The Welfare States Turnaround in the Arabian Peninsula
The Arabian Peninsula amassed affluence, which was reaped since the early 1950s from oil endowment. The benefits derived from oil revenue rose higher after the boom in October 1973. Migrant workers became attracted to the accelerated development among the Gulf States (Al-Ali, 2008).
In a move to put into better use the surplus wealth generated, the Gulf Cooperation Council members (that is, the kingdoms of Bahrain and Saudi Arabia, the sultanate of Oman, and the emirates of Kuwait, Qatar, and the United Arab Emirates) began economic diversification programs to sustain their growth. Under these programs, particular sectors were identified as priority for investment and development; these include tourism, education, infrastructure as well as health care.
However, some of the set targets were challenged by undesired demographic imbalances and localized labour dynamics. Take for instance, larger proportion of non-nationals; two-thirds of nationals were within the 14-27 age bracket as well as disinterest of nationals to gain the requisite managerial and organizational skills for private sector jobs to avoid the need and export of expatriate labour.
The UAE nationals make up about 10 percent of the workforce (Albayrakoglu, 2010, p.39). Al-Ali (2008, p.1) states that Emiratis (UAE nationals) only comprise 20 percent of the national populace. Most of the migrant workers in UAE perform labour intensive duties or manual jobs within the private sector (Albayrakoglu, 2010, p.40).
Al-Ali (2008, p.1) attributes the influx of foreign expatriates into the Gulf States to the shortfall in the labour force to work in the construction of facilities and infrastructure. As the economies modernized, the number of skilled and professional expatriates also increased.
Al-Ali (2008, p.1) explains that UAE underwent two important economic and social transitions, that is the economic windfall between 1974 and the early 1980s and a succeeding era of negative growth that was supported by oil price deflation in the late 1980s and 1990s.
The Arab work ethic presents a sharp contrast from the Protestant work ethic that considers work as a noble act as well as intended to enhance capabilities and the character of individuals (Sikdar and Vel, 2011, p.78). Albayrakoglu (2010, p.40) explains that there are perceived class differentials among Arabs with regard to occupations. For examples, labour intensive occupations are associated with lower class status.
While, the Arabs are attracted to the Western technology, they are less eager to locally invent or innovate of their own (Albayrakoglu, 2010, p.40). Despite the early 1970s efforts to expand education facilities, foreign expatriates edged-out nationals for competitive job opportunities on the bases that UAE education was inclined to the arts, humanities and religious studies at the expense of vocational and technical training.
In order to draw more foreign expatriate workers, the UAE has operated on an open-door policy for them since 1973. Such a policy was pivotal to the development agenda of the UAE as well as hastens the broadening of the economy away from the oil business into the service industries (Horinuki, 2011, p.42).
On welfare ground, Gulf States created more job positions in the public sector to absorb graduates. Public employment became popular because only limited skills and experience were required. In addition, employees enjoyed competitive remuneration and benefits packages such as job security, extended holidays, maternity leave as well as social status.
Al-Ali (2008, p.1) confirms this has had happened in the UAE. The arrival of the bourgeois class in the GCC States was a deterrent to employment of nationals because families focused on lavish lifestyles such as acquiring large apartments, scheduling more travel as well as employing more house helps (Al-Ali, 2008, p.2). While, the private sector never put up with nepotism (Wasta) tendencies, the public sector seemed indifferent (Al-Ali, 2004, p.67).
Parenthetically, traditional cultural norms and practices secluded women from joining vocational training considered as reserved for men like the mainstream engineering fields. Lighter training subjects were identified for women; these include tailoring, cosmetology and teaching. Overall, this has led to overstaffing and unjustifiable bureaucracies as well as a dismal increment of nationals into the private sector.
The UAE Case Study
Al-Ali (2008, p.1) estimates that foreign expatriates in the UAE comprise 98 and 91 percent of private and public sector labour markets, respectively. Comparatively, there are high unemployment rates among the Emiratis (Horinuki, 2011, p.41). Al-Ali (2008, p.1) attributes this to oil exploitation that has generated massive resources, which bypass the social and economic development of Emiratis and now, within a generation the country has a world class economy that outpaces the Arab traditions.
In order to be in the world class economy, the UAE upgraded the social infrastructure of the indigenous population as well as invested in extensive infrastructure development, basic industries and utilities program. Al-Ali (2008, p.1) explains that UAE opted for expatriate workers from other Arab countries and Asia in order to fix the labour crisis since the population of the Emiratis was small and largely unskilled. This made the country prosper, highly developed and politically stable; while, at par with major global economies.
