A lost cause?

Nationalization of employment in the GCC is still out of reach

The talk of labor nationalization in the Gulf Cooperation Council — ‘Saudization’, ‘Emiratization’, ‘Qatarization’, etcetera — has dominated national policies and development plans for the past 20 years. Qatar’s national vision for 2030, for example, explicitly mentions “increased and diversified participation of Qataris in the workforce” as a goal for human development. 

Qataris have not taken to the streets to demand more jobs, but the protests that have shaken Bahrain and sporadically erupted in the Eastern Province of Saudi Arabia were, at least partially, an expression of economic grievances, specifically high rates of unemployment among the youth of both countries. 

To stave off the rumblings of potential uprisings, oil-rich regimes of the GCC have a two-pronged approach: defuse popular resentment by injecting enormous sums of money in the form of benefits and salary increases for the public sector,  while brutally cracking down on dissent. In February 2011, Saudi King Abdullah bin Abdul Aziz ordered $37 billion as cash handouts and benefits, followed by a royal decree to double the monthly salary for all of the kingdom’s public sector employees for the month of March of the same year. More recently, an immense sum of $184 billion was also planned for expenditure in the 2012 budget plan. 

The Kuwaiti government has embarked on a similar spending extravaganza by committing to give every family free food rations until the end of March 2013 in addition to a sum of $3,500, even though Kuwait has not witnessed near the same scale of public outcry as in Bahrain or even Saudi Arabia.  

While it is too early to judge the efficiency of the planned public expenditure in creating jobs in Saudi Arabia, economists have long warned that the ‘munificence’ of GCC rulers will keep their populations reliant on state subsidies and an inflated public sector, making them less likely to seek ‘real’ jobs in the private sector —  an outcome which contradicts the stated aims of labor nationalization policies.

A closer look at these policies reveals that they face many obstacles, and even a certain amount of reluctance on the part of some GCC governments to pursue them.

 

Doomed by oil 

The windfall created by the oil boom, which lasted from 1973 until the early 1980s, resulted in the creation of a large number of jobs that attracted foreigners who were more skilled than nationals, or simply willing to work for less. A study titled “Local Workers in the GCC countries, assets or liabilities?” published in 2000 estimated that 25 percent of the 20 million migrant workers in the world in the 1980s were located in Gulf countries, while more recently expatriates make up at least 50 percent of the total workforce in the six GCC states, according to the latest national labor statistics (see table). 

This has proven detrimental to the local labor force: as low-cost foreign labor continues to skew the salary scale, it has become more difficult for nationals to find a job in the private sector that meets their expectations, according to Zafiris Tzannatos, senior advisor for the Arab States at the International Labour Organization (ILO) [see story page 54]. 

The public sector, by contrast, is largely staffed by locals, but inflated salaries and flexible working hours have done nothing to change the work culture of Gulf Arabs or prepare them to compete in the private sector job market.  

“People in Kuwait still prefer a job in the public sector because they get paid more, work for shorter hours and can’t get fired,” said Yassine al-Farsi of the Kuwait Trade Union Federation, speaking on the margins of a workshop recently organized by the ILO in Beirut. 

According to a study published by the Brookings Doha Center (BDC) in December 2011, employment in the public sector makes up 83 percent and 85 percent of the total employment of Qatari and Emirati nationals, respectively. The predominance of youth in the public sector is another indication that it continues to be the favorite destination for young job seekers. According to the same study, 60 percent of Emiratis between the ages of 25 and 34 are employed in the public administration and defense sectors, while the same proportion rises to 68 percent for those between the ages of 20 and 24.

The situation is similar in Kuwait, according to a 2010 survey published in 2011 by Silatech, a para-governmental Qatari foundation that aims to promote employment. The report shows 83 percent of the surveyed Kuwaitis preferred working for the government as opposed to the private sector.

Young people’s unwillingness or inability to compete in the private sector contributes to high unemployment rates among young people in the Gulf, according to Tzannatos, who suggested that the public sector cannot absorb such large numbers of new job seekers. Young job seekers may have lukewarm feelings towards the private sector, and the feeling seems mutual among their would-be employers. The problem is also partly due to the fact that the private sector, sensitive to demands of productivity and competitiveness, cannot afford the same incentives as its public counterpart, according to the BDC 2011 report. 

 

More than a lack of skills  

A highly competitive private sector needs employees with high-level skills that job seeking nationals might not necessarily have, as reported in several employer surveys.    

To accommodate, official nationalization schemes have sought to overhaul educational infrastructure in order to equip job seekers with suitable qualifications for the job market. 

The presence of Western-style education is significant in Qatar and the UAE; both countries host local branches of leading Western institutions of higher education, otherwise known as ‘satellite universities’. Abu Dhabi is home to satellite campuses of the Sorbonne, New York Film Academy and New York University, while Qatar’s Education City and Dubai’s Knowledge Village hold prominent institutions such as branches of Texas A&M and Georgetown University. 

But this endeavor is still flawed, according to the BDC 2011 report, as the majority of graduates plunge into the job market without having a clear understanding of the available job opportunities or the skills they need to acquire. The study advised governments and educational institutions in Qatar and the UAE to “increase young people’s employability, build their soft skills and effectively advise them of their employment rights,” going as far as recommending the introduction of “mandatory” internship programs at the high school and university levels. 

But in certain instances, the limits of nationalization processes might be more a matter of lack of commitment on the part of certain governments than a failure to devise the most suitable practices, as not all GCC governments seem to be pursuing nationalization policies with the same enthusiasm. 

Saudi Arabia seemed to have stepped up its drive to limit the domination of expatriates in the labor market with the introduction of the ‘Nitaqat Plan’ in 2011, whereby firms that fail to ‘Saudize’ their workforce face restrictions on hiring expatriates.

Other governments, however, have adopted approaches that are much more favorable to the private sector. Both Bahrain and Oman have taken the road towards removing obstacles to private investment, both foreign and local, in the hopes that job creation will follow, according to Marc Valeri, a lecturer on the political economy of the Middle East at the University of Exeter. 

 

A long way to go

“All the GCC governments — except Qatar, and probably also the UAE — face, in one way or another, the same dilemma: the private sector, especially the leading business families, is a key ally of the regimes, and they need their support; the problem is that the [labor] nationalization policies are contradictory to the interests of these business actors,” Valeri adds. Bahrain’s economic vision for the year 2030, as formulated by the kingdom’s Economic Development Board in 2005, makes no mention of limiting the influx of expatriate laborers. Instead, it promises to increase employment among Bahrainis by shifting to “an economy driven by a thriving private sector — where productive enterprises, engaged in high-value-added activities, offer attractive career opportunities to suitably skilled Bahrainis.” 

The fact that expatriates make up 74 percent of Bahrian’s workforce and 54 percent of the total population according to the official census of 2010 —  in addition to the unreported number of naturalized foreigners who work in the ranks of the security and military forces — throws into question the premise that economic diversification is taking place to the benefit of Bahrainis.

The governments of Bahrain and the rest of the GCC still have a long way to go to reform the labor market, while preserving the balance between a productive private sector and their people’s welfare. This raises a legitimate question about the extent to which the benefit of the people figures on the official agenda of labor nationalization.  

“The fact that most cabinet members are involved directly or indirectly in business explains… why the jobs’ nationalization policies cannot be maintained as such in the long term,” says Valeri. “These decision-making people had to avoid questions being asked about the nation’s general interests they are supposed to promote like the Bahrainization or Omanization policies, and the particular interests they have defended as businessmen.” 

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