Widening demographic gap worries GCC

The influx of expatriates involves serious implications for the Gulf, says GCC Secretariat.

Nearly half-a-century ago, Gulf nations were desperate to see expatriate workers stream into their oil-rich region. Today, they are struggling to see them stream out. While their policy in the past recorded success, it is not equally successful at present.

Several years of extensive job nationalisation programmes and warnings about a steady deterioration in the population imbalance have failed to produce results. Regional governments have just renewed a warning that the demographic gap could get worse.

Expatriate workers in the GCC, which controls over 40 per cent of the world's proven oil wealth, are now estimated at around 17 million, just under half the total population in the 19-year-old economic, defence and political bloc.

Within 10 years, the figure could soar to 30 million as regional countries could fail to stem the influx of expatriates into the region, an attractive destination for Asian, Arab and other expatriate workers. "By 2020, it is feared that the numbers of expatriates in the GCC could increase from around 17 million to 30 million," warned a recent report by the Riyadh-based GCC Secretariat. "This development involves very serious implications for the demographic, economic and human future of the GCC countries."

The report, carried by Saudi newspapers, said the surge in the number of foreign workers means less job opportunities for GCC nationals and constitutes a major obstacle to nationalisation.

"This increase comes as more and more GCC citizens are graduating from universities and institutes and cannot find jobs," it said. "It is time for the GCC countries to intensify their efforts to find jobs for their people and reverse a steady inflow of expatriates. The problem has reached alarming levels and nationals in many GCC members have become a minority in their own countries. GCC states should take these efforts seriously otherwise it will be too late."


National minority

The report, citing IMF data, showed nationals in the majority of the GCC countries are a minority, with those in the UAE accounting for only around 20 per cent, while the ratio is estimated at about 30 per cent in Qatar, 44 per cent in Kuwait and 49 per cent in Bahrain. "After 10 years, we could see other peoples share [with] our citizens their land, ambitions and affairs," said Bahraini Labour Minister Majeed Al Alawi. "There is a pressing need now for the GCC countries to find a common mechanism to tackle this serious problem."

Expatriates began arriving into the Gulf in early 1960s when the discovery of oil brought immense wealth to the desert nations and triggered one of the biggest construction drives in history.

GCC countries were forced to rely on foreign labour as they lacked skilled manpower and technical experience.

But such a policy was reversed in early 1990s after the bulk of the infrastructure in the region was completed and member states suffered from a sharp decline in their income due to lower oil prices.

Prompted by a steady rise in their populations and the number of national graduates, GCC governments began to discourage the recruitment of foreign workers and replace existing expatriate employees with natives in a bid to find jobs for their citizens and tackle a widening gap in their demographic structure. While such programmes have achieved substantial progress in the public sector, they have not been equally successful in the private sector as most nationals prefer government jobs for better benefits.

The problem has sparked warnings by many officials and experts that more serious efforts will be required.


Citizens' rights

"In all countries and human societies, citizens are mobilised and assimilated in all important sectors of society. This is an important constituent of national sovereignty and constitutional provisions and laws do not accept to be tampered with nor to be ignored or violated in this regard. It is also necessary in order for every citizen to take turn in leading society towards requirements of global and permanent development," said Abdullah Al Awadhi, consultant at the UAE's National Human Resources Development and Recruitment Authority. "Nationalisation of the UAE society is a strategic pillar that enables citizens to harness the resources and fortunes of the country in their interest and the interest of all who contribute to the development of society. The UAE society has always sought the good of humanity and not just its own interests. Since human resources are a major force behind development of a safe society, which has allowed the UAE to reach levels enjoyed by advanced countries in all aspects of life, whether in economic or social spheres, the time is now right for it to promote its national human resources."


Impact of crisis

In a recent study, the National Bank of Kuwait (NBK) warned that the global fiscal crisis and the ensuing fall in crude demand and prices could have an adverse effect on the GCC's job nationalisation plans.

It said this is because many private sector establishments have been forced to shelve expansion plans and adopt retrenchment measures, which mean a freeze on new recruitments in those firms.

"With the ongoing discharge of workers taking place in the GCC private sector, it is feared the existing preference of nationals for public sector employment will gain momentum, putting recent gains at risk," it said. "To prevent this, serious measures are required to restore confidence in the private sector."

Several companies in the GCC have been reported to have sacked employees or have plans to sharply cut their workforce within a new retrenchment strategy triggered by the global crisis.

In Saudi Arabia, the world's top oil exporter and largest Arab economy, newspapers last year spoke of the sacking of many Saudis in the private sector and attacked such moves as running counter to the country's policy of finding jobs for its citizens. "The enlargement of the public sector in Gulf countries is not consistent with global trends, or with the idea of promoting the role of private sector in economic activity. The public sector is still the preferred place of employment for nationals because of the biased incentive structure, and the severe competition with expatriates in the private sector," NBK said.

