GCC set to remain reliant on expat labour

Gulf hydrocarbon producers will likely remain heavily reliant on expatriate labour given the relatively high growth in their economies and the shortage of skilled manpower in their native population, experts said on Wednesday.

Although Saudi Arabia is planning to enforce a partial six-year limit on the stay of expatriates in some of its firms in a bid to tackle festering unemployment, a similar move is unlikely in the UAE and other high-income members of the six-nation Gulf Cooperation Council (GCC) given their low jobless rates.

The six-year limit announced by Saudi labour minister Adel Faqih on Monday sent brief shivers across the large foreign community in neighbouring countries before Riyadh issued a statement on Tuesday clarifying that the decision would only affect local companies that do not abide by job Saudization plans.

In their comments , many expatriates in the UAE voiced concern that the Saudi decision could spread into other GCC members and some of them even went further by saying Indians and Filipinos could be the main victim.

Analysts doubted the Saudi plan would be fully enforced even on companies failing to adhere to job nationalization rules, dubbed by the labour minister “yellow and red” companies.

Those which support the programme are classified as “excellent and green” companies and will get “generous” government incentives.

“The decision will only apply to companies rated as yellow on the traffic light system they announced recently.…the color of a company depends on their Saudization ratio…. if it is too far low (i.e. red) then the company won’t be allocated any new employment visas for expatriates,” said Paul Gamble, head of research at the Riyadh-based Jadwa Investments.

“If it is yellow (not high enough) then there will be restrictions on visas(such as the one on people that have been here six years),… if it is green then the company can get the visas it wants,” he told.

Gamble said he believes there should be a full and detail policy announcement on the revised Saudization plan soon.

But he added that companies have been able to get round their quotas in the past, so it all depends how aggressively it is enforced.

“For those GCC countries where unemployment is very low – UAE, Qatar, Kuwait – the policy will not be considered. Elsewhere, they are likely to see how effective the policy is before deciding whether to follow it.”

Another Saudi-based expert ruled out a full implementation of the Saudi six-year limit on the grounds it could adversely affect the country’s economy.

“The minister needs to qualify his statement because if it includes all foreigners then those who heavily contribute to the local economy will negatively impact the output and productivity of the private sector,” said John Sfakiankis, chief economist at Banque Saudi Fransi.

“I don't expect that such rules, if implemented will change the dependence on expatriates as one laborer will be replaced by another……. structurally nothing will happen. I don't know if this might be replicated in the region but even if does it will not change the labor market structure and dependence on expat labor….such policies are misdirected.”

Clarifying the labour minister’s statements, a Saudi government spokesman said the six-year limit would affect only red and yellow firms, part of an aggressive job nationalization programme dubbed “Nitaqat”, to be launched in June.

"What the Labor Minister meant by his statement was that the measure would be applied on those foreigners who work for companies in the yellow category," said Hattab Al-Anazi, official spokesman of the labour ministry.

He said visas for foreign workers in red category companies would not be renewed at all, irrespective of the years they have spent in the Kingdom.

"The new Nitaqat system allows renewal of iqamas (work visas) without any condition for expatriates who work in companies in the green and excellent category," Al-Anazi said, quoted by local newspapers.

He noted that the measures would not affect domestic workers as their visas would be renewed without considering how many years they stayed in the country, the largest Arab economy and the world’s top oil exporter.

In a recent study, a prominent global organization 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 Swiss-based International Organization for Migration (IOM) estimated at more than 16 million expatriates live in the GCC, an increase of nearly 20 per cent over their number in 2005.

“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,” it said.

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

The study gave no breakdown but Saudi Arabia has the largest number of expatriates in the GCC, estimated at around 8.4 million. The UAE has over six million foreigners while the rest are based in Kuwait, Qatar, Oman and Bahrain.

Asians, mainly from India, Pakistan, Bangladesh, Afghanistan, Sri Lanka, Indonesia and the Philippines account for more than half the expatriate community in the GCC, which controls just over 40 per cent of the world’s recoverable oil wealth and a quarter of the global gas resources.

Foreigners began streaming into the Gulf nearly half a century ago when the discovery of oil kicked off one of the largest infrastructure construction drives in history. The drive has largely receded but regional nations continue to be heavily reliant on expatriates as more experienced and less costly labour.