In the 1950s, Gulf States experienced minimal development and education was below standard. Take for instance, the area that later became the UAE had 20 schools and a student population less than 4,000, which was male dominated. When the UAE became a federal state in 1971, education was prioritized and free public education was adopted for all children.
Godwin (2006, p.1) explains that free education for nationals runs from K-12 to university. Godwin (2006, p.2) states that by 2003, the school going population had risen; K-12 education system accommodated an estimated 12,000 children, 15,000 were in higher colleges of technology and an estimated 16,000 in the Universities. Godwin (2006, p.2) partly attributes this to the rise in national fertility rates over the time. Nevertheless, the UAE required not less than a generation so that a sizeable population of Emiratis gains the requisite know-how for its world class economy (Al-Ali, 2008, p.2).
This created employment leverage for expatriate professionals to work as university dons, media practitioners, teachers, judicial officers as well as administrators. Moreover, the expatriate professionals managed to gain entry into jobs that needed technical expertise and fluency in English. Others served in the low skill services and domestic sectors (Horinuki, 2011, p.41).
Al-Ali (2008, p.2) explains that the sudden emergence of a bourgeois class in the GCC States contributed certain setbacks to employment. The bourgeois class enjoyed better living standards as well as had an attraction for lavish lifestyles (Mashood et al. 2009, p.4). The nationals were less attracted to the large scale construction projects, probably because of harsh environmental conditions in the Arabian Peninsula as well as low pay rates.
The Low pay rates were associated with unskilled non-national workers of Indian origin, who were traditionally a labour pool for the Arabs. In addition, the UAE society is predominantly Bedouin, comprised of urban, nomadic and rural categories. Cultural traditions made those in the urban and nomadic categories not to immediately embrace the manual labour market.
The women were marginalized from the labour market because traditional customs deterred them from participating in occupations where genders intermingled (Al-Ali, 2008, p.2). More Emiratis accepted a public sector job that had friendly working conditions and higher pay as well as an Islamic environment which automatically employed graduates (Mashood et al. 2009, p.5).
The private was a sharp contrast to the public sector; it was new to most Emiratis; was mainly operated by English speakers; demanded technical skill and experience expertise as well as required extra working hours beyond the norm (Mashood et al. 2009, p.5; Al-Ali, 2008, p.3).
The oil and gas sector in the UAE generates over 60 percent of the national revenue and accounts for one percent of the workforce, compared to the commerce service industry, construction and manufacturing industries that employ over 50 percent (Godwin, 2006, p.3). There has been a positive nexus between population growth and economic growth. This is attributed to an open business environment as well as liberal trade policies.
The gross delay in putting in place proper immigration regulations gave room to an influx of low wage labour with workers remaining or persisting in the country long after the end of contract or project.
Continued influx of migrant workers mainly from the non-oil producing states and southern Asia attracted to the GCC’s improved living standards and stability has led to a gender imbalance with males dominating (Horinuki, 2011, p.41). Lack of timely intervention by the government to address the effect of massive expatriate arrival on a small population has contributed to gender imbalance, which is a long-term concern leading to Emiratis being alienated in their own country.
Definition & Purpose
The GCC States began localization programs since the late 1970s and more ambitious in the 1990s that had positive biases aimed at injecting a huge chunk of nationals into the country’s workforce. The Emiratization program (also known as Tawtin) was a government decree with an interventionist approach (Horinuki 2011, p.46; Mashood et al. 2009, p.2; Godwin, 2006, p.8). The Emiratization policy became a full fledge in the year 2000 under the nationalization of the labour market-programme.
The advent of Emiratization gained initial momentum when the labour policy (UAE Labour Law Article 9) that gave Emiratis the first priority when hiring (Horinuki, 2011, p.45). The federal Labour Law came into place in 1980, while other subsidiary regulations followed suit in the early 1980s.Largely; the Emiratization policies were intended to lower reliance on non-nationals labour and increase the number of nationals in the country’s labour market.
In order to achieve affirmative action the government pursued tactics like the carrot and stick by providing tax relief to foreign companies that support the localization programs as well as maintain quotas for Emiratis working in foreign companies, while punishing those that do not oblige.
In other words, Emiratization policies make the costs of an organization rise as the proportion of foreign workers increase vis-a-vis that of the Emirati staff. The higher costs imply a kind of the taxation scheme meted for employing foreign expatriates (Chartouni, 2010, p.2).