Its figures showed GCC nationals working in the public sector are estimated to be about 58 per cent of total GCC citizens employed in 2008. The ratio ranges between 50 per cent in Saudi Arabia and 84 per cent in Kuwait and about 90 per cent in Qatar.

"Unfortunately, GCC Governments have not taken any solid market-oriented measures to tackle this issue," the report said. "On the same front, the privatisation process is moving slowly across GCC countries, except in Saudi Arabia. Governments need to expedite their gradual withdrawal from commercial activity and become better regulators and facilitators."

Given its relatively large population and high growth rates, Saudi Arabia appears to be suffering most from unemployment among its citizens although it has a better score in terms of national-to-expatriate ratio, with foreigners standing at around seven million at the end of 2008 against 18 million Saudis.

While official estates put the unemployment rate at just under 10 per cent, private institutions believe estimate it at over 20 per cent. Some officials have blamed what they described as the unfair competition between foreign and Saudi workers for employment in the private sector, in an apparent reference to the fact that expatriate employees are preferred because they accept far lower wages.

"The unfair competition between the Saudi and foreign workers has created an education of non-serious work by the Saudis," said the kingdom's Deputy Labour Minister Abdul Wahid Al Hameed.

When the public sector started suffering from redundancy, Saudi Arabia turned to the private sector to support its programmes to create jobs for citizens, who have grown much faster than the real economy before the last oil boom. At the end of the first half of 2009, about 450,000 Saudis were estimated to be jobless, slightly higher than the level a year ago, despite a surge in the domestic economy in 2008.

"Hopes and wishes will not tackle unemployment in Saudi Arabia and I again say that the sky will not rain jobs," Saudi Labour Minister Ghazi Al Qusaibi told newly employed Saudis in Jeddah recently. "Giving social aid to Saudis is also not a solution. The only way to eliminate this problem in the kingdom is through training and rehabilitation of Saudis. Hard work will produce results but it will be useless without a concerted effort by both the public and private sector. I am sure that the private sector can play a crucial role in this respect and I call on Saudi youth to get training and take jobs."

In a recent study, well-known Saudi economist and Shura member Ihsan bu Hlaiga called for "an emergency plan" to tackle the unemployment problem in Saudi Arabia. He said the problem could deteriorate with the decline in oil prices and the absence of a clear employment strategy.


Financial pressure

"It is time for the GCC countries to make more serious efforts to control the demographic gap and the unemployment problem," the GCC Secretariat said. "Besides their social and security burden, the large numbers of expatriates constitute heavy financial pressure on the GCC economies given their massive transfers out of the region."

Figures by government-controlled Emirates Industrial Bank (EIB) showed the combined remittances of foreign workers in the GCC peaked at nearly $40 billion (Dh147bn) in 2008, about 31 per cent above the 2007 level and more than double the 1995 transfers.

From about $30.5bn in 2007, cash remittances by the more than 10 million GCC-based foreigners swelled to nearly $40bn in 2008, EIB said in a recent study. ?The increase last year far exceeded the 18 per cent growth in the remittances from nearly $25.7bn in 2006 despite the adverse effects of the global financial distress in the fourth quarter of 2008, it said.

"The phenomenon of the large financial remittances by the expatriate workers in the GCC illustrates the imbalance in the local labour market. This has turned the region into the second-largest base of foreign remittances after the United States, where they stood at about $47bn in 2008," EIB said.

Bankers estimated the UAE remittance market at about $9bn in 2008 while the Kuwait and Qatar markets are put at $5bn each. "High dependence on oil resources and the relatively small native population size, have led the GCC countries to rely massively on foreign workers," Kuwaiti Global Investment House said.

According to the GCC study, real financial transfers by expatriates could be much higher if their remittances through unofficial channels are included. These include hawala and other sources. "The figure about the expatriates' financial transfers could sharply increase if those remitted through the unofficial system are included. These remittances constitute a heavy burden on the balance of payments in GCC countries."


Young population

According to experts, what complicates the GCC's efforts to employ their citizens is the steady and rapid rise in their young population, which are projected to constitute a majority within the next 10 years.

Forecasts by the London-based Economist Intelligence Unit, an affiliate of the Economist Group, showed the GCC's combined population would likely soar to around 53 million by 2020, with the vast majority of people under 25 years old. "The rapid growth and the relative youth of the population present serious challenges as well as major opportunities," said Jane Kinninmont, author of EIU's study "The GCC in 2020".

"The continuing population boom will raise significant questions related to labour and immigration policies, the role of women, and the adequacy of infrastructure and public services," she said.

Kinninmont said the GCC has one of the youngest populations in the world, and the future development of the region ultimately depends on the success of efforts to educate and employ these young people. "We see dramatic changes under way in the structure of the workforce, with an increasing number of educated women now keen to have careers. However, dependence on expatriate labour is likely to continue in the long term," she said.


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