Localization of the Workplace in UAE - Essay Example

Prefering to employ its own citizens/nationals than expatriates is beginning to become a trend in the Middle East. Oman, Saudi Arabia and the United Arab Emirates are the countries leading this initiative. A literature review is presented that identifies the lack of academic research relating to the nationalization of HR practices in the Middle East. This paper will show that this lack of academic research about the changing HR practice in the Middle East has an implication in issues such as transferability of HRM (Human Resource Management) systems and practices. In the later section of this paper, the case study of of Emiratization in practice is presented to identify the issues in the implementation of Emiratization (employing UAE nationals) programmes. The findings of the study demonstrate some of the complexities in implementing Emiratization. The complexities that were identified in implementing Emirazatization were management commitment, quantitative evaluation methods, resistance to change and the role of expatriates in implementing Emiratization programmes. The implication of the research also identified areas for future research. The areas were identified in the study that needs future research are; 1) The reasons why there is a lack of study of the nationalization initiatives 2) Emotional dimension of nationalization methodologies 3) Strategies in dealing with resistance to the implementation of nationalization within organizations 4) Problems in designing Emeriatization programmes 5) and the role of expatriates as key stakeholders in nationalization programmes Introduction Political leaders in the Middle East knew that their dependence on expatriate workforce has has serious long-term political, economic and social consequences (Al-Lamki, 1998). Such, the region has implemented nationalization strategies to employ nationals(citizens) instead of foreigners/expatriates. This initiative has various names in the region such as Omanization, Saudization and Emiratization. These nationalization strategies attempts to integrate HRM policies and practices in the change management practices (going to nationalization from employing expatriates to a local national) (Mellahi and Wood, 2001).is a topic in HR literature which lacks research at present (Hallier, 1993; Palthe and Kosseck, 2003; Mendenhall et al., 2003; Ruona and Gibson, 2004; Sheehan, 2005). At the outset nationalization strategies seemed to be associated with globalization, economic growth and reform, and competitiveness (Al-Dosary, 2004; Looney, 2004; Mellahi and Wood, 2002). Thus, nationalization strategies is an international issue albeith Middle Eastern leaders have implemented nationalization policies that are specific to their own countries. This initiative however is not exclusive to Middle East. Similar parallel programs can be seen in countries such as Malaysia (Ahmad et al., 2003), Zimbabwe, South Africa (Muthien et al., 2000) and Fijis (Bowie, 1988; Deyo, 1987; Jomo, 1993; Jomo and Wah, 1999; Muthien et al., 2000). While it is not the scope of this paper to provide a detailed discussion of nationalization policies across the world, it is relevant to provide a brief background of indigenization (other term for nationalization) in Africa to illustrate the complicity in employing a local as opposed to a foreigner. The experience of replacing foreigners with local workers have been documented in the African continent (see Adu, 1965; Fonge, 1997; Morris-Jones and Fischer, 1980). While most African governments adopted the Africanization policy (Africa’s version of nationalization), they too tailored it according to their types of governments (Fonge, 1997). The most common feature of Africanization) is limited to government or civil service and almost ignoring the private sector except in Uganda under the regime of Idi Amin. Arguably, one of the reasons for focusing upon the civil service is because African leaders ... accused the colonizers of failing to establish positive polices that could have established services on sound indigenous foundations suited to the needs of various territories. They contended that although the post-world war constitutional developments led to rapid political change in these territories, the changes outstripped the capacities of the public services as local institutions. (Fonge, 1997: 99) There are a number of reasons why Africanization policy was implemented. Among them are; a) The desire to consolidate political independence b) The stance that it is more economical to maintain indigenous staff than expatiate staff c) To ensure stability of staffing d) To conserve foreign exchange e) The desire to be able to manage own affairs (Adu, 1965; Morris-Jones and Fischer, 1980; Robinson, 1990) The nationalization policy in the Middle East have been implemented for the same reasons. In citing this, it is important to account that not all nationalization policies are the same all over the world. The political and economic contexts differ especially with the growing influence of Globalization. For example, Africanization in Africa were only limited in the government sector while in the Middle East, nationalization included both the government and private sectors (Mellahi and Wood, 2001). Nationalization within the Middle East As mentioned earlier, f Africanization policies has been attributed to factors such as political independence, economic advantages and the conservation of foreign exchange, and the desire to manage one’s own affairs (Adu, 1965; Morris-Jones and Fischer, 1980; Robinson, 1990). The nationalization in the Middle East also used the same variables. For example, Al-Dosary (2004: 125) proposes that Saudization is developed as a result of the ‘drawbacks’ from employing a foreign workforce . These drawbacks are identified as; 1) Economic 2) Social (contradicting social, cultural and religion values between local and foreign worker) 3) Psychological (for example, stemming from temporary job relationships) 4) Security (for example, shutdown in times of crises and blackmail) The driving in Middle East why there is nationalization initiative was due to