A critical shortage of local talent is continuing to stunt the growth of key non-oil sectors of Gulf Co-operation Council (GCC) states, a panel of experts has revealed.
At a time when many of the region’s mega projects are entering their crucial completion stage, the lack of know-how and shortage of local talent in construction, information technology, healthcare and services industries are threatening the ventures’ future sustainability, it said.
The group called for immediate efforts to tackle the problem that has traditionally not bothered countries in the Gulf, which have relied heavily on high oil prices to offset talent shortages. But with continued growth in the region and the prospect of an end to the oil era, the panel focused on initiatives to bolster education and skill levels among nationals to support the non-oil sectors.
It said the local population is yet to acquire appropriate skills required for a knowledge-fuelled economy. And in Dubai expertise is needed to run ambitious ventures such as the Metro network, The World, The Palm and other projects.
Dependency on the oil sector and inadequate skills among the domestic workforce have resulted in high demand for qualified individuals from across the world, it said.
This has caused the expatriate population to grow considerably in the country, leaving a significant proportion of national youth without employment.
Today expatriates form more than one-third of the GCC population; in countries such as Qatar and the UAE, expatriates constitute more than 80 per cent of the population.
Emirates Business asked the panel to shed light on the possible causes for talent shortage and the implications it could have on the growth of the GCC economies. It also discussed possible solutions to boost skills and measures needed to prepare local youth to join the workforce.
Why are we facing a skills shortage in the GCC?
AL KAMALI: There are a lot of projects that are under way in the region and they will be completed in the next three to five, or 10 years. Sustainability of all these projects is not an easy job. You cannot wait until the projects are complete.
We have no less than 100 hotels, 100 residential towers, schools and knowledge centres coming up. We need people with skills to run these projects.
VAN DER WALT: It is not so much of a skills shortage as it is a problem of maintaining the skills to keep pace with growth. The construction sector is booming in Dubai. With all the residential and office space that is becoming available, there is bound to be demand for skilled people as well.
AL HASSAN: This is not just a GCC problem, it’s a worldwide issue. In a lot of areas of expertise there are shortages worldwide. In our field, the shortages crop up because we are just two years into this business in Dubai. We have visited several countries and have tried to recruit talented people to plug the gap. Unfortunately, we found the shortages were a worldwide phenomenon. Since we never had a railway network, there is no expertise available locally.
EL ZEIN: You have a skills shortage in general, but among GCC nationals at the executive level specifically. This is because the pace of development here is fast, but again it is not only in Dubai. Investors are also pumping money into underdeveloped areas in the Middle East such as Morocco, Libya and Egypt, which now are in need of executives as well. So the issue is more complicated.
AL SULAIMAN: It’s a fact that we are facing skills shortage across all sectors in the GCC. Some companies say they are losing a lot of skilled people.
And add to it the fact that there are many more projects coming up and many more international and local companies getting involved in those projects.
HENDRIKS: Talents should be groomed to suit the right sectors that need them. For example, if you have the best shopping malls in the world here that is what your institutes must focus on; they should be able to produce professionals who can run the malls. And you will see the industry beginning to recognise you as a main player.
Unfortunately, the Middle East is not benefiting from this business model.
KHAMIS: It’s a worldwide problem rather than just the Gulf Co-operation Council states. The rise in oil prices have helped the governments here to develop more projects, which is why the skill shortages appear more prominent in this region.
When they have money, they will look to implement more projects, but the workforce didn’t get the time to catch up on its skills. The shortage is also caused by the high cost of bringing people to the region.
What are the sectors being affected?
AL KAMALI: We’re suffering skills shortages in technical areas. This is mostly felt in the IT and real estate sectors – in the technical operation of towers that are being built – as well as in areas such as marketing.
VAN DER WALT: It’s across the board. But the construction sector is getting people with just the basic skills, right from architecture to structural engineering. Other areas such as the hi-tech industry and healthcare attract people from around the world. In fact, the skills shortage is being felt across the world.
EL ZEIN: The property sector is one of the hardest hit. We have got to the stage where we struggle to get the right people. For example, earlier we used to go to countries such as Australia to pick the senior management of Middle East property companies. Now Australia is trying to get its people back because there is a shortage over there.
There is also competition between the Gulf and China. Every top-notch property development executive who wants some international experience must have had a call from either the Gulf or China.
