Gulf States Struggle to Shift Jobs to Choosy Locals

November 10, 2011 by · Leave a Comment 

By Mahmoud Habboush

ABU DHABI, Nov 2 (Reuters) – 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 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 labor to do it.

As Ibrahim’s case underlines, though, governments face a tough task trying to change labor 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 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 labor 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 localization 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 labor ministry official, who declined to be named because he was not authorized 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 subsidize 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 localization 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.

“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 localization program 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, labor 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 laborers 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 localization program 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 localizing jobs. Earlier this year, the government announced $130 billion of additional spending on welfare programs, subsidized 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.

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 labor.

“We have now started to limit foreign labor,” 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 laborers. Foreign laborers 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 localize 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 labor.

“I don’t think the nationals are, at the moment, ready to ‘take over’,” he said. (Additional reporting by Amran Abocar and Asma Alsharif; Editing by Andrew Torchia)

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Al-Qaeda Prisoners Escape in Yemen

June 30, 2011 by · Leave a Comment 

By Mohamed Sudam

SANAA (Reuters) – A senior U.S. official pressed the Yemeni government on Wednesday to implement a Gulf Arab initiative calling for President Ali Abdullah Saleh to step down to end months of protest, Yemeni officials said.

The United States and ally Saudi Arabia fear that a power vacuum and tribal warfare in Yemen will be exploited by the local wing of al Qaeda to launch attacks in the region and beyond.

On Wednesday, dozens of al Qaeda militants escaped from a prison in the city of al-Mukalla in southern Yemen, the latest in a series of increasingly deadly clashes between security forces and militants in the south of the country.

A Yemeni government source said Jeffrey Feltman, the U.S. Assistant Secretary for Near Eastern Affairs, met Foreign Minister Abubakr al-Qirbi and Vice President Abd-Rabbu Mansour Hadi, who is acting president.

“The American side insisted on implementing the Gulf initiative and then removing features of tension (protests), while the Yemeni side demanded that features of tension be removed first and then implementing the initiative,” a Yemeni government source told Reuters.

Saleh has exasperated his rich Gulf Arab neighbors by three times agreeing to step down, only to pull out of a transition plan at the last minute and cling on to power.
Saleh is in Saudi Arabia recovering from injuries sustained in an attack on his palace in Sanaa nearly three weeks ago.

Feltman also held talks with Saleh’s son, Ahmed Ali Abdullah Saleh, once widely seen to be next in line for the presidency until protests broke out earlier this year. No details emerged from the meeting.

As commander of the Republican Guards, the main strike force in Yemen, Ahmed Ali holds sway in the country of 23 million, which sits on the southern border of Saudi Arabia, the world’s top oil exporter.

Saleh has defied calls from global leaders, elements in his own military and tens of thousands of protesters to end his 33 year rule, which has brought Yemen close to financial ruin.

In an early bid to placate protesters demanding his ouster, Saleh guaranteed he would not hand power down to his son, but many Yemenis say key members of Saleh’s family including Ahmed Ali remain firmly in control of key levers of power, blocking any political transition without Saleh’s consent.

Opposition parties allied with youth activists have also insisted that Saleh formally hand over power to Hadi as a step toward a new government and democracy.

An aide to Saleh said on Wednesday his health was on the mend and that he had been receiving guests and giving instructions on day-to-day affairs in Yemen, including a power cut and fuel shortages.
“The president has rejected a request from several members of his family to come to Riyadh to visit him, and stressed that he will return home soon,” said Ahmed al-Sufi, the president’s media secretary told Reuters.

Dozens of al Qaeda militants escaped from a jail in southern Yemen on Wednesday following an attack on the compound.

One soldier was killed and two were wounded when militants opened fire on al-Munawara prison in al-Mukalla, a security official said.

“The militants opened fire on the prison gates and exchanged fire with the guards, injuring two and killing one,” the security official said, adding that 62 prisoners had fled.
All the prisoners were Yemeni and most of them had been jailed after returning from Iraq where they fought in militant ranks, he said.

(Writing by Sami Aboudi; editing by Mark Heinrich)

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Gulf Islamic Banks Eye Conversion of Conventional Peers

May 3, 2010 by · Leave a Comment 

By Frederik Richter and Shaheen Pasha

MANAMA/DUBAI (Reuters) – More banks in the Gulf Arab region may convert to Islamic finance in a bid to tap rising demand for sharia-compliant products and to avoid the heavy investment required to launch new banks.

A source told Reuters this month that Qatari investors are planning to buy a 25 percent stake in Ahli United Bank <AUBB.BH> <AUBK.KW> from Kuwaiti investors and have plans to convert Bahrain’s largest retail bank, which itself plans to take its Kuwaiti unit Islamic.

“Converting to Islamic is compelling in the region. In Kuwait Islamic banks have rapidly won market share from conventional ones,” said Sayd Farook, senior consultant at Dar Al Istithmar.

Converting conventional banks would help the industry expand its retail footprint — for instance in countries where no new licenses are given out but conversions are allowed –, which experts say the industry needs to develop a more sustainable business model.

The Islamic banking industry in the Gulf Arab region has mostly relied on channeling the region’s oil wealth into real estate and private equity, and was badly hit by a regional property correction late in 2008.

“I would say between 70 to 80 pct of the Muslim market (in the region) would bank with an Islamic bank….if you are an Islamic bank you get to capture that market,” said Sameer Abdi, head of Islamic finance at Ernst & Young.

Scholars have said they do not oppose converting conventional banks as long as their investments and debt levels are brought in line with sharia, which bans investments in certain sectors such as alcohol, over a grace period.

“There is usually a two-year conversion gap from the moment you convert….during which you need to give away to charity any income from conventional instruments,” said Farook.

Experts say that converting a bank comes cheaper than launching a green-field retail bank, but costs associated with revamping the bank’s work-flow, accounting and core banking IT systems are still high.

“Depending on the scale of the bank and the market in which it operates, it could take two or three years before the investment pays off,” said Hatim El Tahir, a Bahrain-based director at Deloitte & Touche.

Abdi said he estimated that up to 15 percent of existing customers could leave a converted bank, not necessarily because they disapprove of the switch to sharia, but because the bank might struggle to maintain its service level during a difficult transition period.

Bahrain’s Al Salam Bank <SALAM.BH> is converting Bahraini Saudi Bank <BSBB.BH>, which it bought last year, as is Egypt’s National Bank for Development <DEVE.CA> after Abu Dhabi Islamic Bank <ADIB.AD> partially bought the lender in 2007.

But the Gulf Arab region is rarely seeing mergers and acquisitions due to cultural sensitivities and opaque ownership structures, which could be the biggest obstacle to the conversion of conventional assets.

Bahrain’s Ithmaar Bank <ITHMR.BH> this month concluded the transformation from an investment house to an Islamic retail bank to improve its funding base, but could do so because it fully owned Islamic retail bank Shamil.

But Kuwaiti banks and merchant families have been badly hit by the financial crisis and are trying to sell down their international assets, which could be a way in.

Their ownership in many banks in the off-shore banking center Bahrain, both Islamic and conventional, could migrate to Qatari investors and banks that are awash with cash, bankers and analysts say.

“Qatar is a small economy…the bigger banks are looking at other markets,” said Janany Vamadeva, banking analyst at HC Brokerage, adding that Qatari companies would also be best positioned to raise money in current capital markets.

(Reporting by Frederik Richter and Shaheen Pasha; Editing by Dinesh Nair and Louise Heavens)

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