Skills mismatch key to unemployment among GCC nationals

Unemployment among nationals in Gulf oil producers is expected to worsen in the next five years as the private sector still favours cheaper and more skilled expatriate labour, according to the International Monetary Fund (IMF).

Although the six Gulf Cooperation Council (GCC) countries, which control more than 40 per cent of the world’s recoverable crude deposits, have succeeded in creating nearly seven million jobs over the past decade, less than two million of them went to GCC citizens, the Washington-based IMF said in a study.

It said the sharp rise in expatriate employment in the GCC has occurred largely in the private sector, but also in the public sector in Kuwait and Qatar.

“The high unemployment rate for nationals has not resulted from insufficient job creation, but from skills mismatches, high reservation wages, and the attractiveness of public-sector employment,” it said.

“Based on historic trends, and in light of the rapidly growing workforce, the number of unemployed GCC nationals could increase by as many as two to three million over the next five years, compared with approximately five million employed nationals in 2010.”

Projections by the Fund showed GCC nations could be expected to increase employment by almost six million workers during 2010–2015.

But it added that less than one-third of the new jobs would go to GCC nationals, barring a “policy shift.” On the supply side, more than four million new GCC nationals will be old enough to work, it said.The IMF said it believes an increase in employment opportunities for GCC nationals will require an enhancement of the current employment strategy, while ensuring that it does not erode competitiveness.

It noted that for several years, most GCC countries have had programmes in place aimed at increasing employment of nationals, including quotas, training and placement services, subsidies, and other incentives.

“These initiatives will likely need to be supplemented or replaced by measures to address skills mismatches and high reservation wages of nationals,” it said.

“A challenge will be to promote the employment of nationals (in the private sector) without imposing undue costs on doing business that would erode competitiveness and potentially reduce growth.”

GCC countries—UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman—have been locked in drives to create jobs for their fast growing native population to stem festering unemployment and avert any social turmoil in the future.

But such drives have made little progress in the private sector as it still prefers cheaper and more skilled and experienced foreign labour. Nationals also favour the public sector for more attractive benefits and fewer work hours.

With the public sector becoming redundant given its slow growth, unemployment among natives has widened in most member states, mainly Saudi Arabia, which estimated the rate at over 10 per cent at the end of 2010.

Failure of previous programmes has prompted Riyadh to embark on the most aggressive job Saudization strategy to create at least 500,000 employment opportunities for its people. The strategy involves attractive incentives for the complying companies and penalties against offenders.

Saudi Arabia, the largest Arab economy and world’s top oil exporter, has nearly eight million expatriates compared with 20 million nationals. Foreigners are estimated at over 10 million in the remaining GCC members.

In a recent study, a prominent global organisation said it expected the GCC nations to seek more foreign labour because of the sustained growth in their economies and lack of skilled national manpower.

“The high growth in foreign labour in the GCC is due to several factors including the national demographic structural imbalance, and the steady growth in most sectors of their economies such as services, real estate and trade,” The Swiss-based International Organisation for Migration (IOM) said.

“These countries will continue to rely on Arab and international labour in the future to ensure their needs of skilled workers and expertise.”

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