khashoggi

Published: January 10, 2013

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Editor’s Note:

Last week we shared the insights of over a dozen specialists on Saudi Arabia who responded to a question about the challenges facing Saudi Arabia. Among them was Amr Khashoggi, a distinguished businessman who framed his response as the “Three ‘E’s”: Education, Employment and Energy, noting:

“The management of the job market will prove to be the most challenging because we have a young population (60% under the age of 20) and growing fast. They need jobs, and they need to have the necessary skills that map with the job requirement. For that we need to train and prepare them for that. Furthermore, the job creation and placement must cover women and persons with disability. This growing population is demanding electricity and water, which are depleting our finite resources at a fast pace, so we are changing the country from an oil producing nation to an energy producing nation. This is turning our attention to renewable and nuclear energy, an industry that will preserve our fossil fuels and allow us to export them at higher prices than selling them domestically at subsidised rates. This industry will create jobs for our youth.”

These issues have been on his mind for some time and we recall our conversation with him on the sidelines of the inaugural US-Saudi Business Opportunities Forum in Chicago in 2010. Addressing questions about building business bridges between Saudis and Americans he was keen to make the point about needed partnerships in these important areas:

“There are tremendous opportunities for Saudi and American businesses working together to improve people’s lives, focusing on clean energy, focusing on education. There is a great need to educate all of the young men and women of Saudi Arabia. Education goes hand in hand with job creation, and job creation goes hand in hand with building a sustainable economy. We can benefit from the great systems of education the United States has and can share with Saudi Arabia, and the United States will benefit from the future solid relations with Saudi Arabia.”

In the SUSRIS “Challenges 2013″ survey Khashoggi added “energy” to the twin challenges of education and employment as the need to connect an ever growing youth “bulge” with jobs, in an economy that has relied on expatriate labor for many years to fulfill work need especially in the private sector. The relationship among these factors was echoed in “Challenges” by Richard Wilson, President of the Saudi-US Trade Group, who talked about education, employment and the economy, “Since they are entwined, success or failure in any one of them impacts the others.” As we said Khashoggi framed the discussion as the “Three ‘E’s” referring to education, employment and energy. We asked him to expand on this construct and fill in the background and context for these challenges. Today we provide for your consideration our exclusive conversation with Amr Khashoggi, exploring the Saudi “Three E’s.”

Education, Employment and Energy: A Conversation with Amr Khashoggi

EDUCATION

[SUSRIS] Saudi Arabia is heavily invested in improving education with as much as one-quarter of government spending going to that purpose. Why is there such an emphasis on education?

[Khashoggi] Sadly, we are playing catch up with regards to our education. Our international ranking in critical subjects such as math, science, computer skills, and languages is shamefully at or near the bottom. You cannot have graduates with skills that meet the job requirements if they are not at acceptable levels in the above subjects.

[SUSRIS] The boom in education spending has focused on infrastructure — expanding the numbers of schools and universities. How well is the Kingdom doing in building the human resource component of education — the preparation and assignment of the many teachers and professors that are needed to staff the new classrooms?

[Khashoggi] Infrastructure is important as many schools were in rented facilities that were ill-designed to be used as schools. The Government has embarked on an ambitious program to expand the numbers of schools and universities not as just buildings, but as places conducive to learning. However, this is not enough. Classrooms and laboratories are only a third of the requirement to improving our education system. We also need curricula that engage students and get them to think and solve equations using applied science and tools rather than learning by rote. Furthermore, our teachers need to be constantly trained and upgraded and make them the best in the world. After all, we are entrusting to them the greatest asset of our nation, our human capital, the leaders and workers of our future.

[SUSRIS] The emphasis on education is strongly linked to the Saudi citizen employment challenges. Some private sector leaders express concerns that past graduates in the Saudi system were not properly prepared to meet workplace needs – a problem not unknown elsewhere. Are these valid complaints?

[Khashoggi] Job seekers need to have the necessary skills that map with the job requirements. Almost all jobs require a degree of knowledge of math, sciences, English language, and computer skills. The ability to compose and write in both Arabic and English is essential. But we also need to instill self-discipline and a serious attitude towards bearing one’s responsibilities. These must be taught at K12 schools, and yet we must re-train those who have already gone through the system but lack the required skills, knowledge and capabilities.

[SUSRIS] The King Abdullah Scholarship Program (KASP) is funding overseas higher education for a phenomenal number of young men and women. Given the expansion of higher education opportunities in the Kingdom, why has the KASP been given such emphasis? What has been the payoff in US-Saudi relations from the hundreds of thousands of Saudis who have received American education experiences?