In another study, the GCC’s private sector itself said it expected member states to hire more foreign workers in the future because of higher growth rates.

Given their heavy reliance on expatriate workers, the GCC countries should prepare for such growth by taking measures to regulate the movement of foreign labour within them, the Saudi-based Federation of the GCC Chambers of Commerce and Industry (FGCCI) said early this year.

The report expected flow of foreign direct investment into the GCC to pick up from around $48 billion in 2009 to $64.4 billion in 2010 and $81.3 billion in 2011. It projected private capital to swell from around $50.7 billion to $55.9 billion and nearly $68 billion in the same period.

“The job market requirements in the GCC states are projected to record sharp growth in the coming years due to an expected expansion in the regional economies……..demand for qualified labour, whether nationals or expatriates, will largely increase,” it said.

“At the same time, pressure from international labour groups will gain momentum and this should prompt regional nations to adopt flexible laws and regulations that will take into consideration the interests of all parties and meet the demands of their membership in the World Trade Organization.”

GCC states have often been urged to support the private sector as their only means to absorb the rapid rise in national job-seekers on the grounds the public sector has become saturated and is not growing enough. Another reason is that the private sector is dominated by expatriates given the preference by nationals of government jobs for more attractive financial benefits.

According to a joint study by National Bank of Kuwait and International Bank of Qatar, the number of national employees in the pubic sector stood at nearly 50 per cent of the total work force in Saudi Arabia and as high as 88 per cent in Qatar, 85 per cent in the UAE and 82 per cent in Kuwait.

“The GCC countries face two serious challenges in the coming decade…they include their ability to create enough jobs for their people and the possibility of the return of large deficits to their budgets,” it said.

“The public sector is expected to have a limited capacity to absorb new employees and its ability could weaken further in the future as it has become saturated and a possible drop in oil prices could curb high public spending and push the budgets of member states into shortfalls again.”

The study said such challenges should prompt the GCC to take measures to encourage the private sector to absorb millions of nationals.

“The GCC countries must allow the private sector to play a bigger role in the domestic economy with the aim of creating sufficient jobs for nationals…it also should be enabled to become the main provider of public services instead of the government…to do so, GCC governments must adopt policies that will facilitate the expansion of the private sector and remove unnecessary barriers for investors…despite some progress in this regard, a lot more needs to be done.”

Saudi issues clarification on six-year expat visa limit

Saudi Arabia on Tuesday put an end to speculation that it is about to kick out all its expatriate workers after six years, clarifying that the decision applies to only those private sector firms that do not abide by the country’s job nationalization quotas.

A government official was reacting to statements on Monday by Saudi Labour Minister Adel Faqih, who said a new incentive programme for the private sector to recruit more Saudis includes limiting the stay of foreign workers to six years.

The minister said the programme would be implemented in June and would give four classifications to companies, including “excellent and green” for those who abide by Saudization quotas and “red and yellow” for non-compliant firms.

“What the Labor Minister meant by his statement was that the measure would be applied on those foreigners who work for companies in the yellow [non-compliant] category,” said Hattab Al-Anazi, official spokesman of the Labour Ministry.

Quoted by the Saudi Arab News daily, he said that companies in the yellow category that did not fulfil Saudization conditions should correct their status in order to get visas of their workers renewed.

He said visas for foreign workers in red category companies would not be renewed at all, irrespective of the years they have spent in the Kingdom.

“The new Nitaqat system allows renewal of iqamas (work visas) without any condition for expatriates who work in companies in the green and excellent category,” Al-Anazi said.

He noted that the new measure would not apply on house servants as their visas would be renewed without considering how many years they stayed in the country. “They are not at all linked with the Nitaqat system,” he said.

Expats fear other Gulf states may follow Saudi’s 6-year visa limit

A decision by Saudi Arabia to limit the stay of expatriate workers to six years appears to have triggered fears among foreigners residing in the region that such a move could also be enforced by other Gulf oil producers in line with a proposal discussed at the Gulf Cooperation Council Summit in 2008.

