Gulf's jobs quota push seen as risk to business

Investors say national jobs quota programmes in region will push up business costs
Gulf's jobs quota push seen as risk to business
Saudi has stepped up efforts to enforce an updated quota system
By Reuters
Fri 28 Oct 2011 10:23 AM

Investors fear a big push by Middle East states to boost jobs for citizens, especially in the Gulf which has national quota programmes and where higher salaries are demanded, will push up costs for businesses in the region.

A slew of state moves in recent months, accelerated by regional unrest partly rooted in a lack of job opportunities, has seen Gulf states raise salaries for citizens and attempt to reduce their expatriate workforce.

"All these different HR-related issues are relevant (as investment risk) because they obviously have a political parameter to them now," said Mohieddine Kronfol, chief investment officer for Middle East and North Africa fixed income and global sukuk at Franklin Templeton Investments.

Executives at the Reuters Middle East Investment Summit said concerns are growing about finding qualified local talent - at salaries they can justify - and the cost of job creation measures on economic growth.

As public sector jobs dwindle and more fresh graduates appear on the scene, Gulf Arab states are increasingly looking to private sector employment.

Saudi Arabia, with its burgeoning youth population, is keen to get its youth working and has stepped up inspections to enforce an updated quota system in the kingdom where nationals make up just 10 percent of private sector employees.

Private sector firms who fail to comply face penalties, including a limit on foreign worker visas.

"The Saudisation is the most challenging but in business there is no free lunch. You just have to deal with it," Pinak Maitra, chief financial officer of Kuwait Projects Co, said of risks in investing in the Saudi market.

"In the region, we have made the mistake of depending on expats. It was easy. We're focused on trying to grow local talent."

For Saudi firms, the risk is less about finding staff and more about keeping them. So-called withdrawals, where employees who have been trained by one firm jump ship for another after a short period, has become endemic.

"The rate of withdrawals is among the highest worldwide. In our company, it has reached 60 percent," said Abdulmajeed Alhokair, head of Saudi retailer Fawaz Abdulaziz Alhokair Co.

"There must be a contract that employees abide by. Just as employers (can not fire them) ... The labour ministry must enforce employees to complete their contracts."

In the United Arab Emirates, Abu Dhabi has been trimming expatriate jobs while in gas-rich Qatar, salaries for citizens in some private sector firms were raised 60 percent, matching a similar hike for government sector employees.

"I would love to hire more (nationals) but I can't afford them," said a senior executive at an international bank.

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