Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia Dr. Ahmed Alzahrani Sonja Loots Neil Butcher Carole Chartouni Ministry of Human Resources and Social Development Kingdom of Saudi Arabia Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia Dr. Ahmed Alzahrani Sonja Loots Neil Butcher Carole Chartouni Disclaimer Some rights reserved. © [2025] The World Bank This work was prepared by The World Bank at the request of the Ministry  1818 H Street NW, of Human Resources and Social Development (MHRSD) of the Kingdom of Washington, DC 20433 Saudi Arabia (KSA). The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of Telephone: (202) 473-1000; The World Bank or the governments they represent. 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Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution: Dr. Ahmed Alzahrani, Sonja Loots, Neil Butcher, Carole Char- touni. 2025. Towards System-Level National Skills Strategies: Lessons from the Kingdom of Saudi Arabia. World Bank. Washington, DC. Translations: If you create a translation of this work, please add the following disclaimer along with the attribution: “This translation was not created by the World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation.” Adaptations: If you create an adaptation of this work, please add the following disclaimer along with the attribution: “This is an adaptation of an original work by the World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by the World Bank.” Cover photo: iStock.com / Vadim Nefedov Sample credit for a non-WB image: MHRSD archives, Unsplash and iStock. Fur- ther permission required for reuse. Cover design: www.doscuatroocho.net All queries on rights and licenses, including subsidiary rights, should be ad- dressed to World Bank Publications, The World Bank, 1818 H Street NW, Wash- ington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia Acknowledgments This report is the product of collaboration between Saudi Arabia’s Ministry of Human Resources and Social Development (MHRSD) and the World Bank un- der the Technical Cooperation Program with the Saudi Arabia government. The collaboration was led by Johannes Koettl (Senior Economist, World Bank), Carole Chartouni (Senior Economist, World Bank), and Ekaterina Pankratova (Senior Social Protection Specialist, World Bank). The authors of the report are Ahmed Alzahrani (Deputy Minister for skills and training, MHRSD), Sonja Loots (Skills Consultant, World Bank), Neil Butcher (Skills Consultant, World Bank), and Carole Chartouni (Senior Economist, World Bank). The report benefited from the technical insights of Johannes Koettl (Senior Economist), Nayib Rivera (Economist, World Bank) and Ekaterina Pankratova (Senior Social Protection Specialist). Fatiha Amar (Operations Analyst, World Bank) and Larisa Marquez (Operations Officer, World Bank) provided operational support. The report’s authors are thankful to the World Bank peer reviewers Victoria Levin (Senior Economist, World Bank) and Harry Edmund Moroz (Senior Economist, World Bank) whose comments enhanced the report con- tent. The visual design and report theme was produced by Doscuatroocho.net (Design studio). The report was edited by Harry David (Editor). The report benefited from the strategic guidance and insights of Safaa El-Ko- gali (Country Director, Gulf Cooperation Council Countries, World Bank), Cristobal Ridao Cano (Practice Manager, Social Protection and Jobs, Middle East and North Africa, World Bak), and Christopher Herbst (Program Leader and Lead Economist, Gulf Cooperation Council Countries, World Bank). The World Bank team and authors express their sincere appreciation for counterparts involved in the World Bank’s long-standing partnerships with MHRSD, and who provided guidance and valuable insights and support during the report preparation, namely, His Excellency Dr. Abdullah Abuth- nain, Vice Minister of MHRSD-Labor; Eng. Mohannad Aleisa, Deputy Minister for Labor Policies (MHRSD); Ms. Sara Alraddadi (MHRSD) and Mr. Ahmed Humedi (MHRSD). 4 Table of contents Executive Summary 8 1 Skills development as global priority 12 2 Current approaches to skills development 18 1. Preparing skills strategies to guide skills development 21 3 Towards a coordinated skills development system for Saudi Arabia 25 1. Why a skills strategy is necessary for the KSA 25 2. A systems-level framework for skills development 30 2.1 Skills systems cannot succeed without an enabling environment and good governance. 33 2. 2 Skills systems need to be demand-led. 43 2. 3 Supply-demand decisions need to be based on accurate and timely information. 50 2. 4 Improving quality assurance in skills development systems optimizes the credibility, relevance, and transferability of skills. 53 2. 5 Partnerships between education and training providers and the private sector can rapidly advance skills development. 