Nitaqat (limits), the new Saudi government programme to be enforced in June, compels the Gulf Kingdom’s private sector firms to recruit Saudis and providing incentives to companies which abide by the new rules. The programme will limit the stay of foreign workers, mainly unskilled, to six years while it will also ban new visas for non-compliant companies.
Saudi Labour Minister Adel Faqih did not provide many details of the new decision, but businessmen hope it would apply only to unskilled labour, estimated at around 3m in Saudi Arabia and 10m GCC-wide.
“This decision apparently targets a quantitative rather than a qualitative policy... in other words, if the decision is issued in this form, this means the Ministry of Labour is focusing on quantity not quality,” Khaled al Suleiman, a well-known Saudi economist told Al Arabiya television.
More than 18 million expatriates live in the six-nation GCC, remitting home tens of billions of dollars every year, seen by regional economists as drainage of the Gulf countries’ wealth.
The programme comes amidst reports that unemployment in Saudi Arabia is widening because of the private sector’s preference of the cheaper expatriate labour and the fact that the population is growing faster than the economy.
Faqih put the official unemployment rate in Saudi Arabia, the largest Arab economy, at around 10.5 per cent but noted female joblessness largely exceeds that rate, standing at nearly 26.6 per cent. Unemployment among Saudi high school graduates is also as high as 40 per cent.
He said nearly six million foreigners work in the Saudi private sector, accounting for around 90 per cent of the sector’s total workforce.
“We have nearly half a million unemployed Saudi in the country while around 8m expatriates live here…6m of them work in the private sector, transferring nearly SR100 billion every year,” he said.
Faqih is expected to face a storm of protests when he meets Saudi businessmen in the eastern region tonight in case the decision affects foreign labour across all skilled classes. The meeting will cover Saudization of jobs while the minister will explain the new programme, according to Abdul Rahman al Rashid, chairman of the chamber of commerce and industry in Saudi Arabia’s eastern region.
“The decision to limit the stay of expatriate workers to six years is not clear and needs further clarification as is the case with Nitaqat,” said Suleiman.
“Tackling the expatriate labour problem in Saudi Arabia in a bid to reduce unemployment among Saudis should be based on the experience and qualifications of the expatriate workers to be imported by the Kingdom.”
“Nitaqat will be an effective tool to eliminate malpractices in the labour market… We are not completely stopping visas for foreign workers but we want to find jobs for our people… Companies in the green zone will not have any problem while there is a plan to limit the stay of most expatriate labour to six years,” Faqih said.
Government data released early this year showed Saudi Arabia is suffering from very high jobless rate among young men as more than 43 per cent of citizens aged between 20 and 24 years are unemployed. The rate at the end of 2009 was higher than in 2008 despite an ongoing campaign to find jobs for the fast-growing nationals.
The report by the government statistics and information centre showed about 43.2 per cent of the Saudi males and females aged 20-24 years were unemployed at the end of 2009, nearly 20 per cent above the 2008 rate.
“This comes at a time when one million labour visas for foreign workers were issued last year,” the report said. “The private sector continued a drive to import foreign labour although nearly 111,000 Saudis were looking for jobs,” it said.
Saudi Arabia, which controls over a fifth of the world’s recoverable oil deposits, is suffering more from unemployment than other Gulf hydrocarbon producers given its large population and the slowdown in its economy in some years.
The government is now seeking help from the private sector to create jobs for Saudis. “The present situation requires strong cooperation and coordination between the government and the private sector to tackle the unemployment challenge as hundreds of thousands of Saudi continue to search for jobs,” Faqih said.
“Nitaqat is just one of 10 new programmes to be implemented in the coming stage… Our aim is to make Saudisation of jobs an advantage to companies.”
Suleiman, on the other hand, said he saw several ambiguous aspects of the new decision. “These include how the ministry will deal with housemaids and low-paid jobs in the construction sector, which are still shunned by the Saudis,” he said.
Suleiman said the Ministry of Labour has been issuing successive decisions because it has been under pressure to tackle unemployment. “Under such pressures, which are often highlighted by the Saudi media, the ministry appears to be looking for a way out by presenting such ideas.”
He warned against the repercussions of that decision on the Saudi private sector, which relies heavily on “cheaper” expatriate labour. He said job nationalization in the Saudi private sector would boost cost of labour and this in turn would increase the financial burden on national companies.
Suleiman also criticized the deadline for the implementation of Nitaqat, which requires national firms to start Saudization of jobs within three months. “These decisions will hurt the private sector because they should not be presented in such a random way,” he added.
Other analysts believe Faqih’s announcement of the six-year limit is intended to block the way for Saudi-based foreigners to demand political rights, including Saudi citizenship. But Suleiman believes such demands are not “in the pipeline” on the grounds that many expatriates have been residing in Saudi Arabia for more than 50 years and have not made such demands.
He noted that the idea of replacing the foreign labour with nationals was discussed by the GCC heads of state in Bahrain several years ago.
In Egypt, Minister of Manpower Ahmed Al Burghi said he had contacted his labour representatives in Riyadh and Jeddah and was told that they have not received any official notification about the new decision.
Saudi Arabia is home to around 1.5 million Egyptian workers, who could be sent home in case that decision was fully enforced.
The new programme will give four classifications to companies including “excellent and green” to those which adhere to job nationalization and “yellow and red” to firms which fail to employ enough Saudis.
Analysts described the programme as the most radical measure taken by the Saudi government to force its private sector establishments to employ more Saudis following the failure of previous procedures.
The government in the world’s dominant oil power has not yet published details of the programme but its labour minister said it includes “generous” incentives to compliant companies and punitive measures against non-abiding firms.
“Companies which abide by Nitaqat will be moved to the green zone, which will allow them to receive many benefits, including visas and others,” Faqih told businessmen this week. “It will also allow them to get skilled labour from firms in the red zone.”