[Khashoggi] Saudi students abroad are our ambassadors to the foreign lands in which they study. They develop circles of influence academically, socially and in any work places they join for internships and training. Similarly, the students they mix with will teach them about their countries, helping them learn how to interact with them in the future. The payoff in relations between Saudi Arabia and the United States, as well as the other host countries, is better relations leading to greater trade and economic cooperation through those young leaders of each country.

[SUSRIS] Are there concerns that the young people educated in the West, particularly the United States, may return to the Kingdom with ideas, interests or experiences that run counter to traditional Saudi culture? Or is it part of the calculation that the experiences, apart from the education, are a bonus to be earned by the students’ learning abroad?

[Khashoggi] We as Moslems never stop being Moslems. Islam for us is a way of life and our religion encourages us to advance and educate ourselves and work honorably and contribute to our communities and families. We are part of our nation and our nation is part of us. What we learn in advanced educational centers of excellence and we bring back to our nation will allow us to be better contributors to our country and make us productive and respectable citizens. There is nothing in this that would run counter to our Islamic teachings and traditions, on the contrary.

[SUSRIS] How well is the Kingdom managing the education of women?

[Khashoggi] Women are great learners and they make good students. I sit on the Board of Advisors of Effat University, which is an all-women university in Jeddah. I am constantly impressed by the intelligence and achievements of our students, even in global forums. Women are graduating with greater diversity of skills, not only limited to traditional topics such as teaching and journalism, but they are charting new paths in medicine, engineering and sciences.

[SUSRIS] What challenges remain in reform, expansion and the role of education in Saudi Arabia?

[Khashoggi] Education is not a static industry, but dynamic and requires constant upgrading and updating. We need to learn best practices from countries that have excelled in education such as Singapore, Finland and South Korea. I call it an industry because it produces the job seekers of today and tomorrow, and they must be of top quality in order to succeed in the real world.

EMPLOYMENT

[SUSRIS] There have been efforts to nationalize the workforce, Saudization, since at least the 1990s. Why is this an important component for economic reform in the Kingdom?

[Khashoggi] As you know we are a very young population, and the “youth bulge” is getting bigger and bigger every year; the number of young Saudi men and women are constantly increasing. We did not have exact numbers of who is really actively looking for work until recently with the introduction of “Hafiz,” a program developed by the Ministry of Labor and blessed by King Abdullah.

Hafiz, which means “incentive” in Arabic, aims at helping unemployed Saudi men and women find decent full-time jobs, receiving training or re-training in order to make them employable, and offering the Business sector an accessible one-stop shop to find Saudi job seekers. The program also acts as a filter of serious job seekers apart from those who just want to be “on the dole.”

The latter are easily identifiable through Hafiz’ rigorous requirements and room is made for those who are serious about employment. Today there are more than two million Saudis registered with Hafiz – men, women and persons with disability – all looking for work.

At the same time, you have seven million expats working in Saudi Arabia. Counting their dependents the figure exceeds 10 million. That is almost one expat for every two Saudis. These expats transfer their hard-earned dollars abroad and that amounts in the billions of dollars, depriving the local economy from the benefits of such tremendous purchasing power. Hiring Saudis would definitely reverse such trends and keep the money in the country benefitting its economy and its people.

One cannot fail to mention the cumulative effect of Saudis being fully employed on their families and the social structure of society. The opposite is equally profound, but with disastrous results.

[SUSRIS] We recently spoke with Prince Turki al Faisal who has said he couldn’t understand how a country that employed millions of expats had such trouble finding work for its own citizens. He pointed to the many jobs in new projects — railways, housing construction and so forth. Where are the disconnects between jobs produced by the economic boom in the Kingdom and Saudis in the work force?

[Khashoggi] I have great respect for HRH Prince Turki Al Faisal, for he is a pragmatic thinker and a learned scholar. He is right of course. As a wealthy country we have no excuse for not employing Saudis. That is especially true in the case of the country’s mega projects, which are funded by the Government. However, little is done to address the root problems. I believe we have a communication and awareness problem resulting in ignorance. There is a divide between employers and employees – or potential employees – that results in a lack of trust and transparency.

The Ministry of Labour has introduced another project, called “Liqaat”, which in Arabic means “meetings.” These are events that are well attended by both employers and employees. These face-to-face meetings result in the employers finding out what is out there in terms of job seekers: their abilities, their knowledge and their commitment to work. Similarly, job seekers learn about available jobs, training, career paths, and the job environment at the attending companies and organizations. The Liqaat events have had limited success so far but I think they are improving every year.