There are particular industries that have been identified by the government as suitable for Emiratis to be employed in. In order to impose quota systems through the Emiratization policies, the government introduced Labour Law that empowers and obligates the Labour Department to scrutinize quotas during inspection of workplaces.
Initially, localization program was a voluntary compliance; however, legislative action has changed the status quo. As of September 2007,there was stricter enforcement of the rules, where companies that complied enjoyed fee waivers; while the Labour Ministry cut ties with those who did not, on the grounds that employing new expatriates without government approval was illegal (Mashood et al. 2009, p.7).
The UAE government further introduced the paradigm of Emiratization and Levy Payroll Fees, which was an equivalent of taxing the hiring of foreign expatriates; while granting discounts and monetary benefits to those employing Emiratis (Mashood et al. 2009, p.7).
Other initiatives that have been used by the government include limiting the number of work permits given to expatriate workforce as well as job design approaches that necessitate employers to regularly shift work patterns and the introduction of more part-time jobs (Mashood et al. 2009, p.7). Foreign companies like the Shell, DHL and HSBC, that embraced the localization programs invested in training and internship programs and rewards for nationals (Albayrakoglu, 2010, p.42).
Meaningful Initiatives by the UAE Government
In the UAE, entrepreneurship falls under the private sector. UAE was rated among the most conducive environment for entrepreneurial initiatives by the Global Entrepreneurship Monitor (GEM). This has had an influence on a number of the UAE people to think that entrepreneurship had a good career and self-employment in the private sector was an alternative (Sikdar and Vel, 2011, p.79).
Erogul and McCrohan (2008, p.181) while investigating about the Emirati women entrepreneurs in the UAE explain that through Emiratization there has been the creation of education opportunities for women as well as a departure from the conservative beliefs on the women’s role, hence opportunities for women’s participation in the entrepreneurship career have risen.
Randeree (2012, p.10) notes that much as the Emiratization had not progressed considerably in the recent past, it appears that the working conditions as well as Emiratization-friendly company policies and practices have slowly taken over.
Challenges facing Emiratization
The Emiratization program has led to high preference for public sector jobs by most Emiratis. The International Monetary Fund has warned the UAE government of creating cradle to grave jobs within the public sector (Godwin, 2006, p.9). Such jobs lack the necessary checks and balances against the gross abuse as well as competitive service delivery, hence corruption thrives.
Sikdar and Vel (2011, p.79) note that fear of failure for a start up business resulting from limited skills and experience was a major concern that made the Emiratis to shy away from venturing in the private sector.
Horinuki (2011, p.42) notes that focus has shifted too much on enhancing the educational level of Emiratis; however, there are emerging problems that face Emiratization concept that have not been adequately dealt with thus becoming drawbacks to gains made. These emerging drawbacks include high unemployment rates among the nationals, demographic imbalance as well as human resource development.
With regard to demographic imbalance, the Emiratization policy initially targeted to expand the state economy and shift the focus of nationals away from oil sector by developing non-oil sectors such as services, manufacturing and construction; however jobs that were created absorbed more foreign expatriates as Emiratis shied away due to working conditions (Horinuki, 2011, p.43).
Unemployment is rising as a result of more youth that are graduating vis-à-vis national job placement rates. Nevertheless, the problem has a policy issue since the higher proportions of the unemployed youth are from northern Emirates and are mainly female. Female gender in the UAE tends to be marginalized. With reference to the human resource development, Horinuki (2011, p.45) explains that experts in the sectors had decried that there was a mismatch between higher learning and labour demands as more students opted for humanities.
There is conflict of understanding between the business community and the government (Horinuki, 2011, p.50). While, the business community describes the nature of the UAE labour market as free market thus hiring should be on a competitive bases; the government refutes this as unfair competition in the national workforce.
Watson (2004, p.41) explains that there was an expression of detrimental concern at the pace at which Emiratization was being implemented in the education. In order to reach the set targets on Emiratization substandard teachers continue to replace professional expatriate teachers.
Watson (2004, p.41) state that the current number of indigenous teachers in government schools were 25 percent but ambitious plans in place aimed at achieving 90 percent by the year 2020. Such ambitions continue to affect the quality of teaching and the teachers.
Part of the reason for Emiratization policies was to replace expatriate professionals with young nationals; however, there are challenges of increasing employment opportunities and widening Emiratis participation in industry (McDermott and Neault, 2011, p.121).