AL SULAIMAN: It affects all areas, but especially the technology sectors where we are facing major challenges at the moment.
HENDRIKS: It’s ridiculous the region is not strong in petrochemistry. Actually we should also focus on solar energy, nanotechnology, urbanisation, tourism and retail as areas for development.
KHAMIS: Areas that are particularly hit are the industrial, services, public administration, law, accounting and finance.
How worrying is this shortage to the future growth of the GCC economies?
AL KAMALI: We have to be very worried indeed. Most of the people in the companies here at the moment do not have the right skills needed to handle their jobs. The growth of the economies depends on the skills of its workforce. If there are no skilled people there are no economies.
VAN DER WALT: There’s certainly strong awareness of the issue in the Gulf Co-operation Council. It’s being reflected in the number of universities that are setting up branches here and the emphasis that has been given to this by policy-makers and individual emirates. The economies of this region will be affected considerably if we don’t get the right people here.
AL HASSAN: This is one of the major concerns we have. Because, we are supposed to have a minimum of 50 professionals in our department but we have only 50 per cent of the figure at the moment.
Several projects are coming up and the workload is increasing, so we need to have the right people on site. We need managerial and engineering expertise.
EL ZEIN: It means there are delays in delivering the projects and if you’re really stuck then you end up paying more for the talent. And this isn’t only about property, we’re talking about other areas, including shopping malls and investment banking. The economies will continue to grow as long as the oil prices hover around the mid-90s. But the impact is on the GCC’s efforts to diversify their economies and get away from being 90 to 100 per cent reliant on oil. It delays the diversification of the economy.
It also has a financial impact on investors who are backing projects here because there could be delays in the return they get on their investment.
AL SULAIMAN: Skills are the fuel of our development, and if we don’t have this then we will have problems in moving forward. We’ve been complaining for a long time that the economy is growing too slowly and we don’t have enough manpower.
Now is our chance. We have to pay attention to the quality and type of education we provide to our younger generation and give the nationals responsibility. We need to take some risk and develop that talent, because whatever mistakes are made it will still be well-invested money I hope.
HENDRIKS: In the short term, you can see there won’t be any serious implications because of the way things are programmed and supported by higher oil prices. But in the longer run, disaster is going to happen, because you are trying to position yourself as a service industry as well now.
KHAMIS: For the time being everybody is worried about getting the right people to implement projects, but because of the high oil prices it’s not much of a problem; they pay higher salaries because they can. It must be understood that there’s an interdependence between the oil sector and non-oil sector. It won’t be a problem, however, if you think about ways of injecting this oil income into areas such as construction, mortgages or services, so these areas can start to represent a more significant role in the total gross domestic product of the GCC.
Whose responsibility is it to address this issue and what action must be taken?
AL KAMALI: It is a shared responsibility between the public sector and the private sector. We require more partnerships across the industry as a whole. The time has come to do a full audit of all industries so we can get an understanding of the situation here. And because development is happening across all sectors we need a full audit across the GCC. We have to take the discussion of education further and bring business into learning. We do not need Western organisations to come here and for us to duplicate what they are doing. They are bringing a business curriculum here but they have not ever been to this part of the world. This will not translate and will not work. You have to introduce business ideas for the region early on, and let people be part of it.
VAN DER WALT: It is everybody’s responsibility. It is the corporates’ and the governments’ in terms of trying to facilitate the environment for this to work. I do not think anybody can say it is not their responsibility. There is investment going into education, but what concerns me is the need for greater depth and breadth rather than numbers. There are about 70 institutes for higher education in this area but when you look at these individually, none of them a have a particularly significant size or breadth.
AL HASSAN: The affect of the Metro on the economy will be very big. It will aim to solve the issue of traffic, which is one of the major problems in the UAE and Dubai specifically. Today, Dubai is losing Dh4.5bn every year because of the traffic congestion. And the rail business is coming to solve a portion of that, as well as other legislation and solutions, such as roads, public and marine transport.
EL ZEIN: It varies from country to country. The Qatar Government is putting a big portion of its budget towards the education sector and that just started a couple of years ago. So hopefully we will see more and more coming out of there. Dubai is also becoming a breeding ground for education programmes, as well as Saudi Arabia.
Governments and the private sector have realised that this cannot be neglected, and if you really want to have a talented, national GCC workforce, then you have to put money into education.