57 4 Developing system-level skills strategies in other contexts: A way forward 6 5 Conclusion 66 References 69 Table of Abbreviations ALMP Active Labor Market Programs NOSS National Occupational Skills Standards AQRF ASEAN Qualification Reference Framework NQF National Qualification Framework ASEAN Association of Southeast Asian Nations NSA National Skills Authority EC European Commission NTP National Transformation Program EMIS Education Management OECD Organization for Economic Information Systems Cooperation and Development ESCO European Skills, Competences, PISA Program for International Qualifications and Occupations Student Assessment ETEC Education and Training PLIDA Person Level Integrated Data Asset Evaluation Commission PPP Public-Private Partnerships EU European Union RPL Recognition of Prior Learning FEC Future Economy Council SABER Systems Approach for GASTAT General Authority for Statistics Better Education Results GDP Gross Domestic Product SETA Sector Education and Training Authorities HCDP Human Capability Development Program SMP Skills Mobility Partnerships HRDF Human Resources Development Fund SPSP Saudi Petroleum Services Polytechnic ILO International Labor Organization SSC Sector Skills Councils IMF International Monetary Fund TIMSS Trends in International Mathematics and Science Study JSA Jobs and Skills Australia TVET Technical and Vocational KSA Kingdom of Saudi Arabia Education and Training LMIS Labor Market Information Systems TVTC Technical and Vocational LMS Labor Market Strategy Training Corporation MHRSD Ministry of Human Resources UNESCO United Nations Educational, and Social Development Scientific and Cultural Organization MSDE Minister of Skills Development VET Vocational Education and Training and Entrepreneurship WEF World Economic Forum NLO National Labor Observatory WIL Work-Integrated Learning iStock.com / Johnny Greig Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia Executive Summary Shifting workforce demands require intentional efforts from govern- ments to develop skills systems. Skills development is recognized as a critical driver of economic growth and inclusive participation, which has re- sulted in an array of global responses, with some more effective than others. The dynamic nature of skills needs and the complexity of skills gaps make it difficult for often-used stopgap interventions to contribute effectively to the development of a skilled workforce. As such, global skill development ef- forts have been moving towards establishing coordinated systems to meet rapidly changing skill needs. At the national level, skills strategies have been relatively success- A systems approach ful in attempting to coordinate skills development efforts. The global to skills strategies that G20 intergovernmental forum’s emphasis on skills strategies has influenced focuses on developing national governments to take action. Further, international organizations, the foundational such as the World Bank, Organization for Economic Cooperation and Devel- structures necessary opment (OECD), the International Labor Organization (ILO), Cedefop, and to support a holistic UNESCO-UNEVOC, have supported national skills strategy development and coordinated directly or indirectly through active guidance, collaborations, and publica- skills development tions. The learnings of skills strategy development efforts have culminat- system has been ed in a renewed focus on strengthening the governance systems of skills relatively successful. ecosystems. This paper builds on the work that has been done to illustrate that there is room for a systems approach to skills strategies that focuses on developing the foundational systems or structures necessary to support a holistic and coordinated skills development system. A systems approach considers the complex interrelationships with- in the skills ecosystem rather than its isolated components. Systems thinking is critical for developing effective, sustainable skills strategies. Skills development efforts often rest solely on the Technical and Vocational Education and Training (TVET) system’s shoulders, where, in reality, skills development operates within a complex web involving education systems, labor markets, policy frameworks, industry needs, and societal expectations. A systems-thinking approach allows for a comprehensive understanding of these intricate relationships, ensuring that interventions or strategies ad- dress the ecosystem as a whole rather than isolated parts. A systemic perspective enables a more proactive and forward-thinking strategy. It moves beyond reactive measures by recognizing skill develop- ment initiatives’ long-term implications and consequences. By considering the ripple effects across various sectors and stakeholders, it facilitates the cre- ation of adaptable and future-proof skills ecosystems. This is particularly im- portant in an era of rapid technological advancements and evolving job land- scapes where new skills are frequently required. Systems thinking in skills 8 Executive Sumary Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia development further encourages partnerships between educational institu- tions, industry players, policymakers, and communities. By understanding the interconnected nature of various components within the skills ecosystem, it becomes possible to identify leverage points where interventions can have maximum impact. This strategic allocation of resources minimizes waste and maximizes the effectiveness of initiatives, leading to a more efficient and sus- tainable skills development framework. The World Bank has been working closely with the Ministry of Hu- The system approach man Resources and Social Development (MHRSD) in the Kingdom to skills strategy in the of Saudi Arabia (KSA) to develop a system-level skills strategy. The KSA were based on MHRSD first started by establishing a Skills and Training Deputyship and five main principles: 1) allocated resources to start leading the national skilling agenda through governance, 2) demand- coordinated efforts with all relevant role-players. The strategy responds to led skills approach; 3) the KSA’s goal to diversify its economy and empower its people with the accurate information; necessary skills to become global citizens. It further responds to the