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The Question of Localisation

The Question of Localisation

The UAE is a prime example of both the potential for localisation and the difficulty of implementing it. An ILO estimate in 2009 put unemployment among its citizens at 14 percent,

November 3, 2011 8:00 by



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

All eight United Arab Emirates 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 well paid 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 theInternational 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.

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

EMIRATISATION

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) — Bahrain, Kuwait, Oman, Qatar,Saudi Arabia and the UAE — handed out awards to firms in recognition of their role in employing Gulf nationals.

“When it comes to my number one concern, it’s Emiratisation,” UAE labour ministerSaqr Ghobash said on the sidelines of the ceremony, using the local term for givingUAE 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, told Reuters.

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.”

RED ZONE

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 told Reuters. “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 Arabiarecalls 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.

LIMITS

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.

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. By

Mahmoud Habboush

(Additional reporting by Amran Abocar and Asma Alsharif; Editing by Andrew Torchia)



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1 Comment

  1. moss on November 8, 2011 11:12 am

    good morning , this is a very difficult subject to tackle as with all the countries in the GCC, having worked in the region for twenty years i fully understand the points made by you .
    allow me to just share with you one company that i worked for started with 28 Nationals out of a work force of 145, in 1991. When we finished working there in 2008 the work force was some 64 % localised and had grown to in excess of 400. How was this achieved you may ask , well it was hard work and training of local staff and the decision of the Board to concentrate and focus on the youth of the Nation to recruit and foster the working ethics of the company.
    Yes it does work but you must trust and train the locals and give them the power based on their individual performance , training and retraining is what is needed and exposure to other and global markets will see success in the long term

     

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