Compulsory quotas for the national labour force should be revisited as the policy is creating negative effect on companies' productivity and competitiveness, according to a survey of Arab CEOs.
In the past, labour nationalisation initiatives have been supply-driven with quotas on hiring nationals being historically enforced irrespective of industry demand.
This trend, however, failed to address a core private concern that the national workforce was not equipped with adequate skills leading to the continued preference of hiring expatriates, said the survey, Arab Human Capital Challenge – Voice of the CEO, done by Mohammed bin Rashid Al Maktoum Foundation (MBRAMF) and PricewaterhouseCoopers.
Only 29 per cent of the 587 CEOs surveyed believe that such compulsory quotas will enhance their company's current performance. A vast majority of Gulf's CEOs thus believes that imposing the quota will not enhance the performance of their company while only 41 per cent believed that such quotas will benefit the company in the long run.
A major concern aired is the negative effect on company's productivity and competitiveness due to "forcing" corporations to recruit based on numbers rather than skills.
"The notion of labour quotas and the nationalisation policy is effecting negatively for the simple reason that the supply of expertise does not match what the industry requires," said Hussam Abu Issa, Vice-
Chairman and Chief Operations Officer, Salam International Investments, Qatar.
The rising unemployment rates among nationals and the need to increase the human capital contribution of the capital workforce has encouraged many Arab governments to embark on labour nationalisation policies. (This issue was not a concern for CEOs in the Levant and North Africa given their minimal reliance on foreign labour.)
According to Dr Sulaiman Al Hattam, CEO of Arab Strategy Forum, unemployment remains a major problem in the region.
Citing a recent World Bank report, he said 60 million to 80 million jobs need to be created in the Arab World by 2020 to close the gaps of unemployment.
"Even at the most optimistic scenario, the scenario is still grimmer than the expectations of World Bank," said Dr Ghaith Fariz, Director of Arab Knowledge Report – a UNDP and MBRAMF joint initiative.
Sultan Ali Lootah, Vice-President, Employment and Entrepreneurship, MBRAMF, added that majority of the population is below 16 years and if no sufficient jobs are created unemployment may balloon to 30 per cent in 2020 from the current 15 per cent.
The region's economies have been ineffective in creating jobs as evidenced by the low employment-to-population ratios – 32.2 per cent in the Middle East and 27.4 per cent in North Africa, according to International Labour Organisation.
The problem is aggravated by the fact that employment trends in the region are not women and youth-friendly, which comprise more than half of the population.
"About 50 per cent of the population is female so this certainly needs to be addressed," said Anne Simon, Director and Head of PwC Middle East Intelligence, Research and Survey Unit. "More than 90 per cent of Arab CEOs believe that increasing female education will have a positive effect on the Arab World by enhancing the human capital value of women in the region."
Employing women has always been a challenge due to a number of cultural factors. Salah Al Afaliq, Managing Director and CEO of National Trigeneration CHP Company in Saudi Arabia, said: "We would like to employ female workers but are unable to do so because of constraints imposed on employers in relation to logistical issues, special entrance, seating arrangements, separation… making it harder to in fact hire females."
Nationalisation policies were thus developed to increase participation of nationals in the labour force, increase their proportion in national workforce across different sectors, enhance their productivity and replace expatriate workers with nationals.
Survey results however confirm that such policies have not lived up to their initial expectations. "In fact, Gulf business leaders have been reluctant to replace expatriate workers with nationals," it said. "Gulf CEOs tend to regard the quality, productivity and efficiency of expatriate workers to be of superior value to their national resources."
These same CEOs would rather avoid replacing an already efficient expatriate human resource base with potentially less productive national resources. In cases where quotas are based on professions, the CEOs raised the challenge for companies to fill those positions when the number of nationals in such fields is insufficient.
The report stresses that the Arab World faces a dual dilemma – on one hand, there is heightened pressure from a growing labour force that largely comprises of people under the age of 29 and on the other hand, the skills available do not coincide with market requirements.
In other words, there is a mismatch between the supply and demand of local human resources.
And Arab CEOs blame this on the weak links between education, training, skills development and labour market.
Only half of the CEO surveyed said there are sufficient numbers of qualified students coming out of the education system, with 54 per cent citing that new graduates carry the right skills set.
Only 48 per cent believe that these skilled students are provided in sufficient quantities. Gulf leaders are among the least satisfied with the supply of skilled students, with only 37 per cent citing their satisfaction.
The Education Capability Index, which represents CEO satisfaction levels to the education system, is low at 42.6 per cent.
CEOs believe teachers performance should be improved, followed by the enhancement of curricula delivery, second language study and facilities.
Almost three-quarters of Arab business leaders believe that the emphasis of the region's education curricula is based on theoretical knowledge than practicality.
According to World bank, while many countries worldwide have adopted inquiry-based leaning methods, most Arab countries still concentrate on traditional earning methods such as copying from the blackboard and minimal interaction between teachers and students.
"I remember when I studied, it was about memorising as opposed to thinking," said Tariq Al Saffar, Managing Director, Fortune Promoseven Bahrain.
"The whole system needs to be overhauled. It is about thinking, adding, questioning. You are not allowed to question a teacher. How can that be?"
Overall, soft skills like communication, teamwork and analytical skills and innovative thinking were found to be most important to Arab business leaders who rated them at 90 per cent or above.
Memorisation skills on the other hand were at the bottom of the list of their perceived performance.
"We need to move away from the theoretical education that we have in our universities now, towards more practical curricula that are linked to the needs of the private sector," said Dr Abdul Malik Al Jaber, Vice-Chairman and CEO of Palestine Telecommunication Company. Given these "academic" sentiments, Gulf CEOs recommend that nationalisation policies be part of the broader labour strategy aligned with current and future growth sectors of the economy and that the subsequent demand of professions be matched with the supply of graduates.
Abdullah Al Saleh, General Manager, the UAE Ministry of Foreign Trade, added: "Maybe a better way to tackle the nationalisation quotas is to create a fund that is financed via a percentage of the private sector revenues and be directed towards Human Capital Development."
However, bridging the skills gap requires more than just reforming the education system represented in schools.
It is also about reforming vocational education and training and introducing the notion of career development, the report said.
About 92 per cent of Arab CEOs are aware of the importance of training for the development while 87 per cent of CEOs view training and development as a tool to retain staff.
This has historically been a major problem as many CEOs claim that there exists negative perceptions associated with certain technical and vocational professions deemed socially inferior and unacceptable.
This has resulted in many nationals tending to refrain from participating in related vocational and technical education and training. Instead they choose to study disciplines which do not necessarily hold direct relevance or add value to the growth sectors of the economy, the report said.
"Vocational training is very weak in teaching the required skills by the private sector…" said Fadi Ghandour, President and CEO of Aramex. "Governments and the private sector should discuss and decide on a set of incentives that will encourage the private sector to increase their training functions."
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