Nationalization in GCC Countries-- A Dream or Reality?

Ashehad Faizy
Posted: 08/02/2011

There is a unique situation in the GCC (Gulf Cooperation Council). These six countries comprising the GCC – Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, the Sultanate of Oman-- have the highest influx of migration workers at any point of time, it has expatriates sending home more remittances than any other part of the world apart from the US, and yet unemployment among the nationals of these countries remains high. Despite all the growth, oil exports, and economic boom, joblessness is a growing dilemma faced by all Gulf Cooperation Council nations. We should ask why countries with such large and healthy economies like Dubai, Bahrain, Qatar, Saudi Arabia, Oman, etc., are facing this problem.

GCC nations have long realized this problem and have since been implemented "nationalization" plans by taking steps in several areas and jobs. Each country has its own set of problems and came up with different types of solutions. Some announced incentives for the jobless; some moved private companies to hire more; some created new jobs in the public sector. But did any of these really achieve the dream of getting all nationals working and able to support a decent life? The answer is no.

Saudi Arabia recently came up with forced nationalization program called "nitaqat". What this means is, the ministry of labor will categorize companies into different class – Red, Yellow, Green & Excellent. Companies that do not have any nationals working under them will fall into red; Yellow companies employ a small percentage of nationals; Green will have the minimum prescribed number of nationals as set by the Ministry of Saudi; Excellent companies will have majority nationals working for them.

All the services from Ministry of Saudi to the companies will now be based on the nitaqat system. If you are an organization and have excellent nationalization record, then your process with the ministry will be fast. You will get more visas to bring in expatriate employees and you can hire from Red and Yellow category employers without the need for the company or sponsor’s approval.

The benefits are visible, and the plan sounds good, but is this feasible? There have been several plans in all GCC nations but the results have been hard to achieve. In a country where inexpensive labor is available from other countries, with workers who are willing to do menial jobs for longer hours— and a whole generation that consider certain jobs to be "worth" doing and certain jobs not—the picture looks bleak.

There are several reasons behind this. If we start to look for answers, we have to analyze this problem from the ground up. The attitudes towards work, entitlement, culture, and commitment are issues that must be addressed. Imagine a country depending on other nationals to clean the roads, perform house work, provide childcare, and sell retail goods. In such a country, it will be of no surprise to find unemployment. When a generation is not willing to perform certain jobs and seeking only white collar careers, how many jobs are realistically open to be filled?

Is there a solution? There are several issues that come into focus for the GCC governments, including: the availability of cheap labor, huge remittances, the system / development of national workforce, and implementation of the plans in private sectors. The forced programs of implementation should have been started at least three to four years prior, and time and money invested for development. The development should start at grass roots level. By purveying message that it’s dignified to do any kind of job, a major social impediment will be solved. This would require developing the current generation of youth to perform actual jobs, rather than fictitious ones, and training them to face real challenges. Attitudes would have to change, so that people understand you cannot have a decent life if you don’t work hard and honestly for it.

This change must happen socially. A cultural ethos does not shift overnight—this is something that will take time to accomplish. As a temporary solution, the new arrivals of expatriates could be limited. Alternatively, allowing expatriates to bring in family and spend money in these countries could reduce foreign remittances. There was an idea that surfaced some time ago regarding taxation for expatriates, but since double taxation could potentially occur, this idea was not implemented in all countries. Already in most of these countries, expatriates are paying for visa and residency-related fees. It would be unfair to tax them as well.

The long term goal should be to create an education/development plan and a job market that is able to rely on this talent pool. But this will need drastic shift in perceptions towards work and entitlement. One of the troubles of nationalization is that nationals will often take up jobs, and the firms will invest time and money in training them—only to see them hop to a new job shortly thereafter!

Current leaders should focus on attitudinal shifts; investments in training and education; ease current expatriates’ living standards and terms; allow caps in nationalities—these solutions could address the issue of nationalization gradually. Unfortunately, there is no short term solution or quick fix. There is a danger, too, if implemented by force. Nationals who are not active or value-added participants in the company may be hired just to boost the official employee counts. By managing the expectations of employers and nationals, and with ample time, this dream could be sustainably achieved.

Ashehad Faizy
Posted: 08/02/2011

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