Of course, Nitaqat, the point system evaluating companies, has helped to spur lackadaisical companies in becoming serious about employing Saudis. The Ministry of Labor is introducing version 2 of Nitaqat that will evaluate job seekers and color them according to their seriousness and abilities making those in the “Platinum” and “Green” bands attractive to employers and spurring those in the “Yellow” and “Red” to get their acts together, to work on improving themselves and to take their job-seeking seriously.

[SUSRIS] Where should the emphasis be made in addressing the employment issue?

[Khashoggi] For the first time, I believe, we are seeing the formation of partnerships between those in the private and public sectors in addressing the employment issue. This is a national issue of the utmost importance. It affects us all deeply. We must think first as “national citizens” before we think as businessmen, and we must seek pragmatic and realistic solutions that target the root problems. It is not enough to give it lip service.

We need to engage job seekers, find out what they lack, and try to bridge the gap. As the partnerships get stronger, we can act as one team in really addressing this issue head on. It may take many years to achieve the desired results, but we cannot start soon enough.

[SUSRIS] Nitaqat, the Saudization program, has rigid quota and penalty guidelines and the government has stepped up application and enforcement of strict employment rules, amid some pushback from business. What is your assessment of the program, its progress, and its critics?

[Khashoggi] Nitaqat is a great program, because it levels the playing field. You are evaluated based on your industry and compared to your peers within that industry. If you act seriously, then you are sure to succeed in getting into the Green or Platinum bands. It is not as strict as many may think or that the critics may say, and the results are the proof. Those in the Yellow or Red bands are in the minority. The fact that more people were hired as a direct result of the program than all of those employed in the preceding five years – more than half a million people – is significant and an indicator of the program’s success.

Furthermore, it has refocused the attention of employers not on just hiring Saudis, but also creating new jobs. Companies aim to engage their customers and serve them well, and developing a national work force that is employable is the best engagement of all, especially in the long run.

[SUSRIS] What do you think about the notion that “there are jobs in the Kingdom that are not suitable for Saudis to perform”?

[Khashoggi] Not all your fingers are the same. Similarly, not all Saudis are the same especially when you look at Saudi Arabia from a geographical perspective. There are Saudis in the fertile lands of Qassim and Hail for example who are quite prepared to work as farmers, while in other parts of the country they are not. Saudis in Yanbu have been exposed to industrial development so they tend to gravitate to jobs in industrial complexes. We cannot paint all Saudis with the same brush. It is a population with diversity and complexity in its fabric.

Companies need to look at the type of business they have and the geographical locality of job seekers, and then map their skills with the job requirements. I know this is easier said than done, but we cannot properly start to recruit if we do not understand the different nuances of the labor market in Saudi Arabia, and how we can adjust our work environment, training programs and career paths to attract and retain Saudi employees.

[SUSRIS] What about women in the job market?

[Khashoggi] Within the Hafiz, the incentive program, there are 1.7 million women job seekers. They are able and willing to work. Furthermore, every year there are more women graduates than men. They are highly qualified and fully committed to working and earning a living. Women are half the society and cannot be ignored. They have proven they are capable and productive.

This huge employable work force must be harnessed for the development of our country. The number of jobs that women can do within our Islamic and traditional teachings is great and diverse. Many women are the breadwinners of their families and fighting poverty with decent, honorable jobs is by far more preferable than that they stay at home laying to waste or becoming dependent on handouts and charity.

One final word: Tawteen, or the nationalization of jobs, is a national responsibility and it must be a fully comprehensive program that is not only applied by the Ministry of Labor, but should be developed and applied within each company and organization. Tawteen on a national level and Tawteen on a corporate level need to be fully aligned to have an effective solution to our second “E”, employment.

ENERGY

[SUSRIS] The changing landscape of the international energy markets includes sanction-induced cutbacks on Iranian exports; the global economic slowdown; and a call for the Kingdom to use spare capacity to fill shortfalls. What are the implications of shifts in global oil supply and demand trends?

[Khashoggi] Yes, the landscape of the international energy markets is constantly changing. New fields are being discovered in America and it may no longer need to import oil from Saudi Arabia. The United States may become a net exporter of oil. However, thirsty markets still exist elsewhere in the world, especially China and India and further afield.

Saudi Arabia is keen on maintaining stability in the energy markets, and may from time to time act as a swing producer to remove any sharp volatility in supply and demand. This is a responsible role my country has chosen to play and has faithfully carried out over past decades.

