GCC Nationalisation Schemes Creating “Ghost Workers”

Nationalisation schemes in the GCC, aimed at improving job opportunities for locals in the private sector, have failed to succeed even after years of implementation, according to a new report.

The Arab Youth Unemployment report from Saudi-based Alkhabeer Capital blamed the failure of these schemes on the poor skill sets of the local workforce.

“Most of these schemes in past have failed to achieve the desired outcome even after years of implementation, and can only be successful when accompanied by wage reforms, and skill match up by locals,” it stated.

“Many employers still prefer hiring expatriates largely due to their higher commitment to work at lower remunerations compared to the nationals.”

Private sector employers feel that the cost of hiring locals is much higher than hiring expats, making businesses unviable.

Locals also lack the technical skill set needed for high-end jobs, the report said.

“These labour laws have resulted in ghost workers; where companies pay locals to stay at home just to have them on their rolls,” it added.

The report comes even as reports suggest that Saudi Arabia plans to penalise companies that practice ‘fake nationalisation’.

Saudi, which faces the biggest unemployment challenge in the region, has been strictly implementing its nationalisation scheme – the Nitaqat programme. The scheme penalises companies based on the percentage of expatriate employees and offers attractive incentives to complying companies.

The Saudi government has also sharply increased visa fees for expats in private sector companies that have a lower proportion of Saudi nationals, directly impacting profit margins of businesses.

Nearly one million foreign workers, out of roughly nine million, are estimated to have left the Kingdom from March to November 2013, due to the non-renewal of visas and a crackdown on illegal workers.

“This move has not only impacted the labour from the South Asian economies, but is also impacting the other labour supplying Arab economies of Yemen and Egypt. Reports cite that about 380,000 jobless Yemeni workers have returned to their country during the year through early June,” stated the report.

While the initiative reportedly resulted in the creation of 600,000 jobs for Saudi nationals, the number is “miniscule” when compared to the total Saudi youth population, said Alkhabeer.

The Kingdom’s official unemployment rate is said to be around 11.8 per cent, but economists estimate that only 30 to 40 per cent of working-age Saudis hold jobs or actively seek work.

Alkhabeer stressed that the failure of the education system was the root cause of youth unemployment in the region.

“Even at the vocational level, the vocational training institutes’ curriculum fail to address the needs of the labour market and impart proper guidance to the youth, resulting in low number of enrollments in the vocational streams.

“In most Arab regions, the proportion of secondary enrollees in technical or vocational education is often below that compared to the developed world.

“Lack of information and comprehensive national strategies compatible with the labour market and mismatch between skills have compelled many youth to sit idle without quality jobs,” it stated.

The report urged for greater investment in the education system, better policies to create ‘quality’ jobs and further funding for SMEs to increase youth employment.