need 4) quality assurance; to coordinate existing skills development efforts. The system approach to and 5) partnerships. skills strategies includes a strong focus on governance, creating sectoral representative bodies, such as Sector Skills Councils (SSCs) to facilitate a demand-led skills approach to skills development, establishing efficient la- bor market information and quality assurance systems, and cultivating a responsive education and training system. Each of these focus areas makes up the core of a systems-based approach to skills development. The key principles of a system-level skills development framework are summarized here and expanded on later in the text. Principle 1: Skills systems cannot succeed without an enabling envi- ronment and good governance. Regardless of its structure and strategic po- sitioning, entities responsible for the governance of skills systems have clear functions to perform, including policy development, securing sustainable fund- ing, facilitating relationships between stakeholders, coordinating existing and future skills development efforts, and overseeing the implementation, monitor- ing, and evaluation of policies, among others. The success of the governance en- tity in performing these tasks relies heavily on political will, national strategic alignment, and an enabling economic environment. Principle 2: Skills systems need to be demand-led. A demand-led skills development system fosters a dynamic and adaptable workforce, enabling individuals to navigate the evolving demands of the job market. Prioritizing skills that are in high demand empowers individuals to secure stable em- ployment and contribute to their communities. Additionally, demand-led systems encourage collaboration between education and training provid- ers, employers, and industry experts, fostering a shared understanding of the skills required for success in the modern workplace. This requires edu- cation and training providers to be adaptable and responsive to the needs of the labor market. Recent years have seen significant efforts to transform TVET systems. Historically perceived as rigid and disconnected from in- dustry needs, modern TVET systems now emphasize close collaboration with employers, industry experts, and local communities. This evolution has been marked by a shift towards competency-based curricula and in- 9 Executive Sumary Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia tegrating practical skills with theoretical knowledge. Key to facilitating a demand-led skills system is sectoral bodies, which can perform a range of functions that bridge the gap between the needs of the job market and what education and training providers supply. Principle 3: Supply-demand decisions need to be based on accurate While the underlying and timely information. Labor Market Information Systems (LMIS) are es- systems or structures that sential for guiding skills development by providing accurate and up-to-date drive skills development information on labor market trends and needs. They enable policymakers, ed- will differ slightly ucation and training providers, and individuals to make informed decisions between countries, about education and training programs, ensuring alignment with the current the principles for a and future needs of the labor market. By leveraging real-time information on coordinated skills system job vacancies, salary trends, and skill shortages, these systems facilitate the stated here are universal. design of targeted and relevant training initiatives, minimizing mismatches between skills supply and demand. Principle 4: Improving quality assurance in skills development systems optimizes the credibility, relevance, and transferability of skills. Quality assurance is crucial in skills development systems to ensure that training programs produce work-ready graduates with competencies that meet industry standards. Robust quality assurance in education and training provisioning includes having credible providers, accredited cours- es and curricula, appropriate instructor qualifications, and well-designed competency assessments. Beyond education and training provision, quality assurance in skills systems also includes skill verification, authentication, and setting skills standards. Principle 5: Partnerships between education and training providers and the private sector can rapidly advance skills development. The value of Public-Private Partnerships (PPPs) and Work-Integrated Learning (WIL) opportunities cannot be underestimated. WIL bridges the gap be- tween academic learning and practical application by immersing learners in real work environments. Through internships, apprenticeships, and cooper- ative education programs, individuals gain invaluable hands-on experience, honing not just technical skills but also crucial soft skills demanded by em- ployers. Simultaneously, PPPs leverage the expertise and resources of both public and private sectors to design, implement, and sustain effective skills development initiatives. Collaborations between educational institutions and industries ensure that curricula remain aligned with industry needs, fostering a more responsive and adaptable workforce. These partnerships offer a mutual exchange of knowledge, enabling the co-creation of training programs that are dynamic, relevant, and directly applicable to the rapid- ly changing demands of the job market. Ultimately, the synergy between WIL and PPPs not only enhances employability but also drives innovation, fosters economic growth, and strengthens the overall resilience of skills