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100,000 New Jobs

07-Aug-11

Toby Simpson - The National

Regulation vs Innovation, the argument on job creation in the UAE.

The Ministry of Labour has recently announced that the private sector in
the UAE must create around 100,000 new jobs in the next ten years to accommodate new citizens entering the labour market. At first glance this statistic doesn’t seem overpowering, but in context you get a feeling for the magnitude of the challenge

According to the Dubai Statistics Center one of the largest employers in the country, The Emirates Group, employed 1,571 Emiratis as of December 2010. This would suggest that the UAE needs to create more than six companies of a similar scale every year for the next ten years to achieve its goals.

Of course such an assumption isn’t entirely accurateCurrently around one in fourteen employees in the private sector are UAE nationals, and this statistic will change naturally due to population growth and as a result of the government’s continued investment in excellent education which has delivered young Emiratis into the job market who are well equipped to enter a modern and globally-orientated workforce.

However this alone will not meet the challenge UAE legislators are currently faced with. The UAE needs to either regulate to massively increase the proportion of Emiratis in the workplace, or innovate to create massive growth. Saudi Arabia also has a very youthful population which is facing significant unemployment, and the government is also looking for answers. Their first response has been one of regulation as they have recently announced that they will not renew the working visas of foreign nationals after six years. Whilst this may, or may not, be the right approach for Saudi, Qatar is considering options at the other end of the spectrum; permanent residency for expatriates who hold a particular value to the economy.

An interesting parallel might be drawn between the major financial centres of London and New York in the mid 2000s. In the wake of 9/11 and the collapse of Enron the US built walls of regulation and became more introverted and heavily reliant on their own vast, but faltering internal financial markets. By contrast the UK, with a much smaller domestic economy, opened itself up to the world, unified regulators in a more flexible approach and opened its’ doors to the best and brightest individuals from the four corners of the earth. London became a melting pot of global talent, and as a result began to eclipse New York in terms of foreign IPOs, equity, currency and derivative trading.

The result for the native Britons was a buoyant economy where in 2007 14% of the government’s tax receipts came from just 3.5% of its population and new careers were forged in the fires of competition and unsurpassed global excellence. Of course, with hindsight, we all got a bit carried away, but the argument remains a relevant one for UAE legislators.

If the government seeks to create 100,000 high value careers for UAE citizens its’ relative size precludes it from relying on internal markets, but must seek to expand its’ presence as an international hub and a gateway for trade and services to the GCC markets and beyond. If it wishes to act internationally, it must be a centre of global human capital excellence and this is only supported by attracting the best talent from around the world.

It’s not just about attracting the talent, but creating the right environment and infrastructure for growth and innovation. Whilst the number of available jobs in the market is picking up (the Gulf Recruitment Group placed 1.64 employees per consultant per month in March – May 2011 vs 1.04 in the same period in 2010), the gain seems to be due to a slight increase in confidence in the market and the padding out of existing departments depleted in the downturn, rather than the much more encouraging opportunities with new businesses (less than 2% of new jobs registered with the Gulf Recruitment Group in 2011 are based in businesses or business lines that have been operating for less than 24 months).

Much seems due to a lack of free cash flow to invest in new business. The capital markets remain stagnant and huge steps could be taken to encourage liquidity, overseas investment in UAE markets, and even foreign listings simply by consolidating the exchanges in the UAE and supporting the Emirates Securities and Commodities Authority (ESCA) in its ambitions to create a genuine asset management industry in the Emirates. This would ensure middle class participation in capital markets http://www.bages.us and must be accompanied by good corporate governance and transparency, which would further set the UAE apart as the destination of choice for overseas investment in the Gulf.

Currently the US economy is struggling to create jobs through stimulus and schemes targeted at reviving the manufacturing sector and small to medium size enterprise. Europe seems set to commit the sort of knee-jerk legislative hari-kari that so blighted the US financial markets ten years ago. The world is moving eastwards, and without the legacy debt and social burdens faced by the West, the UAE has a unique opportunity to create a real job market for its citizens in a globally competitive economy. It must only choose the carrot over the stick.

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