Out of work In the Gulf

By Shilpa Mathai, MUSCAT
Sitting in a Dubai café, 35-year-old Adel Hassan despondently nurses his tea. It's been a long day and his chances of landing a job seem as remote as ever. "I lost my job in a contracting company two years ago. I never thought I'd be unemployed, but now I am beginning to lose hope of ever finding another job," says the Gulf national. "When we were young, we thought we'd have a job, that our government would ensure that. Not anymore."

Hassan's story is not uncommon: unemployment is on the rise all over the Arab world. According to Ibrahim Queidar, the head of the Arab Labor Organization, nearly 14 million people - or 15 percent of the 90 million Arab workforce - are unemployed. By 2010, the total Gulf Cooperation Council (GCC) population is estimated to reach 39.4 million from 25 million in 1995. There will be another 8 million job seekers in 15 years time - 533,000 jobs will be have to be created annually to meet demand.

Expatriates. That is a staggering amount of jobs to be created in the Gulf, traditionally the expatriate job seeker's El Dorado. Overseas workers represent 61 percent of the total labor force in Oman, 82 percent in Kuwait, 83 percent in Qatar, 69 percent in Saudi Arabia, 60 percent in Bahrain and 91 percent in the UAE.

Most Gulf countries have extremely youthful populations. In 1999, 42 percent of the total population was under 15 years of age. The Middle East and North Africa (MENA) region registered the highest rates of population growth in the world during the 1970s and 1980s. Although there has since been a decline in fertility, it will take 20 years for this phenomenon to translate into slower growth in the workforce.

Decreasing productivity compounds the regional unemployment problem. In the 1990s, the MENA region had a high proportion of government employees, high wages and extensive state involvement in economic production. Labor markets functioned smoothly in the mid-1980s: there were jobs aplenty as the ever-increasing levels of government outlay matched the demand for labor.

GCC nationals could afford to cherry pick employment options and government jobs, with their generous pay scales and easier working hours, were their first choice. Expatriate workers from other Arab and Asian countries filled the vacancies. However, unstable hydrocarbon revenues could not sustain the situation for long. As government spending tightened during the downswing in oil prices, the growing demand for labor began to taper off.

The GCC private sector offers poor employment opportunities: many private businesses opt for cheaper overseas labor. This is why there still are a substantial number of foreign workers employed in all sectors of the economy, despite unemployment among GCC nationals. Although an increasing number of national secondary school and university graduates come onboard annually, they are not easily absorbed into the private sector, as their skills are not in tune with the needs of private employers.

Economists say that GCC economies currently face both structural and cyclical unemployment. The demand-supply mismatch, where national workers are unable to find jobs that match their skills at the reservation wage rates, create structural unemployment problems. Fluctuating oil prices have an impact on government spending. Decreasing revenues trigger economic slowdowns - the public sector reacts by freezing recruitment and the private sector by streamlining operations. This causes cyclical imbalances in the labor market. Disguised unemployment among nationals working for the government is another long-recognized problem.

A report on GCC labor markets states that the regional economy has undergone three major transitions. The first was the major influx in the early and mid-1970s due to the huge increase in oil revenues. The second transition began a decade later as a result of the declining oil revenues from 1982 to 1986, and skill requirements shifted from the building of new projects and the expansion of the service sector to the maintenance of established infrastructure. Now the third stage has kicked in.

The days of governments as job creators seem to be over. The oil sector is not a good employment provider either, as it is highly capital-intensive. This leaves the private sector with the task of absorbing a burgeoning young population.

Why does the private sector shy away from employing nationals? Most businessmen running small-to-medium enterprises in the region say they cannot afford to meet the high wage bills of nationals - and expatriates are willing to do the same job for less. It is also more difficult to terminate a national's employment contract. "Nationals," explains a Muscat businessman, "are not always trained and equipped with the right skills. I do not have the resources to train them on the job. I'm left with no options but to employ foreigners to do my work."

In countries whose rulers are keen to ensure a generous welfare system, this has become an important political issue. A range of sectors and occupations have been earmarked as exclusively for nationals, and the number of foreign work permits issued has been drastically reduced. A mandatory quota intake of nationals has been fixed in all sectors.

Gulf governments are now pulling out all the stops to make expatriate hiring unattractive for local employers. Recruitment taxes levied on expatriates have been raised. In Saudi Arabia, annual fees for foreigners' residency and work permits have gone up 25 percent to 750 riyals ($200). The Saudi labor ministry has also decided to impose a 25 percent increase on the hiring of nationals in private companies that employ more than 20 people. The government has set up a manpower fund to help private companies train and employ young graduates.

This fund is expected to create 155,000 job opportunities over the next three years. According to Abdul Rahman al-Jarisi, the head of the Chamber of Commerce and Industry in Riyadh, more than 75 million riyals is expected to flow into the fund as a result of the increase in visa and residency fees. "The law also now requires all companies to increase their levels of Saudization, or the intake of locals, by five percent each year," said Alan Dolan, Saudi Development and Training's business development manager.

Most GCC governments have specific targets for job creation. Oman hopes to create 110,000 jobs by 2005 and is pushing ahead with a fast-track Omanization program - in addition to implementing quotas for nationals in some sectors and stipulating minimum wages, the government is also focusing on education and training.

National pride. Qatar is aiming to have a 50 percent nationalized workforce in its energy sector by the end of 2005, and the UAE's Ministry of Labor and Social Affairs is evaluating ways to create jobs for as many as 100,000 UAE nationals over the next five years. Osama al-Shariff of the American University of Sharjah says that the localization policies adopted by Oman, Saudi Arabia, Bahrain and Kuwait have been successful, but that the UAE still needs to do better.

"The main reason for sluggish Emiratization," says al-Shariff, "may be government indulgence: in their effort to give citizens a good life they have made it too easy for them not to take up a job."

There is also a tendency to reduce nationalization requirements to a numbers game. In a bid to satisfy ministerial criteria, they often employ untrained nationals to meet quotas, restricting locals to the lower levels of the office hierarchy. Employers, when under pressure to localize, outsource to balance quota restrictions.

Future job opportunities in the Gulf will be for technical and managerial positions, rather than clerical and administrative ones, and it will be difficult to fill these slots with suitably trained nationals. Greater emphasis needs to be placed on training. Gaps exist in the educational curriculum in the Gulf, and educators say systems should be more labor market oriented. Vocational training is important for nationals; in most Gulf countries, there is not the capacity or capability for all nationals to have professional and managerial jobs.

Gulf governments, especially in Bahrain and the UAE, actively promote higher education. But, says al-Shariff, "training is now treated more on a social service basis than return of equity basis. Education does not stress the need to work for a living."

Human resource specialists say that private-sector job creation is the answer to the unemployment problem. Private employers should be allowed to recover a part of the training costs, execute bonds to bar nationals from frequent job hopping and set their own pay scales. Labor laws in both the private and public sectors, analysts say, should be unified. But are protectionist labor laws the answer to solving the Gulf's unemployment problems?

"Yes, sometimes in the enthusiasm to promote locals, we tend to overlook capabilities required to do a job competently, and this does more harm than good," says al-Shariff. "Every country must use its human resources to the maximum. Citizens of a country are the natural stakeholders in development since they benefit the most - the more they contribute, the more they value that development."

Many Gulf nationals currently seem unwilling to work in certain sectors, such as manufacturing. As a result, foreign workers must be brought in. It is a vicious circle, and a politically sensitive problem. Although there will always be a movement of labor between countries, this must be made in tandem with the transfer of skills. Hiring someone else to do the dirty work is not the answer - even in the Gulf.