de- velopment systems. Based on these principles and informed by the collaborative work be- tween the World Bank and MHRSD to develop a skills strategy for the KSA, the paper proposes a systems-level framework for skills develop- ment that can be applied in any context. While the underlying systems or structures that drive skills development will differ slightly between coun- 10 Executive Sumary Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia tries, the principles for a coordinated skills system stated here are universal. Getting the foundational support systems right will enable existing and fu- ture skills development efforts across the education and training spectrum. If the foundational structures are in place and operating in a coordinated way, it will support and align with a range of skills development programs or initia- tives aimed at basic, vocational, higher education, or lifelong learning levels. As such, this paper aims to serve as a guide to support the development or improvement of coordinated skills development systems. We hope that learn- ing from the KSA context, this work will support international organizations, governments, and other role players to take a systems-level approach when developing skills ecosystems, and thereby work towards coordinated and ef- fective systems that will positively impact productivity and growth. 11 Towards System-Level Reform through National Skills Strategies Lessons from the Kingdom of Saudi Arabia 1 iStock.com / Kindamorphic Skills development as global priority Skill development has a direct impact on enhancing employabil- ity, labor productivity, and economic advancement. Investment in a high-quality workforce can create a virtuous cycle, where skills enable pro- ductivity growth and foreign direct investment, resulting in more jobs for the current workforce and more investment in the education and training system.1 In theory, this cycle seems simple, and the logic is clear. Howev- er, while many countries acknowledge the value of investing in skills de- velopment and have implemented efforts to advance components of skills systems, not many have adopted a comprehensive, systemic approach to advancing skills development. Governments and global development entities are increasingly rec- ognizing the need to prioritize skills development as a key strategy for economic competitiveness and growth. This is evidenced by the G20 intergovernmental forum’s continued emphasis on strategically position- ing skills development through its global skills strategy, and the European Union’s (EU) Year of Skills, a scaled effort among EU nations to create aware- ness about skill development and matching initiatives that extends national borders.2 Global megatrends continuously change the nature of work and skills demands. In recent years, the impact of certain trends, along with 1 World Bank, 2023. 2 G20 Skills Strategy Indonesia, 2022. See 5-LEMM-G20-Skills-Strategy.pdf (utoronto.ca); EU Year of Skills. See European Year of Skills (europa.eu). 12 1 Skills development Towards System-Level Reform through National Skills Strategies as global priority Lessons from the Kingdom of Saudi Arabia global events, such as the COVID-19 pandemic, have intensified the urgency to align education and training provision with labor market demands. Some of the key trends driving skills development include technological advanc- es, climate change, demographic shifts, literacy deficits, and inequities in access to labor markets. Technological advances can cause uncertainty for policy makers, em- The impact of ployers, and workers themselves. Rapid advancements in technology global trends such make it difficult to predict in what way jobs will be affected and which skills as technological will be needed to take advantage of the productivity and efficiency promis- advancement, es technology brings. The World Economic Forum (WEF) estimate that 44% demographic shifts, of workers’ skills will be disrupted in the next five years. Further, 60% of and climate change workers will require training before 2027, particularly in sought-after skills have intensified the such as analytical and creative thinking.3 Technologies such as robotics and urgency to prioritize artificial intelligence raise difficult questions about the broader impact of skills development as automation on jobs, skills, wages, and the nature of work itself.4 While tech- key strategy for growth. nological innovations are currently creating jobs and will create even more jobs in the future, they are likely to be in occupations other than those de- stroyed by technology. They will be characterized by a low share of routine tasks and a high share of tasks that require creative and social skills, mainly found in many health, education, and social occupations.5 This prediction of the European Parliament implies that a range of digital skills should be included in all secondary and tertiary qualifications and be made available to all wishing to upskill or reskill themselves. Similarly, respondents to the WEF survey agree that focusing on closing different skills gaps and find- ing innovative ways of attracting and developing relevant talent are key to managing changes brought on by technological advancements. Over 190 countries have committed to fighting climate change. The United Nations’ Paris Agreement to limit global warming and reduce harm- ful emissions has been active since 2016. This international agreement re- quires countries to submit national plans on how they aim to take action and will inevitably impact skills development systems.6 The WEF expects green transition initiatives to have strong positive impacts on job creation, particularly in the Energy, Materials, and Infrastructure sectors. Globally, the green transition could create 30 million jobs in clean energy, efficiency, and low-emissions technologies by 2030. In the next few years, the transi- tion to a green economy in China alone is expected to add $1.9 trillion to the country’s economic worth and generate 88 million new jobs.7 To put green skills into practice, particularly to include skills pathways for young people, three best practice examples have been identified to guide policymakers. These include i) leveraging successful skilling programs to create inclusive green skilling pathways for youth and concurrently eliminate participation 3 WEF, 2023a. 4 McKinsey Global Institute, 2017. 