[SUSRIS] The population growth and economic expansion have meant more Saudi energy resources have had to go to satisfy domestic demand, reducing the oil production that can be channeled to the export market? How is this development being addressed? Have energy subsidies in the domestic market attributed to the problem?

[Khashoggi] As I said earlier, we have a young population. We also have an ambitious housing program, some 500,000 new residential units. The surge among the younger population cohort is putting additional demands on getting electricity and desalinated water. All of this requires fuel to operate existing and planned power and desalination plants. As a result, domestic demand will rise significantly depleting our finite natural resources and depriving us of export revenue.

This cannot continue. We have already recognized the need to change our country from being an oil producer and exporter to an energy producer and exporter. As such, we are turning to alternative and renewable energy resources, such as nuclear power plants and renewable energy from solar, to wind, to thermal, to waste-to-fuel. The government created King Abdullah City of Atomic and Renewable Energy (KA-CARE) in addition to programs by King Abdulaziz City of Science & Technology (KACST) and King Abdullah University of Science & Technology (KAUST). We have the first of a kind desalination plant operating on solar energy in Khafji, one of five pilot plants and we have a hybrid solution in a power plant in Farasan Island in the south of the country providing electricity. More projects are in the pipeline and the country is embarking on an ambitious program to produce 17 gigawatts of power using nuclear power plants and 54 gigawatts using renewable energy by 2032. This will save our natural resources for export and our future generations.

[SUSRIS] What should people know about Saudi Arabia’s role in maintaining global energy stability and security?

Click for more on KA-CARE

[Khashoggi] There are two elements to consider. First is the reduction of domestic consumption of our hydrocarbon resources. We were talking about KA-CARE which was created by a Royal Order on April 17, 2010 to be the driving force for making atomic and renewable energy an integral part of a national sustainable energy mix, creating and leveraging the competitive advantages of relevant technologies for the social and economic development of the Kingdom of Saudi Arabia. This would directly contribute to global energy stability and security, and whatever developments we manage in the renewable energy in Saudi Arabia would contribute to greater economies of scale that will lead to lower costs of renewable energy globally and keeping rampant demand for oil in check.

Then, of course, there is Saudi Arabia’s role as the largest oil producer and exporter in the world, with about one-fifth of the world’s proven reserves. It is the seventh largest natural gas producer. The country has long been the key to global energy security through its capability as a swing energy producer. Through investment in spare production capacity – something that, by the way, was a significant expense borne by the country – Saudi Arabia has been ready to step up to cover shortfalls in the world’s energy demands. This has been repeatedly demonstrated when the rest of the world’s producers have fallen short, whether a result of natural disasters, wars, or even the increased need resulting from positive economic climates. Saudi Arabia, like no other country in the world, has maintained the ability and shown the willingness to keep the markets satisfied.

[SUSRIS] What do Saudis think when they hear that the U.S. is set to become a net oil exporter and will surpass the Kingdom’s production as a result of the development of new shale-oil related reserves?

[Khashoggi] To become a net exporter of oil requires several factors to be in play, simply and primarily the cost of extracting the oil, transporting the oil from field to the market and so forth. Having said that, Saudi Arabia and the USA are not locked in competition, as world demand for oil still outstrips supply. But should the price of oil drop significantly from its current levels, it may become unfeasible to produce shale oil and other more difficult to extract reserves. In Saudi Arabia, the cost of exploration and production remain among the lowest in the world, providing us with the greatest elasticity towards volatility in global prices.

[SUSRIS] Saudi Arabia is engaged in a massive expansion of the non-fossil fuel domestic energy production sector, especially nuclear and solar. What are the implications, consequences and benefits of these developments?

[Khashoggi] The implications are all good. As I said earlier, we must change into an energy producing and exporting nation. Developing alternative and renewable energy producing industry will create jobs, centers of knowledge, research and development, and improve our education.

Energy is the 3rd “E” after education and employment. They are linked and equally important. Having such an emphasis on alternative and renewable energy sources and new industries will increase awareness and make us less wasteful, hopefully, and will aid in achieving our aspirations to becoming responsible citizens of the world.

[SUSRIS] What should American businessmen know and focus on when they look for commercial opportunities in the energy sector? What emerging trends offer good starting points for partnerships and investments?