AL SULAIMAN: The responsibility lies with everyone, starting from the family, the government, the private sector to the individual himself. The government owes it to people. They have done their best so far in terms of initiating new universities, colleges and vocational training centres. But we also now need to look at the quality of what is being provided and to have some key performance indices. It is also the private sector’s responsibility to make sure they do their bit to prepare talent and skills. There is a lot of investment going into education, but that is not the problem. It is where that money is invested and the effectiveness of the investment. In
terms of numbers, we are investing quite a bit, but in terms of return, this is where the problem is.
HENDRIKS: If you look at some of the measures Sheikh Mohammed has made – thousands of difficult to employ academics were re-engaged in a management development programme – it is clear that the will is there. But at the moment, the vision is not developed sharply enough.
More research must be done and there needs to be more legislative guidance to make this country more accessible for external talents and create an environment where sharing and learning is more vital. The sort of education provided is also important. You must ensure that a MBA in Dubai, Abu Dhabi or Al Ain is as good as in Rotterdam or London. But at the moment this region does not have this. You have to re-invent the way you educate your people.
KHAMIS: It is a joint responsibility between the public and private sector. Illiteracy in this region is almost eradicated. There are a lot of areas that are in line with the EU’s regulations and standards for basic literacy. The next step now is to match the education level to the needs of the society, and to promote technical and on-the-job training and management skills. Because there is no competition among skilled people, the prices are going up and it is creating a natural monopoly. In Bahrain, we have created “incubators” to help small- to medium-sized businesses develop. The Bahrain Development Bank provides funding and a location to set up a business, until it is mature enough to operate independently.
What are the financial implications of the shortage on GCC companies?
AL KAMALI: The financial impact for the GCC is huge, but the media is not covering this enough. You see so many people with skills, but they do not get what they want from a job and they leave. When this happens they take their knowledge, so they cannot share this with GCC nationals that work alongside them. All this is damaging the turnover of companies here.
VAN DER WALT: We need to seek statistics in more detail, but at the moment it is an issue. At the moment we are making do, but it is an issue that has the potential to be significant for the future.
AL HASSAN: The lack of skills will affect business here. If you do not have the skills then you depend on people who will not do the job right the first time. So it will affect the cost of any project or service that is being provided. If you bring talented and experienced people to do the work, even if you pay them more, you get greater benefits.
EL ZEIN: The financial impact of the shortage of skills in the GCC is pretty substantial. I would be surprised if there was any private company where the payroll cost to the company had not increased less than 20 per cent over the past three years to maintain the skill level or to bring in new staff. The skills shortage is making this problem worse because we are having to drag people in from elsewhere, which comes at a premium.
AL SULAIMAN: Because of shortages exuberant salaries are paid for fresh talent. That is one negative aspect that will reflect on businesses. Plus, if you do not have enough talent, it will affect the mission of the establishments on a long-term basis.
HENDRIKS: For a GCC company it has a major impact. But if it is an international company then they will just dedicate the part of the workflow to their part of the world, and they are happy with that and can make up for the shortages in the region from another part of their business.
Therefore, companies based in the region are having the problem that they are not among the quality of intelligence from the international companies. They are not exposed to how to develop innovation, which hits their bottomline financially.
KHAMIS: Companies are paying a premium for talent, but they are passing this on to the end beneficiary, so the recipient of the product or the end user feels the pinch, be that the consumer, the government, banks or contractors. It will have an impact on the goods that are bought and the overall cost of living.
How can the GCC attract talent to the region?
AL KAMALI: Dubai is doing this already, by providing all the facilities for workers and a freedom in business. We have to continue to offer a complete lifestyle package for people coming here.
VAN DER WALT: We have to continue doing what we are doing now, creating a very good place to live, a very safe city for residents and a place that is family-friendly, where there are good values and where people can have lifestyle options along with doing their work.
These are the key things, but it also has to do with income and the potential for future career development.
AL HASSAN: You have to provide people who come to live and work in Dubai with proper pay compared to what they are going to provide as a service because living in Dubai is very expensive. Our salaries were very low compared to worldwide trends, but we increased that so we could start to bring in people from abroad.
EL ZEIN: We need to get to the stage where we make them come here and live and not for two or three years of their careers. They should reside here like it is their home country, and spend money here. To get to that stage we have to do a lot of things that go towards building a full society for expats, such as better healthcare, better education, a better social security system. Those things are happening to varying degrees in the GCC.
