RIYADH (Reuters) - Saudi Arabia on Saturday named a prominent businessman as labor minister in a move welcomed by the private sector, as the kingdom seeks to diversify the economy away from oil and create jobs for an overwhelmingly young population.

FILE PHOTO - Saudi Arabia's King Salman bin Abdulaziz Al Saud talks during the opening of 29th Arab Summit in Dhahran, Saudi Arabia April 15, 2018. Bandar Algaloud/Courtesy of Saudi Royal Court/Handout via REUTERS

King Salman also issued royal orders setting up state bodies to promote culture and protect the environment, and appointed a cleric known for moderate views to lead the Islamic affairs portfolio at a time when the deeply conservative Muslim country is easing social restrictions and promoting entertainment.

Private sector businessman Ahmed bin Suleiman al-Rajhi was named minister of labor and social development, according to the royal orders published on state media.

Getting hundreds of thousands of unemployed Saudis into the workforce is a major challenge for Crown Prince Mohammed bin Salman, known as MbS, who oversees economic policy for the world’s top oil exporter, where unemployment stands at 12.8 percent.

The kingdom, which has struggled for years to create jobs for its nationals, aims to create 1.2 million jobs by 2022 to reduce unemployment to 9 percent, a senior labor ministry official has told Reuters.

The selection of Rajhi, who chairs the Council of Saudi Chambers of Commerce and is the scion of an Islamic banker billionaire, follows a broader trend of tapping the private sector to fill top government posts, including the housing, water and agriculture ministers, and a senior defense official.

Last year sources told Reuters that Rajhi was among a delegation of 10 businessmen representing the private sector who met MbS to discuss how the sector had been hit by austerity measures designed to cut the budget deficit and rising fees for employing foreigners, which are encouraging an exodus of expats.

“Some of the labor ministry’s programs have been taken in isolation from the private sector which adversely affected their effectiveness,” said prominent Saudi economist Fadl Alboainain.

Economists said Rajhi, the third minister to hold the labor portfolio since 2015, is expected to create a more friendly business environment, enhance public-private sector communication and help support small and medium enterprises.

“This is the best news we have heard over the past few years, we are very optimistic,” said one Saudi businessman of Rajhi’s appointment, speaking on condition of anonymity.

MODERNIZATION DRIVE

King Salman also appointed Abdullatif bin Abdulaziz bin Abdulrahman Al Al-Sheikh, a cleric known for his moderate views, as minister of Islamic affairs, call and guidance.

Al-Sheikh - who once headed the kingdom’s religious police, whose powers were curbed two years ago - has previously voiced support for female employment and gender mixing.

MbS has promised to promote a more moderate form of Islam under efforts to modernize the kingdom, the birthplace of Islam, including the recent lifting of a ban on cinemas and the lifting later this month of a ban on women driving.

The royal orders also set up a Ministry of Culture, extracting it from the information ministry, as part of a move to capture more Saudi leisure spending at home.

Prince Bader bin Abdullah bin Mohammed bin Farhan Al Saud, who was appointed in April to the board of a newly-established General Culture Authority, was named culture minister.

Prince Bader, 33, has risen quickly within the government and already holds several top positions, including governor of a royal commission tasked with developing a historic tourism destination in the country’s north.

The Saudi Research and Marketing Group, which is closely linked to King Salman’s branch of the royal family, announced his resignation as chairman hours after his new appointment.

King Salman also ordered royal commissions for the environment and the holy city of Mecca, and an administration for preserving historical areas in the Red Sea city of Jeddah.

Maps tweeted by state media showed that six nature reserves established by the orders - “to reestablish wildlife, enhance their development and promote eco-tourism” - covered some 265,000 square kilometers (65 million acres) of territory.

One of the sites is named for the king and another, located between the proposed NEOM business zone and a Red Sea tourism project, for the crown prince.

The royal orders named several new deputies in the ministries of interior, telecommunications, transport and energy, industry and minerals, and appointed new heads to the royal commission for Jubail and Yanbu and the King Abdullah City for Atomic and Renewable Energy.