Saudi Arabia's government plans a new set of labour quotas and incentives to reduce unemployment as it tries to wean its economy off oil exports, Labour Minister Mufrej Al-Haqbani said.

The changes are part of a wider reform plan announced last week by Deputy Crown Prince Mohammed bin Salman, and reflect the difficulties the kingdom has faced for years in creating jobs for Saudi nationals.

"There is no doubt that unemployment is a looming spectre and we will take all measures, whether job creation, job substitution or even, if required, increasing the Saudisation target," Al-Haqbani told Reuters in an interview.

He was referring to the possibility of restricting certain jobs to Saudis and pressing companies to employ higher ratios of Saudis to foreign workers.

Cutting the jobless rate to 7 per cent by 2030, and raising women's participation in the labour force to 30 percent from 22 percent, are among a raft of targets in Prince Mohammed's reform plan.

Under a government programme called Nitaquat (Categories), launched in 2011, companies are already encouraged to hire Saudis rather than cheaper foreign workers. Firms employing high ratios of Saudis receive preferential treatment from the Labour Ministry in processing work permits.

The scheme has had only limited success, however. The official unemployment rate among Saudis is 11.6 percent and net employment of Saudis rose by only 49,000 in 2015, its slowest increase since records began in 1999, as the government cut spending because of low oil prices.

SUPPLY AND DEMAND

Al-Haqbani said the government was ready to intervene on both the supply and the demand sides of the labour market. "We expect we will need from 1.1 million to 1.3 million jobs to reduce the unemployment rate to 7 percent."

He said the government planned a new form of Nitaqat that would not focus merely on the numbers of Saudis hired but also on factors such as women's employment, the average pay of Saudis, the ratio of the wages of Saudis to non-Saudis, and the sustainability of jobs occupied by local citizens.

"The new Nitaqat is not quantitative, based on the number of Saudis, but it will include other variables... We will announce it in two to three weeks, and it will be into effect within five months," Al-Haqbani said.

About 10 million foreigners are working in Saudi Arabia, doing many of the strenuous, dangerous and lower-paid jobs shunned by the 20 million local citizens. About two-thirds of Saudi workers are employed by the public sector.

But in recent months, the officials behind the economic reform drive have made it clear that they want the focus of job creation for Saudis to be in the private sector, as the government restrains its spending in an era of cheap oil.

"There are no exceptions from the Nitaqat for any sector, but the quotas are lower for some sectors according to their conditions," Al-Haqbani said of the planned system.

"Retailing, for example, will be required to hire a bigger number of Saudis, while the construction sector doesn't have this capability."

The new form of Nitaqat could mean fresh pressure on the finances of private sector companies, which have complained of the cost of meeting the quotas. - Reuters