This post is by our Middle East based Associate, Michael Pyers. Michael has been advising on a range of Industrial Relations, Immigration and Human Resources issues in the Middle East since 2008. He is the owner of Total HR & ER and currently resides in the Kingdom of Bahrain.
The Middle-East Mosaic
The importance of the Middle East to the Global Economy, and more broadly the cause of world peace, cannot be understated. While the last few years have seen other players in the energy industry (such as the United States of America) increase their output with a related downward impact on oil prices, Saudi Arabia still has approximately 22 per cent of the world’s proven oil reserves. Interwoven with the challenges that a decline in oil prices brings for a region still heavily dependent on energy for budget revenues, the region is undergoing a range of other profound and fundamental changes.
Member states of the Gulf Cooperation Council i.e. (Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman) have recognised the need to diversify their economies away from oil and gas and promote the development of other industries. Saudi Arabia, for example, has introduced the Saudi 2030 plan which is designed to move the economy away from its oil dependency.
Alternate revenue sources
The decline in oil prices has led to countries in the region, through their regional body – the Gulf Cooperation Council (GCC), to make plans for the introduction of a value added tax (VAT). Bahrain, for example, will introduce a VAT of 6% in 2018 adding to the cost of living in a region where the vast majority of food is imported. The possibility of income tax is also being discussed.
There are two population related issue for the region. The first is age demographics. The Countries of the GCC have a very young population with, in 2016, an average age across the six countries of 29.53 years for both men and women. Of GCC countries, Qatar had the oldest population with 33 years. Oman was the youngest at 25.4 years (according to data from the CIA Library). The second issue, which makes the region unique, is the number of non-nationals as a percentage of population. On an overall basis, the percentage of the population who were nationals of GCC countries was approximately 48.5%. In Qatar, nationals only made up 9% of the population. In the United Arab Emirates the percentage of nationals in the population was 11.5%. At the other end of the spectrum Saudi nationals made up 63.2% of the population and Omani nationals made up 54% of the population (according to data from the Gulf Research Center).
Education Participation has grown with the GCC region now having more than 1 million students in higher education (see gcc.stat.org).
Labor Force Participation
There is an incredibly low labour force participation rate amongst GCC Nationals – around 4% in 2014 according to the IMF. There is also a huge difference in the labour force participation rates between men and women, as low as 21.5% for women in Saudi Arabia compared to 79.9% for men in that same country. Issues of population, education and labor force participation are putting pressure on GCC Governments to provide more employment opportunities for their citizens at the expense of the non-national or expatriate population.
In essence, these countries have a young, well-educated population who are looking for opportunities. GCC Governments have developed a range of approaches to deal with these issues (i.e. providing incentives for employers in Saudi Arabia whose level of employment of Saudi’s is above the 10% mandated by law – and penalties for those who do not comply). The Saudi Government has also placed a number of occupations on the list of those reserved for Saudi’s including Human Resources Manager and Shop Assistant.
Other GCC member states, for example Kuwait, are taking steps to ensure that the public sector in their countries are nationalised and generally take the approach of setting quotas for employment of nationals in each industry or sector. In Oman, the Labour Law clearly sets out that you must attempt to employ Omani’s first and only after you cannot find Omani’s can you mobilise non-nationals.
What does this mean for employers in the Middle East and people looking to go there to work?
Because of the nationalisation agenda, for both groups it’s going to be potentially harder to get the all-important work permit needed for employment in the region. Possible changes to taxation regimes may also mean that the shine will come off its past reputation as a place to find the proverbial “pot of gold”.
While these complex demographic and policy changes mean that it will become more challenging to move to the region to work, it’s certainly not impossible. Making sure that you have the right information and expert advice is the key to managing the process.
Feel free to contact me through Australian Human Resource Professionals if you would like a confidential, no obligation conversation about how best to harness and navigate opportunities to work and do business in the region or about Human Resources issues in the Middle East more generally.