[Khashoggi] America has a long history and experience in renewable energy especially in California. Your businessmen need to bring the best technologies and practices there are – and not technologies that are either obsolete or non-proven. We welcome creating joint ventures with them. The private sector in Saudi Arabia is partnering with the government and working with them shoulder-to-shoulder in developing this critical and essential industry.

However, American business people can also increase investments in our education system and employment recruitment techniques and can play a major role in passing best practices to us.

[SUSRIS] What other concerns and considerations should we contemplate in understanding energy developments in the Kingdom?

[Khashoggi] We are building GCC-wide electricity grids that will allow us to manage the costly peaks and valleys of electric consumption by dipping into each other’s resources. We will continue to develop the “Desertec” program producing solar energy that can be exported to Europe. We will continue to educate our youth and population to rationalize the consumption of energy outputs whether electricity or water, and become more responsible to our precious environment. We will continue to create new jobs through the development of the alternative and renewable energy resources. We will continue to share our knowledge and learn from others for the benefit of all of humanity.

[SUSRIS] Thank you for sharing your perspectives and insights on these key issues that Saudi Arabia is tackling. We appreciate your use of the “Three ‘E’s” framework as a useful way to put these inter-related topics in context.

About Amr Khashoggi

Saudi, graduated from Yale University School of Management, Connecticut, USA with an MBA in 1979, and Menlo College, California, USA with a B. Sc. in 1977

➢ VP Corporate Affairs, Zahid Group which has 14 subsidiaries offering products and services for the construction, mining, oil and gas, agricultural, transport and finance sectors

➢ Chairman of Group Machiels Middle East Africa which specializes in landfill management and waste recycling

➢ Chairman & CEO of Amkest group, a holding company with interests in building materials manufacturing & services, packaging of food, hygienic and medical products, provider of e-business and IT services & solutions, through its subsidiary, ArabWeb International

➢ Chairman and Partner of Global Gypsum Company Ltd (3G), a joint venture between a distinguished group of Saudi investors and Lafarge Gypsum International, a French company and the 3rd largest producer of Gypsum in the World. 3G launched a SR 50 million Gypsum Powder plant in Yanbu Industrial City, Saudi Arabia mid 2007. The plant was inaugurated by King Abdullah bin Abdulaziz September 2005

➢ Board Member of Khashoggi Holding Group

➢ Board Member of Alahli Takaful (Life Insurance Provider)

➢ Chairman of the Employers Business Network for the Employment of People with Disability – nationwide non-profit organization, Saudi Arabia – creating awareness and workplace accessibility, job opportunities, training and recruitment for PWD

➢ Former CEO of DITevents, former CEO of Tanmiah Commercial Group, both providing event management of major conferences, exhibitions, forums, product launches, seminars, and road shows, with strong brand recognition such as the COMDEX show

➢ Former Vice Chairman of Modern Computers Communication company, specialized in e-commerce solutions, professional consulting services, and global technology training

➢ Former Managing Director of National Gypsum Company and Triad Holding Corporation

➢ Former Chief Advisor to the Committee for International Trade (CIT) , Council of the Saudi Chambers of Commerce & Industry, and Former Chief Coordinator of the Saudi Outreach Program. Currently serves as a member of the Executive Board of CIT, and is active as a speaker and a writer on US-Saudi Trade and International Relations

➢ Former Board Member of the Jeddah Marketing Board, Former Chairman of the International Relations Committee and former Vice-Chairman of the Information Technology Committee, at the Jeddah Chamber of Commerce & Industry

➢ Former member of the Board of Directors, AMIDEAST, Washington DC, USA, offering Educational advisory services and scholarships

➢ Co-Founder and served in many capacities of the Saudi Chapter of the Young Presidents’ Organization, a global organization with more than 10,000 prominent members focusing on Better Leaders through Education and Idea Exchange. Served as Area Vice President for Area V and a member of the International Board. Alumni Member of YPO

➢ Former Member of the YPO MENA Regional Board

➢ Former Member of the International Board of World President Organization (WPO) and former MENA Regional Chair of WPO, currently Membership Chairman of WPO MENA

➢ Co-Chair of the Next Generation Foundation (under formation) and Vice Chairman of the Next Generation Conference

➢ Member of the Minaret Business Organization, Saudi-German Business Group of Jeddah (Board Member), Circle d’Affaires Français de DjeddAh (CAFDA), American Businessmen of Jeddah, and the Middle East Association (UK)

➢ Former member of the Prince of Wales International Businessmen Forum (UK) under Prince Charles, heir to the British Throne

➢ Member of the Advisory Board of Effat University for Girls in Jeddah, Saudi Arabia

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