Gulf states struggle to shift jobs to choosy locals

GCC eyes job quotas, wage subsidies to cut unemployment as Arab Spring pressure bites
Gulf states struggle to shift jobs to choosy locals
Gulf governments are seeking to create private sector jobs for their citizens
By Reuters
Thu 03 Nov 2011 03:05 PM

Ibrahim Hasanain worked as a tour guide at a Dubai tourism
company for four years but quit to study law at the University of Dubai, hoping
to land a better-paying government job.

All eight UAE nationals who worked for the
company eventually quit, not only because of disappointingly low wages but also
because of difficulties fitting in with their co-workers, who were mostly South
Asian and Western, he said.

"We were all hired because the company had to fill
their required quota of Emiratis," said Ibrahim, 24, as he walked the
aisles of a glitzy shopping mall in Dubai.

Across the Gulf, Arab governments are seeking to create more
private sector jobs for their citizens while reducing their economies' reliance
on hundreds of thousands of foreign workers, who fill posts in sectors ranging
from construction and public transport to tourism, retail and financial
services.

The motive is partly economic; finding private sector jobs
for citizens cuts the fiscal burden that governments must pay in the form of
unemployment benefits or state salaries for workers at government agencies and
corporations, which are traditional tools for job creation in the region.

But it is also political - social unrest across the Arab
world this year underlined the risks posed by unemployed youths. Even countries
which experienced little or no unrest on the streets, such as Saudi Arabia and
the UAE, want to reduce unemployment among their citizens to avoid storing up
potential trouble for the future.

"We should invest in people, not stones," said
Abdulrahim Naqi, secretary general of the Federation of GCC Chambers, a
regional business association, referring to the Gulf-wide obsession with
building skyscrapers, swanky hotels and shopping malls - and using foreign
labour to do it.

As Ibrahim's case underlines, though, governments face a
tough task trying to change labour market patterns established over decades.
Accustomed to social benefits and cushy jobs paid for by oil wealth, many Gulf
nationals find employment at private firms unattractive because it involves
harder work, longer hours, and in many cases smaller salaries and benefits
compared to the state sector.

And the lack of enthusiasm cuts both ways. Many private
firms in the region remain reluctant to hire Gulf nationals because of workers'
insufficient training and high salary expectations, said Azfar Khan, a senior
migration specialist at the International Labour Organization (ILO) in Geneva.

He said undertrained Gulf nationals even posed problems to
governments which wanted to increase the proportion of locals employed in their
public sectors.

"There is a funny paradox that the governments want to
create jobs for their nationals, but are themselves sometimes reluctant to
employ them," he said.

Localising jobs has been a long-term goal of many Gulf
governments for years, but efforts are accelerating. At a ceremony in Abu Dhabi
last month, labour ministers of the six-member Gulf Cooperation Council (GCC) handed
out awards to firms in recognition of their role in employing Gulf nationals.

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"When it comes to my number one concern, it's
Emiratisation," UAE labour minister Saqr Ghobash said on the sidelines of
the ceremony, using the local term for giving UAE citizens more of a role in
the workforce.

The UAE is a prime example of both the potential for
localisation and the difficulty of implementing it. The country does not
regularly release up-to-date jobless figures; an ILO estimate in 2009 put
unemployment among its citizens at 14 percent, but UAE citizens account for
under 20 percent of the population of more than 6 million, which is largely
made up of South Asians and Southeast Asians.

Like most other government officials in the region, Ghobash
said his country had no plans to reduce the number of foreign workers - it was
simply trying to provide more access to jobs for qualified locals.

Although the UAE does not operate an official quota system
for local employees, it uses incentives to encourage private sector firms to
have certain proportions of UAE citizens in their workforces, a labour ministry
official, who declined to be named because he was not authorised to speak
publicly about the policy, said

But if the government presses companies too hard, it could
hurt private business and conflict with another plank of the UAE's economic
policy, which is to diversify the economy away from oil and spur the creation
of innovative small and medium-sized firms.