On average over 17,000 Emirati youth join the labour, annually and the public sector is almost at saturation point. In addition, the Emiratization faces the problem of Emirati employment turnover. Reasons for high Emirati job turnover include lack of career progression and clear career paths; lack of a mentoring culture within the organization as well as intolerance of non-Emirati peers to religious attachments (McDermott and Neault, 2011, p.122).
Emiratization Council, Tawteen Role
The council is mandated to assist in putting in place policies as well as frame regulation for Emiratization of employment (Emiratisation.org, 2009). The council develops the capacities of Emiratis, which will make them competitive in the labour market.
Horinuki (2011, p.46) provides a chronology of events on labour policy in the UAE as from the year 1972 till 2007 when the Emirasation Council was set up. Mashood et al. (2009, p.3) explain that the package of policies on Emiratization intend to assist Emiratis successfully attend to jobs duties that were initially performed by foreign expatriates.
Program Implementation
Quotas envisaged in the Emiratization policies that had been implemented targeted sectors such as banking at the annual rise of 4 percent as from 1998; insurance at the annual rise of 5 percent as from 2005 as well as in trade at the annual rise of 2 percent as from 2004 (Morris, 2005, p.6).
Banking and insurance were identified as sectors that had initially failed to comply with the UAE Governement’s Emiratization policies. There was a directive in 2002 that the banking sector employs UAE nationals to fill up all branch manager positions by the end of 2004 (Mashood et al., 2009, p.9). About 47 insurance companies had met Emiratization policy requirements by 2005 (Mashood et al., 2009, p.9). Those companies that failed to comply faced possible cancellation of work permits.
Alongside the Emiratisation Council, Tanmia (The National Human Resources Development & Employment Authority) was set up in 2009 in order to provide lead efforts on the Emiratization in UAE. Being a Federal Government Agency its main roles include: generate more employment opportunities for the Emirati labour force; lower the ratio of the unemployed; improve the expertise and the productivity of UAE nationals as well as make suggestions to the UAE Federal government on policy enhancement on Emiratization.
Tanmia ensures effective localization of the workforce. Efficacy in localization happens when an Emirati meets the competency criteria for a job and fulfil job responsibilities satisfactorily (Mashood et al., 2009, p.3). Tanmia monitors the compliance of firms according to the Emiratization policies.
In relation to this, there are three categories of firms that is, A, B or C based on the degree of meeting the Emiratization requirements. Lack of compliance leads to demotion to categories B or C. The amount of levy charged for hiring foreign workers relies on the category the firm falls in such that renewal of a labor card cost category A firms USD 136; while, for B and C at USD 408 and 680, respectively (Chartouni, 2010, p.7).
Recommendations
In order to discourage cradle to grave in government jobs, it is advisable for the UAE to reduce benefits to the Emirati public. Reduced benefits will also shift focus of the Emiratis to the private sector although they remain disadvantaged because of their generally lower level of education compared to that of foreign expatriates already in the private sector. Mashood et al. (2009, p.5) recommends higher pay by the private compared to that offfered by the public sector can entice more Emiratis into seeking jobs there.
The high unemployment rates among the youth in the UAE has been tackled through the Emiratization concept; however, the manifestation of the problem especially through marginalized female gender from northern Emirates requires a special attention through policy intervention that will provide opportunities that target them for accelerated integration into the labour market (Horinuki, 2011, p.44).
In order for the government to address the issue of unfair competition through the Emiratization policy there is need to resolve issues of Emiratis terms of skills, higher economic cost, efficiency as well as work ethic.
Horinuki (2011, p.45) explains that the education sector receives the highest allocation from the country’s budget Dh 9.47 billion (27%). Much of the money ends up paying Emirati teachers in order to keep them in education.
Nevertheless, the one percent allocation of education funds to research and development shows lack of interest to promote innovation and progress in the sector (Watson, 2004, p.18). There is need to increase the allocation to research and development in order to research on some of the underlying problems facing the local education sector.
Regarding on matters of high turnover of Emirati employees McDermott and Neault (2011, p.127) suggest strategies such as career coaching as significant in creating differences such as employee engagement and retention that lead to a future in-house career development.
Conclusion
The goal on Emiratization is in progress; however, the aspiration of fronting it with a rapid and full scale motive may have negative impact on the quality of service delivery. There is a need for careful calibration of the processes involved in Emiratization. The processes need to be implemented on step by step basis.
References
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