Emiratization and the Private Sector: Challenges and Opportunities in a Diversified Economy
01 Jun 12:24 AMSector : Industry & Mining Country : UAE
By Dr Hector Morada
The year 2013 has been declared as the year of Emiratization, with ambitious goals to increase the number of Emiratis employed in the private sector. In support of this program the ‘Absher’ initiative was launched in mid-2012 by H.H. Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, promising 20,000 employment opportunities for Emiratis in the private sector in the next five years. There have been efforts to find employment for Emirati jobseekers in the past, including a number of incentives to influence and facilitate both the private sector employers and the Emirati job-seekers.
Economics and Labor Market
The UAE ranks among the richest countries in the world in terms of per capita income, with salary levels and compensation packages of working Emiratis being among the highest in the world. With a sizable expatriate population, the UAE relies widely on a non-indigenous workforce, particularly in the private sector.
Oil has fueled the rapid growth of the UAE economy and this rich resource, along with other sectors of the economy, was encouraged to grow, aided initially by the hiring of a large number of expatriates. During this initial phase of expansion, the local population was encouraged to pursue education in preparation for their eventual involvement in nation building and the broader national economy. The country embarked on an aggressive economic diversification program to lessen the economy’s dependence on oil.
By 2009, the contribution of the crude oil and natural gas sector to GDP was down to less than a third while the manufacturing and construction sectors contributed significantly making up just over a quarter of gross domestic product (GDP). The wholesale, retail trade and repairing, along with the real estate and business sectors also contributed notably to the growth of GDP.
The fast-paced economic growth of the country is accompanied by a number of socio-demographic challenges. The sudden influx of expatriate workers, many accompanied by family members, created a problem called demographic imbalance – a situation where the local population has become a minority in their own country. Estimates for 2011 indicate that of the 8.2 million in the UAE, there were just about 1 million Emiratis.
The increase in the size and number of private sector employers led to demand for a skilled and educated workforce. As more Emirati students graduated from high school and college, it seemed natural that they would enter the private sector, thus enhancing the Emirati representation in all sectors of the economy. Yet Emiratis did not enter the workforce of the private sector, despite growth among non-government jobs and companies, partly because a government job was still preferred by young Emiratis.
To try and overcome this labor imbalance, as early as the 1990s the government began launching a number of programs and projects to provide employment to job-seeking Emiratis, with a focus on getting more locals into employment in the private sector. While government agencies and organizations provide some relief by employing Emiratis and even replacing expatriates in their favor, the limited absorption seems to have been reached by a number of government entities. Therefore, one solution is to influence the private sector into absorbing Emiratis into their workforce and encouraging them to take a bold, non-traditional move and join a private sector employer.
Challenges of Emiratization
While great successes in economic diversification have been achieved by the country, this may not be said of the Emirati deployment in the different sectors of the economy. Reports from the Ministry of Labor indicate that there are around 20,000 Emiratis from a total private sector workforce numbering more than 4 million.
A recent report from the Federal Authority for Government Human Resources indicates that Emiratization rates for the leadership, supervisory, executive and technical groups in a number of federal ministries have exceeded 80 percent by the end of 2010. Several examples of this are the Ministry of Labor (98 percent), the Ministry of Foreign Affairs (98 percent), and the Ministry of Culture, Youth and Community Development (89 percent). Similar cases are observed among federal authorities as a number have an Emiratization rate of more than 80 percent, for example the Sheikh Zayed Housing Program (99 percent), the Emirates Identity Authority (95 percent), and the Insurance Authority (93 percent).
Some government agencies are challenged in addressing their Emiratization programs. The Ministry of Finance (55 percent) and Ministry of Health (33 percent) are particularly in need of Emiratis that can join their respective leadership, supervisory, executive and technical groups. All public higher education institutions, considered as authorities, are also facing challenges, reflected in the human resource development program of the country. As an example, the flagship UAE University has just under 40 percent of its workforce drawn from Emiratis.
Meanwhile, the 2009 Labor Force Survey of the National Bureau of Statistics reports that the unemployment rate among the Emiratis is high, mirroring regional trends particularly among those under the age of 29 years, with unemployment rates also varying by level of education and age. These trends are not unique to the UAE, or indeed the Gulf, but they do need to be addressed as the nation continues to grow and develop its economic infrastructure. There are also differences among male and female Emiratis in terms of unemployment and educational attainment, with these demographic indicators being vital to the government’s strategy of increasing the Emirati presence in private sector companies.