ID registration procedures online in 7 languages

Expatriates wondering about the procedures to register in the UAE national identity can now see them online in seven languages that involve the bulk of the country’s eight million people, according to the ID issuers.

The Emirates Identity Authority (EIDA) said it had just introduced these procedures on its website in Arabic, English, French, Persian, Chinese, Urdu and Hindi so all residents in the country can have access to them before heading for registration offices with the required documents.

“This move is within a number of new measures taken by the Authority to upgrade services and ensure that all residents are registered,” said Abdul Aziz Al-Maamari, marketing director in EIDA.

More than three million Emiratis and expatriates based in the UAE have been registered in the national identity, an ambitious project launched by the country a few years ago to create an accurate demographic data base.

EIDA had set a registration deadline at the end of June but it is expected to be extended again as millions others have not registered yet.

staff from Free zone can't move courts directly

Labour disputes in free zones should be first reported to the free zone authorities before moving the courts. In the event the free zone authority fails to reach a satisfactory settlement of the dispute, the case should then be referred to the Labour Court.

The Dubai Court of Cassation established the new legal principle while considering the appeal filed by an employee working in Jebel Ali Free Zone before the Labour Court to demanding his company pay him of Dh558,000 in dues.

The employee (plaintiff) said he had joined the company as Managing Director on Dh35,000 monthly salary. On his return from annual leave he was surprised to learn that a report of him having 'escaped' was issued by the company. He alleges the company took such a step to avoid paying him teh dues.

He said the dues include salary until the end of his contract which is about Dh345,000; compensation for unfair dismissal which is about Dh105,000; annual leave allowance Dh7,000 for the last two years; Dh73,000 as service bonus; and air ticket alowance Dh1,500.

The Court of First Instance refused to accept the case because he failed to present his complaint to Jebel Ali Free zone Authority first.

He then moved the Court of Appeal which again rejected the appeal and upheld the appellant.

But the employee was not satisfied with the verdict and moved the Court of Cassation which issued the new principles mentioned above.

The Court of Cassation said its ruling: “The legislator in the decree of establishing the authority of Jebel Ali Free Zone and its implementing regulations gave authority to the free zone of Jebel Ali (power and competence) to receive complaints and requests for workers and companies and institutions working in the geographical scope of the free zone of Jebel Ali of any legal disputes."

The court added also it has given the power to settle the dispute amicably, and in case the authority failed to reach a settlement, it is entitled to take the decision it deems appropriate, such as refer the case to the competent court.