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Hadi Khatib wrote for AMEinfo on August 14, 2020 an article asking Are Gulf job nationalization efforts hurting local economies?

Kuwait, Saudi and the UAE are moving towards giving their nationals a more prominent role in their economies via job nationalization efforts. Good or bad?

  • 300,000 expats have already exited Saudi in 2020
  • there are nearly 3.4 million foreign workers among the total population of 4.8 million in Kuwait
  • The UAE plans to provide 20,000 job opportunities for Emiratis in strategic sectors the next 3 years
Are Gulf job nationalization efforts hurting local economies?

Kuwait, Saudi and the UAE are moving towards giving their nationals a more prominent role in their economies via job nationalization efforts.

Combined with the Coronavirus Exodus, can such efforts prove unhelpful?

We look at the GCC and those 3 countries and the level of aggressiveness they are putting behind job nationalization.

GCC

Nationalization is not the only reason expats are leaving the GCC.

The exodus of Gulf-based expats accelerated during the pandemic, is leaving many concerned about the economic consequences.

According to Oman’s National Center for Statistics and Information, 79,000 foreigners left between March and June of this year. 

Jadwa bank in Saudi Arabia projects 300,000 have already exited the country in 2020. Bloomberg reports that the population could decrease by 4% in Oman and 10% in the UAE.

Oxford Economics estimated that some 900,000 people in the UAE, mostly expatriates whose residence visas are tied to their employment, could lose their jobs as a result of the pandemic. 

In addition, 40,000 Kuwait-based expats caught in the coronavirus panic have been trapped overseas and have now lost their passport validity as well as visas and residency permits.

Expats comprise approximately 70% of the total population in Kuwait and close to 90% in the UAE.

However, even before the pandemic, life became harder for Saudi expats due to measures like VAT (15%) and foreigner-targeted taxation.

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Nationalization programs also started driving foreign workers to seek their livelihood elsewhere. In places like Kuwait and Saudi, the effect is more pronounced.

Varsha Koduvayur, a senior research analyst who focuses on the Gulf states at the Foundation for Defense of Democracies (FDD), argues that these countries’ nationalization plans will backfire financially.

For example, Nationals who are occupying vacated jobs by expats expect to get paid at higher rates, increasing labor costs for employers.  

Read: Saudization in full gear: Thousands of expat jobs are disappearing

Saudization     

Foreigners make up about 10.5 million of Saudi Arabia’s total population of 34.8 million.

Saudi Arabia’s Minister of Industry and Mineral Resources Bandar Bin Ibrahim Al-Khorayef recently tweeted: “The industrial sector was able to employ 471 Saudis and lay off 1,904 expatriates during the month of July despite the coronavirus situations.” 

Saudi Minister of Human Resources and Social Development Ahmed Al-Rajhi has inaugurated the mrn.sa platform to document flexible work contracts between employees and employers and help the private sector boost Saudization. 

The first phase of a February 2020 Saudi Shoura (Consultative) Council plan aiming to Saudize 20% of pharmacists in the profession went into effect recently. An extra 30% is envisaged in the second phase of the plan due to start 2021.

Spokesman for the Saudi Ministry of Human Resources Nasser Al-Hazani told state television Al Ekhabriya that the government seeks to employ 3,000 Saudi pharmacists by 2022.

“Since the decree was issued, 1,500 Saudi pharmacists have been employed,” Al-Hazani said.

An estimated 21,530 foreign pharmacists are registered in Saudi Arabia, according to 2018 figures.

Meanwhile, Saudi announced plans to host LEAP 2021 next February, a landmark technology event.

Saudi Minister of Communications and Information Technology Abdullah al-Swaha said: “LEAP will be a key factor in growing the IT sector, boosting ICT’s GDP contribution by SAR50 billion over five years, securing foreign investment, and assisting our Saudization employment ambitions.”

Read: Reasons why Kuwait ranks as the worst place for expats to live in

Kuwaitization

draft bill approved by Kuwait’s National Assembly in July intends to reduce the presence of foreign workers in the country.

Indians’ presence to be limited at 15% of Kuwait’s population, forcing some 800,000 out of 1.45 million in the country to leave.

At present there are nearly 3.4 million foreign workers among the total population of 4.8 million.

Prime Minister Sheikh Sabah Al Khaled Al Sabah recently told reporters that foreign workers must be reduced from 70% of the population to 30%. That translates into expelling 2.5 million people.

State-owned Kuwait Petroleum Corporation and its subsidiaries announced in June that a ban on the future employment of foreign workers would begin in July.

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Pink slips are already out for many expatriates working on contracts in Kuwaiti ministries, especially those employed in non-technical fields.

However, expatriates working as experts in the ministries will be terminated gradually, according to the report.

It is expected that more than 50% of expatriates working for subcontractors will be laid off in the next three months as Kuwaitization gathers momentum, the report stressed.

The government envisioned the deportation of 360,000 expats in the short term period which included 120,000 residence violators, 150,000 unskilled workers, and 90,000 over the age of 60.

Emiratization

Emiratisation is a key performance indicator of UAE Vision 2021. The newest targets are to provide 20,000 job opportunities for Emiratis in strategic sectors including civil aviation, telecommunications, banking, insurance and real estate development over the next 3 years, with an average of 6,700 jobs annually. Plans also include allocating a Dh300 million fund to create specialized training programs that empower Emirati job seekers.

The Human Resources Development Committee in the banking and financial sector adopted the Emiratization points system in the banking and insurance sectors, raising Emiratization targets through creating more than 8,000 jobs for citizens during the next 3 years.

The banking sector is already hiring 9,000 UAE nationals.

Something sounds off-kilter with all these strategies if only taking into consideration the loss of GDP growth that will take place when these expats’ expenditures are removed from budget calculations. The UAE does have a more moderate approach to job nationalization which could prove crucial in the long run.     

Hadi Khatib is a business editor with more than 15 years’ experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it. hadi.khatib@thewickfirm.com