The UAE economy raced by at least 17 per cent in 2007 and is expected to maintain that momentum in the future – but growth will not tackle the unemployment problem, according to a local study.
The oil and non-oil sectors are growing fast, but unemployment among UAE nationals has remained high. More than 90 per cent of the country’s work force are Asians and other foreigners, said the study by the government-controlled Emirates Industrial Bank (EIB).
The problem could worsen because nationals prefer public sector jobs for more attractive benefits and nearly 40 per cent of the native population are under the age of 21 and will soon join the job market, EIB said.
“The key issue the UAE economy faces is the shortage of manpower and yet potential unemployment for reliance on foreign workforce. The UAE is unique in the world with an estimated 90 per cent of the labour force being of foreign origin,” EIB said in its latest monthly bulletin.
“On one hand, the economy needs expatriate labour force for non-oil expansion; on the other hand there is a problem of unemployment among the nationals.
“An estimated 40 per cent of the national population is currently under 21 years, which means the unemployment problem could rise in the future.”
EIB said the bulk of the UAE citizens are employed either in the government sector or are entrepreneurs or businessmen as most of them shun the private sector because of its relatively small financial benefits.
“Cheap labour from Asian countries is certainly a major advantage for the private sector. One solution would be to start programmes for young entrepreneurs to employ new UAE graduates, where they could have incomes which are more commensurate with their expectations,” the study said.
The EIB study noted that the main reason for the high local unemployment rate were because of the hesitance of most nationals to work in the private sector.
“Unemployment in the UAE is not based on economic undamentals,” said an economic researcher at an Abu Dhabi-based bank.
“The domestic economy has been growing much faster than the population over the past five years, but the bulk of the jobs it is generating are for expatriates… this is because they are less costly, the nationals themselves shun private sector jobs, and there is a shortage in skilled local labour.”
EIB figures showed the UAE’s gross domestic product jumped by nearly 17.3 per cent to Dh703 billion in 2007 from Dh599bn in 2006 as a result of a sharp rise in oil prices and steady expansion in the non-oil sector.
The surge in oil prices to a record $70 a barrel boosted the country’s income by more than 10 per cent to its highest level of Dh246bn last year from around Dh223bn in 2006, according to EIB.
The income is expected to hit another record this year as oil prices are projected to be at least five per cent higher than their 2007 average and the UAE has maintained high crude oil production of 2.7 million barrels per day.
“As one of the fastest growing economies in the world, the outlook for the UAE economy is obviously very positive,” EIB said.
“However growth must be balanced for all sectors to avoid structural problems or bottlenecks. This is the main challenge as reflected in the issues of inflation and transport congestion.
‘Deformed’ labour market
Governments in Gulf Arab states have so far failed to tackle unemployment among their citizens despite impressive economic growth fed by record oil revenues. Most Gulf Co-operation Council (GCC) members have programmes to train their nationals to join the workforce, but the region’s private sector still relies on imported labour.
Faced with an inability – or unwillingness – among their own people to work in the private sector, governments remain the main employer of native workers in the GCC.
Saudi economist Ihsan Bu Hulaiga believes the GCC labour market has been deformed because of its openness to foreign workers and because the public sector functions as a convenient employer for citizens.
“Nowhere is it done in such a way,” Bu Hulaiga said of the influx of foreign workers into Gulf states, where expatriates comprise nearly 40 per cent of a total population of about 37 million. (AFP)
Emiratis prefer public sector jobs