So authorities are also planning to subsidise jobs for
Emiratis at private firms - a move that would initially cost the government,
but would ensure higher salaries and hopefully in the long run help to change
the habits of job seekers. Kuwait and Saudi Arabia have already tried similar
policies.

"Why do we need subsidies?" said Ghobash.
"It's because the gap between the public salaries and the private sector
salaries is quite big. Unless you do these subsidies, there is very little
chance to succeed with Emiratisation."

Another area under study is education. Heavy public
investment has created a network of colleges and universities in the UAE; now
there is pressure to orient them more closely to teaching job-related skills rather
than just producing degrees.

Naqi at the Federation of GCC Chambers said GCC countries
should tailor their education systems to cater to their local job markets. This
would allow Gulf nationals to fill more technical and managerial positions that
are now occupied by highly trained foreigners, he said.

But Khan at the ILO said localisation would be hard to
achieve in the UAE as 70 to 80 percent of the foreign workforce was employed in
the construction sector, the services sector and as domestic servants - mostly
jobs that locals would shun.

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"Are they taking away the jobs from the
nationals?" he said. "Or, to rephrase the question: would any
national want to take up these activities? I think no."

Saudi Arabia, where locals account for just 10 percent of
private sector employees and the most recent official estimate for unemployment
is 10 percent, launched its latest localisation programme in June. The scheme
codes companies according to the proportion of Saudis on their payrolls - red
for the least and green for the most.

Companies in the red zone may face punitive measures, labour
minister Adel al-Faqih said. For example, workers in red-zone companies may
join firms in the green zone without having to ask their current employers for
permission to leave.

"For many coming years, we will still be in need of a
large number of foreign labourers to build our home countries in the Gulf
region," Faqih said. "But the main goal is to have balanced
opportunities for our sons and daughters so that they can get jobs."

Once again, however, Saudi Arabia has to move carefully to
avoid damaging growth of the private sector, which is already lagging the
oil-fuelled public sector. Pinak Maitra, chief financial officer of Kuwait
Projects Co, a big regional conglomerate, said the localisation programme was a
major challenge for business in Saudi Arabia.

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

Yet Saudi Arabia's local talent has become notoriously
choosy about where it works. So-called withdrawals, where employees who have
been trained by one firm jump ship for another after a short period, have
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.

And some measures which the Saudi government is taking to
reduce social discontent appear directly opposed to the goal of localising
jobs. Earlier this year, the government announced $130 billion of additional
spending on welfare programmes, subsidised housing and other social spending.

By strengthening the social safety network, the government
may be reducing the incentive for people to join the private workforce. A
foreign banker in Saudi Arabia recalls that on the day after social benefits
were increased this year, few of the security personnel at his bank's offices
were at their posts - some had evidently decided that the benefits of staying
in their jobs were no longer attractive enough.

With unemployment among its citizens low at around 4
percent, gas-rich Qatar has little economic reason to worry about giving more
private sector jobs to locals, but officials say limiting foreign workers
involves social and security issues. Qataris make up only about 16 percent of
the 1.7 million population.

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Qatar's solution may be increasingly imitated across the
Gulf: where it is unable to find local citizens to move into jobs, it appears
to be encouraging the use of Arab workers from other countries, rather than the
South Asians and East Asians who have traditionally done much of the hard
labour.

"We have now started to limit foreign labour,"
said Hussain Yousuf al-Mulla, undersecretary at Qatar's labour ministry.
"When I say foreign, I mean Asian workers.

"The instructions that have come to us from the
government are to stick to Arab labourers. Foreign labourers caused many
problems - their number is big, their customs and habits are not similar to
ours, besides social and security problems."

Oman and Bahrain, which have seen street protests this year,
also aim to localise jobs, but they may have less room for expensive steps such
as job subsidies since they are not as wealthy as bigger oil exporters. Both
countries are receiving multibillion dollar aid schemes from other GCC
governments.

Oman's foreign minister said in March that his country
planned reforms which could include reducing the number of foreign workers.

Khan of the ILO predicted the GCC states would need years of
work to reduce unemployment rates among their citizens and cut their dependence
on foreign labour.

"I don't think the nationals are, at the moment, ready
to 'take over'," he said.

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