AL SULAIMAN: We have seen throughout the years that there are many expats that call this place home, and have spent dozens of years here. And yet they are not being given privileges. I think it is time for them to be given privileges because they have spent a lot of time here and have contributed to the country. There has to be some sort of incentive package to keep people here.
HENDRIKS: The only thing talent wants is to develop its own talent further. So the dependency on GCC firms, if you work here as a talented person, is pretty limited. So they end up throwing money at people to attract them, and the money is OK, but it is not the most important thing. You must create an environment where talent is developed and people say, I would never have this opportunity elsewhere, then it is worth staying.
KHAMIS: You have to create the conditions so that they want to come here, which is mainly a financial issue. Fair remuneration is vital to start with. The establishment of permanent residencies should be increased to give people a reason to stay here because they are an addition to the society and not a burden.
Ali Al Kamali, Managing Director of Datamatix:
Al Kamali oversees the research and conference company, which focuses on issues related to business, management, economy and information technology worldwide. During his time as managing director, he has been able to invite a number of high-profile guest speakers for various events, including former United States vice-president and Nobel Peace Prize winner Al Gore and former chancellor of Germany Gerhard Schroeder.
Nick van der Walt, CEO of University of Wollongong in Dubai:
Professor van der Walt is a member of the executive board of the ITC Group of Companies. Before arriving in Dubai, he held directorships in the energy and professional services sectors, chaired the board of partners of a commercial law firm and was a consultant to the state sector and the boards and senior management of organisations internationally. He was appointed the Honorary Consul for the Republic of South Africa in Auckland by president Nelson Mandela in 1999. He has also been a trustee of charitable trusts involving children and the community.
Abdul Redha Abu Al Hassan, Director for the Planning and Design Department at the Rail Agency, RTA, Dubai:
Al Hassan is one of the key architects behind Dubai’s Metro network. He has more than 21 years of experience in various roles within the UAE Government and helped establishing the RTA, the Projects & Logistics Department and The Planning and Development Department within the RTA. He is also a member of the UAE’s Engineering and Architectural Heritage Societies, and the United States Who is Who Organisation. He is a member of the GCC Rail Committee, and a chairperson for many internal RTA committees, such as Rent Committee, Rail Training Centre and the Dubai Metro Signage Committee.
Magdy El Zein, Managing Director of Boyden Middle East:
El Zein heads one of the Middle East’s largest executive search consultancies and has more than 25 years of experience and a wealth of industry and regional knowledge. He has built management teams in the region for early-stage clients as well as reinvigorating well-established organisations with new talent. Boyden Middle East specialises in high level searches for business leaders and within the financial services, retail, industrial, global technology, life sciences, consumer product and property development sectors.
Dr Faleh Abdullah Al Sulaiman, vice-rector for technology development and industrial relations at the King Fahd University of Petroleum and Minerals:
Dr Al Sulaiman is responsible for the Dhahran Techno-Valley (DTV) at King Fahd University of Petroleum and Minerals, a centre of research and technology development that provides infrastructure for R&D to grow in Saudi Arabia. He has been instrumental in developing a business incubator concept at DTV that nurtures promising new technical and IT companies. The aim is to create new jobs and serve existing businesses and industries.
Boyd Hendriks, Managing Director of Informationland:
Hendriks specialises in handling companies facing skills shortages or talent gaps. He creates management training programmes for skills development and his solutions have been applied internationally among more complex industries and government organisations. Informationland’s approach to shortages of skills, talents and experiences are expressed in innovative strategies and business cases, that are based on the application of knowledge management as well as the introduction of new technologies.
Aref Saleh Khamis, assistant undersecretary for financial affairs for the Ministry of Finance, Bahrain:
Khamis has held his current position since 2002 and has overall responsibility for Bahrain’s budgeting, accounting and monitoring of revenue and expenditure. He is also a member of the board of directors at Gulf Aluminum Rolling Mills Company, Arab Ship Building and Repair Yard, Bank of Bahrain and Kuwait and the Bahrain Petroleum Company. His is also a member of the Supreme Council for Traffic and Board of Trustees of Mohamed bin Khalifa Heart Centre. Prior to 2002 he held various positions in the Bahrain Government.
Call to hone local skills in non-oil areas