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Sun 22 May 2016 04:00 PM

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Abu Dhabi lays off staff as Gulf austerity tightens

Several state-linked companies retrench mainly expats, especially those related to energy sector

Abu Dhabi lays off staff as Gulf austerity tightens
(Representational Image)

Thousands of layoffs at state-linked companies in Abu Dhabi are a fresh sign the Gulf's wealthy oil states are hunkering down for a long period of austerity as low crude prices pressure their economies.

Since mid-2015, the UAE, Saudi Arabia, Qatar and other countries in the region have curbed spending on some construction projects and reduced energy subsidies to limit budget deficits caused by cheap oil.

Now some governments are also starting to reduce staff at the companies they control, many in the energy industry, to ensure the firms are not a drain on state finances if oil prices stay low for several years.

Abu Dhabi's National Oil Co (ADNOC), which employs about 55,000 people, has cut hundreds of jobs in the past few months and will have reduced its workforce by at least 5,000 by the end of 2016, sources familiar with the matter told Reuters.

The reduction will occur across most of its 17 subsidiaries as part of a restructuring following a reshuffle of the firm's leadership this month, they said.

An ADNOC spokesman did not confirm or deny the cuts but said: "In keeping with the entire oil and gas industry, ADNOC is constantly looking at ways to be more efficient and more profitable, particularly in the current market environment."

The UAE's oil and gas recruitment market is set for its most difficult year in more than a decade in 2016, according to a report from recruiters Morgan McKinley.

"The oil and gas industry is still feeling the pain, as was to be expected," said Trefor Murphy, managing director for the region. "Overall redundancies have been on the increase."

Most layoffs at Abu Dhabi state firms are not in response to production cut-backs. The UAE has not reduced its oil output and says it is proceeding with long-planned oil and gas development projects.

Nor do the layoffs mean Abu Dhabi is running out of money. With hundreds of billions of dollars in its sovereign wealth fund, the emirate could draw down its reserves to sustain current levels of spending for decades.

But the government wants to minimise the speed of the draw-down as it looks ahead to the possibility of many years of low oil prices. Last year, Abu Dhabi acted ahead of other Gulf states in cutting domestic fuel and electricity subsidies. Now it is applying the same approach to state-linked firms.

In Qatar, state-controlled firms such as Qatar Petroleum and Qatar Rail have been laying off staff. State companies in other states such as Saudi Arabia and Oman have been looking at ways to reduce costs but have so far not resorted to major job cuts.

Most cuts at state firms in Abu Dhabi and elsewhere involve foreign staff because governments want to limit unemployment among their citizens.

Nevertheless, job losses are contributing to an economic slowdown in the region. The International Monetary Fund has predicted Abu Dhabi's gross domestic product growth will fall to 1.7 percent this year from 4.4 percent in 2015.

In Dubai, where the economy is not directly reliant on oil and state-linked firms are vigorously pushing tourism and real estate projects, growth is forecast to accelerate marginally, to 3.7 percent from 3.6 percent.

Companies cutting staff in Abu Dhabi include Abu Dhabi National Energy Co, which has reduced its workforce by a quarter since 2014. It has cut around a third of oil and gas jobs and 55 percent of staff at its headquarters, it said this month after reporting a first-quarter loss.

Earlier this year, Abu Dhabi's Etihad Rail, the federal government-owned entity building a UAE rail network, said it cut 30 percent of its staff in a restructuring.

Abu Dhabi Water and Electricity Authority laid off scores of people, mostly expatriates, sources said. Spokespeople for the authority did not return calls seeking comment.

National Petroleum Construction Co, owned by Abu Dhabi's state-owned industrial conglomerate Senaat and one of the largest oilfield contractors in Abu Dhabi, is reviewing its manpower levels, chief executive Aqeel Madhi told Reuters.

Construction firm Arabtec, in which Abu Dhabi state fund Aabar Investments is the biggest shareholder, may include job cuts in its cost reduction programme, chairman Mohamed Al Rumaithi said in April, adding: "There's some fat to be taken out."

Some firms are axing expatriates to create jobs for UAE nationals. Medical centre operator Cleveland Clinic, owned by Abu Dhabi state fund Mubadala, is creating more than 100 positions for locals. Sources said some expatriate employees have been told they have to leave by the end of the year.

Cleveland said as part of efforts to develop local talent, a number of administrative roles would move to UAE citizens in coming months.

Ibrahim 3 years ago

I wonder what does the "representational image" represent

Faris Karim 3 years ago

Thanks ArabianBusiness for highlighting this very serious and critical matter, which - unfortunately - many governments and authorities are ignoring and no real-world solutions have been put in place. Unemployment is a significant economic as well as political problem in many countries throughout the world that should be treated seriously and promptly to avoid dangerous consequences in the future. When the many obstacles faced by the GCC region are considered, unemployment is seen as one of the most significant challenges. Unemployment can easily place stress upon per capital standards of gross domestic product, standards of living and economic equality.

James 3 years ago

But from all the articles out there, the oil price was impacting nothing at all in UAE?

Mad 3 years ago

Do such reports reach banks who are very aggressive with small and helpless employees.. they don't care about the disaster around and continue sucking the blood and ruining families and small businesses with their high interest rates and penalties and fees in order to recover their losses from this category... even rent and school fees and official fees.

Telcoguy 3 years ago

The people who used to post along those lines have not been seen for a long, long time.

In the end reality has the nasty habit of quashing wishful thinking but it is really sad that so much time has been wasted, oh well. Plus ça change and all that.

Englishman in Dubai 3 years ago

Telcoguy: pardon? What are you trying to say?

WHJ 3 years ago

@Englishman. I gave up on trying to understand Telco a long time ago. I think you should do the same.

James 3 years ago

Simply that certain people used to play the happy-clappy, rara band all the time, no matter what.
Oh wait, WHJ is back, but of course with nothing substantive to say just the usual insults.
Plus ca change as Telcoguy correctly said.

Telcoguy 3 years ago

@whj, i will try to use shorter words and simpler sentences

@James, the rara band is back, time to go short probably

WHJ 3 years ago

@james. if people can't take it , they shouldn't dish it out and then cry foul.
You want substantive, well when I commented on the impact of lower oil prices, I was referring to Dubai's economy, and as you can see it's faring better than all other countries in the region. But, of course, your protégé Telco is determined to engage in fallacies and claim I said otherwise....and now you're dancing to his tune.