the rising unemployment, soaring birth rates and political instability. However, it can also be viewed that localization can bring about indisputable threat to the social and political stability’ of the Arab Gulf Cooperation Council countries (Mellahi and Al-Hinai, 2000: 178). It is thus realistic to describe nationalization initiatives in the Middle East as both high profile and controversial. The current situation led to calls for the reexamination of the nationalization strategies in the form case studies within the Middle East. For example, the director of a major Middle East HR Summit that was held in Dubai in September 2005 described the main aim of the conference as follows: The aim of this event is to share best practices, encourage lively debate and review examples of workplace issues translating these principles to the nationalization initiative. The Middle East HR Summit sets the stage for the private sector to learn the benefits of a nationalized workforce and participate more fully. (Al Bawaba, 2005) It is surprising to note that despite the prominence and importance of nationalization initiative in the Middle East, there is a lack of HRM literature that analyses them. The disrepancy between the prominence of nationalization strategies and its corresponding coverage in international HR literature is very wide. To illustrate, In August of 2005, if one is to make an internet search of the words “Emiratization, Omanization and Saudization”, it will produce 38,000, 12,000 and 24,000 hits respectively. Meanwhile, using the same terms in doing a search in Proquest, a general database search of international academic business and management literature, produced zero or no peer-reviewed papers in relation to Emiratization. The word Saudization only produced two peer-reviewed papers (Medhi and Barrientos, 2003; Sadi and Henderson, 2005) and only two peer-reviewed papers with search using the word Omanization (Al-Lamki, 2005; Wilkins, 2002). In EBSCO, the eletronic search of papers published in the International Journal of Human Resource Management between 1990 and 2005 only produced one study about Omanization (Al-Lamki, 1998) and none on Emiratization or Saudization. It is important to note however that while international HRM literature avoids Middle Eastern nationalization programmes as a focus of research, the importance of these programmes has been highlighted in more generalized HR concerns and initiatives. For example, in their analysis of HRD in the Sultanate of Oman, Budhwar et al. (2002) note that HRD in Oman has been heavily influenced by the ‘reliance of Oman on foreign workers and professionals’ and, as a result, ‘national development policies made no attempt to link HRD strategies to organizational strategies’ (2002: 200). There are also studies that include the impact of Omanization initiatives on HRD including the education and training of Omani women to encourage them to enter the workforce (2002: 200). Similarly, Al Dosary (2004: 125– 6) made an analysis in a study about the dependence of Saudi Arabia to foreign workers. The analysis included discussion of the drawbacks of relying on overseas workers and then identifies nationalization options that could be used as an alernative strategy of HRD practices which is aimed at reducing Saudi Arabia’s dependence to foreign workers. Despite the availability of these studies, it still did not cover topics such as Emiratization, Omanization and Saudization and this presents a glaring weakness in the international knowledge base as it relates to HRM in the Middle East. While there is a body of literature relating to HR practices in the region is emerging (for example, see Al-Husan and James, 2003; Ali, 1996; Hope, 1984; Murphy, 2002), it is still not enough and cannot cover the nationalization policies in the Middle East until such time that the impact of nationalization strategies are better understood on the international stage. This lack of available literature on the nationalization strategies in the Middle East also puts a limit on the current research of nationalization strategies in the region. For example, current research on nationalization and HRM in the Middle East cannot be expected to include extensive literature-based analyses and is likely to contain methodologies that are untested in this region. From a more global perspective, there is also the question of a lost opportunity; the international community is failing to grasp the opportunity to acquire and build transferable knowledge from an examination of these nationalization strategies as they relate to issues such as international HRM and strategic change initiatives. It is essential for practitioners to know the pattern of HRM systems prevalent in such developing countries. However the achievement of such an objective does require more research. Focusing on developing nations would add a new impetus to HRM research and allow researchers to go beyond the current predominant emphasis on research in the countries in the European Union and North America. Such an approach would also help researchers to examine the transferability of management systems and practices. (Budhwar and Debrah, 2001: 3) This paper will attempt to address the current situation by exploring the nature and application of one of these regional nationalization strategies, namely Emiratization. In summary, the main aims of this paper are; (a) examine critically the nature of Emiratization (b) identify and explore issues surrounding the implementation and evaluation of organizationally based Emiratization programmes (c) Identify a number of implications of Emiratization for HR practice within the UAE. Detailed research questions are presented in a subsequent section of the paper. Contextual background: UAE and Emiratization United Arab Emirates is located in the Arabian Peninsula and was created when the British withdrew from the Gulf in 1971. The federation, formerly known as the Trucial States was formally established on 2 December 1971. Among its borders are the Sultanate of Oman and the Kingdom of Saudi Arabia. The country is comprised of seven sovereign Emirates, Abu Dhabi, which is the federal capital