A number of Emiratization initiatives have been launched in recent years, but they still need strengthening. Emiratization targets or quotas were to be observed by private firms in a number of sectors, but these have yet to be fully met, therefore the presence of the Emiratis in the private sector remains modest.
Private Sector Resistance
The private sector has been evading and resisting government Emiratization programs. The main reason for the resistance is the cost of employing an Emirati. Given the privilege of accessing an almost unlimited supply of economically cheap labor from many labor-sending countries such as India, Pakistan, Bangladesh, Philippines, Nepal and Sri Lanka, hiring an Emirati with a relatively high remuneration package relative to his experience is off-putting to many in the private sector. An Emirati job seeker is often not comparable to an expatriate job seeker given a particular position. On average, this will be true of educational attainment, working experience, skills, work habits and other criteria, along with the financial cost to the private sector employer.
Emirati Reluctance to Join the Private Sector
A recent study indicates that government institutions are the employers of choice for Emiratis, followed by multinational firms and the private sector. Compared to males, more female Emirati graduates would consider working in the private sector. The graduates ranked their reasons for such choices: a) higher salaries and more attractive benefits, b) shorter working hours and more holidays, c) greater job security, d) good working conditions (office-based, without shifts, etc.), e) more overall flexibility at work, and f) a cultural fit and presence of other Emiratis.
Moreover, the same survey reveals that the median monthly salary expectation of graduates is $7,350 for males and $5,173 for females. The salary package involves guaranteed cash payments including allowances. At the top end of wage reservation, many graduates reported that their ideal desired salary monthly packages to be in the range of $9,530 to $13,600. The report also indicated that most graduates prefer to work close to their home town. However, male graduates, more than female graduates, exhibit greater geographic mobility orientation expressing willingness to work away from home if required.
To many Emiratis, expatriate workers have an advantage in the workplace due to having more experience, international qualifications and flexibility. They view the government efforts on Emiratization as helpful and necessary. For them, the Emiratization programs level the playing field allowing Emiratis to get jobs in a very competitive employment market. In addition, for these Emirati graduates, prioritizing Emiratis is fair as they are the nationals of the country. They perceive, too, that prioritizing Emiratis is in the best interest of the companies and country as the expatriate workers are transients while Emiratis will stay for the long run. Some of the graduates, however, view that university degrees have made them too expensive to hire by private sector employers.
Education and Training of Emiratis
The UAE is one among many male-dominated societies where women outnumber men in attending higher education institutions. Reports from the Ministry of Higher Education and Scientific Research indicate that in the school-year 2011-2012, of the 67,000 Emirati students enrolled in colleges and universities, a good 60 percent are women.
On the education front it is worth noting that almost a third of Emirati university students are studying the fields of business and economics. Humanities and the social sciences is the second most attended among female students, while it is Shari’a and law among males. Quite noticeable is the lack of interest in the sciences and fields of education with both courses only attracting 4.9 percent of those attending college or university education. This imbalance is an areas being addressed by the government, with an active campaign to promote research in the sciences and education as a career of choice among Emiratis, as both areas are viewed as being crucial to the future economic and social development of the nation.
The profile of the graduate for the academic year 2011- 2012 is somehow different from the general population of the enrollees. About 45 percent of the 8,490 graduates are from the business and economics fields, while lagging behind are information technology with 12.9 percent and engineering with 12.8 percent.
There are some concerns as it seems the preferred areas of study chosen by young Emiratis do not match perfectly with the growing requirements of the national economy. The persistence and popularity of business and economics among students ignores the need of the country to develop other important parts of the economy, such as sectors that would require more science and technology orientation, or the fields of teaching and education. The UAE, as recognized by many experts inside and outside the country, has achieved great advancements in establishing education-related enabling environments. However, it seems as if there is a need to align the education processes and choices to closely match the future needs of a diversified national economy.
Opportunities and Successes
Emirati champions may be found in a number of spheres, with a growing number of Emirati women reaching managerial and board room positions across both the government and private sectors. Both male and female Emiratis are driving the economy forward, and the successes many of these individuals have had can be used as catalyst to further Emirati involvement in the private sector.
As the government of the UAE continues to move forward with an ambitious and creative economic model, the role of Emiratis in both the government and private sectors will be a crucial aspect of this success. The next stage of this development will be the increased numbers of Emiratis entering employment in the private sector, facilitating the continued dynamic growth for all within the nation.