5 European Parliament, 2018. 6 United Nations, 2016. 7 WEF, 2023a. 13 1 Skills development Towards System-Level Reform through National Skills Strategies as global priority Lessons from the Kingdom of Saudi Arabia ▲ iStock.com / Kelvn barriers; ii) promoting access to green work opportunities by establishing clear learning-to-earning pathways from green skilling programs to green jobs, as well as post-training support; and iii) fostering access to self-em- ployment and entrepreneurship opportunities in green sectors by address- ing systemic barriers and providing ongoing support.8 Demographic changes, including longer life expectancy and in- creased social mobility, impact supply and demand needs. Across OECD-affiliated countries, the ratio of older people aged 65 and over to peo- ple of working age (15-64) is projected to reach 2 in 5 by 2050.9 A longer-liv- ing population implies intentional investment in upskilling and reskilling opportunities for workers throughout their lives. Several countries have moved towards including policies on lifelong learning to enable seamless movement in and out of education and training opportunities for all. Sev- eral push and pull factors, including employment prospects (or a lack there- of), and ease of access to alternative work contexts contribute to over - and undersupply of skills in countries. As a significant challenge in European countries, the European Commission (EC) has been promoting Skills Mo- bility Partnerships (SMPs), or Global Skills Partnerships, as a viable strategy 8 Unicef, 2024. 9 Akinola, 2021. 14 1 Skills development Towards System-Level Reform through National Skills Strategies as global priority Lessons from the Kingdom of Saudi Arabia to benefit both countries of origin and destination. SMPs vary in composi- tion, but generally consist of formal state agreements about education and training, skill recognition, and terms of mobility or migration. Examples of SMP initiatives include vocational training in the origin country before enabling mobility, internships in destination countries, or scholarships.10 Skills development in the context of population aging also implies that the skills that are stronger in older workers could be exploited by promoting mixed-age teams, introducing short-term contractual agreements, or pro- viding younger workers with mentorship opportunities from older workers. Addressing basic literacy and numeracy skills gaps should be a pri- ority for developing countries. Analysis by the International Monetary Fund (IMF) highlights three key findings on literacy deficits. First, com- paring scores on international student assessments, such as the Program for International Student Assessment (PISA), and the Trends in Internation- al Mathematics and Science Study (TIMSS) with GDP growth shows that growth and achievement are closely linked. Countries scoring high on basic numeracy and literacy also tend to have faster-growing economies. Skill dif- ferences account for three-quarters of cross-country variations in long-term economic growth. A second finding is that the global skill deficit should be a great concern, as two-thirds of the world’s youth lack basic skills. Lastly, investing in basic skills development and reaching the goal of global uni- versal basic skills would raise future world GDP by $700 trillion over the remainder of the century.11 Labor markets face significant challenges that undermine social jus- tice efforts. The ILO’s reflection on employment and social outlook trends paints a bleak picture of the overwhelming challenges labor markets are fac- ing. Figure 1 illustrates some of these global challenges, including significant job gaps, persistent gender inequities in employment, a quarter of youth not engaging in education, training, or employment, large numbers of people in informal employment that exclude them from social benefits, large numbers of people not earning enough to escape poverty, and big productivity gaps within high-income economies.12 10 EC, 2022. 11 Hanushek & Woessmann, 2022. 12 ILO, 2023. 15 1 Skills development Towards System-Level Reform through National Skills Strategies as global priority Lessons from the Kingdom of Saudi Arabia Fig. 1 Summary of global labor market challenges, ILO 473 million 2 times 23.5 per cent Jobs gap Gender gap Young people 473 million want employment - 205 Twice as many women as men 23.5% of youth are not in education, million are unemployed (meaning are outside the labor force employment, or training actively looking for work) 2 billion 214 million 47 per cent Informal employment Worker poverty Social protection 2 billion informal workers with 214 million workers in extreme poverty Only 47% of the population limited rights at work or access (