The Saudi government has offered private firms a new incentive for the hiring of its fast growing native population after a rise in unemployment amid the global financial crisis.

The government-run Human Resources Development Fund said it would pay in advance half of the first annual salary of Saudis who are newly hired by private firms. It earlier paid the 50 percent after the completion of the first year.

"(This) aims at encouraging private sector firms ... to contribute in nationalising jobs," state news agency SPA said.

The fund will continue to pay 75 percent of bonuses paid to Saudis who undergo training at private firms, SPA added.

The move came amid a slowdown in the world's top oil exporter and a slower growth of bank loans to the private sector. This has increased concerns over the economy's ability to create jobs for a predominantly young population that generally prefers working for a less-demanding public sector.

Unemployment among the 4.17 million native workforce rose to 10 percent at the end of August 2008, according to the Labour Ministry, up from 9.8 percent six months earlier. It said the increase was due to a rise in unemployment among women to 27 percent in August, up from 25 percent in February.

The non-Saudi workforce reached 4.28 million in August, the majority in blue-color privatre sector jobs deemed too lowly by nationals.

The move by the fund should make the private sector "more enthusiastic about recruiting and addressing the needs of Saudis from less-endowed households after record inflation last year," said John Sfakianakis, chief economist at SABB bank.

"It's like giving these firms an interest-free loan ... But the private sector prefers to use the pool of expatriate workers because it is cheaper, more flexible and the work ethic among Saudis represents a challenge," Sfakianakis said.

A SABB survey of 765 companies showed that almost three out of four Saudi companies expect to freeze hiring over the six months to August, 2009 because of the slowdown. Saudi Arabia has so far suffered less from the global crisis than other Gulf states such as the UAE and Kuwait.

But with the largest population in the region, the kingdom faces a bigger challenge in meeting job demands from nationals.

The fortunes of the private sector mainly depend on state spending, which is linked to the price of crude oil, down about two-thirds from record levels above $147 a barrel in July. - Reuters