and the largest city, Dubai, Sharjah, Ras Al Khaimah, Ajman, Fujairah and Umm Al Qaiwain. The UAE is governed by hereditary rule, namely the supreme council of rulers, which is made up of the rulers of each Emirate, along with the Crown Princes and deputies of each ruler. They are responsible for general policy matters and ratifying federal laws. The UAE is one of the six members of the Gulf Corporate Council (GCC). All six countries are major oil exporters and 45 percent of the world’s oil reserves are estimated to be in n this region. Abu Dhabi alone has 10 per cent of the world’s known oil reserves. The UAE is also a member of the United Nations (UN), International Monetary Fund (IMF), Oil Product Exporting Countries (OPEC) and the World Trade Organization (WTO). The rulers have made every effort to ensure that the country is stable. Modern and impressive high-rise buildings, wellequipped hospitals, dependable electricity and water supplies, educational establishments, modern transportation networks are many examples of how the rulers have transformed the UAE. Dubai is a well-known global commercial centre and business capital of the Middle East, partly due to it being tax-free and a key trading route between the East and the West. Key income generating activities include manufacturing, reexporting, banking, financial services, tourism, retailing and distribution. At the turn of the 20th century, before the discovery of oil, most of the population were fishermen or pearl divers. Consequently from the 1970s onwards the UAE has seen phenomenal political, economic and social changes due to the substantial investments in a number of economic activities made through the production and export of oil products. The country has an open economy with an annual GDP growth rate of 13.2 per cent making it one of the fastest growing economies in the world. In their country-based assessment of human development, the UNDP ranked the UAE 41st in the list of 177 countries and in the ‘high human development’ category (UNDP, 2005). It is estimated that the population of the UAE as 5 million at the end of 2005 which is 20 times greater than in 1971. Yet only 21 per cent of the current population are nationals (or UAE citizens) (IMF, 2005a). In terms of the 15 –64 age group, approximately 74 per cent are non-nationals. This situation has led the IMF to state that it is: ... critical that the UAE take additional steps to liberalize the economy and pursue further structural reforms including lifting remaining barriers to foreign investment outside the free zones and enhancing the long-term employability of the national labor force through training and education. (IMF, 2005b: 5) The major area of employment for UAE nationals is government (Tanmia, 2004). National Bank of Dubai (2004) proposed that this is due to two main reasons. First, the private sector has not, traditionally, been compelled to recruit nationals. Second, public sector jobs have tended to be associated with relatively high levels of pay and job security. The official UAE 2005 Yearbook (UAE, 2005) states that the employment of nationals in the public sector has reached ‘saturation point’ (2005:221). At the same time, the Yearbook highlights the fact that UAE nationals represent only 2 per cent of the total workforce in the private sector at a time when private sector employment accounts for 52 per cent of jobs in the UAE. This has led to intense scrutiny of private sector HR practices, particularly on how they relate to UAE nationals. Specifically, the UAE’s Human Resource and Employment Authority has called for a renewed emphasis on Emiratization based on ‘serious thinking and careful policy making that sets targets with a long-term vision’ (Tanmia, 2004). Emiratization Emiratization (also referred to as nationalization or localization) is the recruitment and development of UAE nationals to increase their employability and decrease the country’s dependency on foreign workforce (Dale, 2004). It has been formally defined as: A multi-level process through which dependency on the expatriate labour force is reduced and Nationals are prepared to take up jobs performed by expatriates. Such preparation entail enabling Nationals to perform their jobs equally as good if not better than expatriates in the shortest possible period. (Abdelkarim, 2001) There is no one agreed method of Emiratization. Its best practices however includes commitment of leadership in Emiratization through organizational polices and processes that support it. Emiratization is the government initiative that employers has to consider because of the introduction of quotas (required number of UAE nationals to be employed) for nationals within specific sectors. For example, the banking sector of UAE has set a target that by 2008, 50% of its workforce should be occupied by UAE nationals although this has been seen as unpopular and ineffective solution for the employment of UAE nationals. The government also introduced the concept of the ‘Emiratization and Levy Payroll Fees’. This scheme requires every expatriate resident to contribute 8.50 AED (1.28 GBP) a month that will fund the development of UAE nationals that will enable them to land a job in various sectors. There are situations where employers were asked to make a choice between between investing in the recruitment and development of a UAE national employee or paying a levy for employing a foreign national. Or the government could restrict the number of work permits issued for foreign workers. The government also set up an institution called Tanmia (the ‘National Human Resource Development & Employment Authority’) which is responsible for the implementation of Emiratization and to address issues related to it. Its main function involves; a) Recommending relevant Emiratization policies to the UAE federal government b) Creating job opportunities for the UAE national workforce in partnership with both the public and private sector c) Addressing the skill gap of the national workforce through the provision of learning and development interventions and resources (Tanmia, 2005). Case Study: Emiratization in practice Overview of research questions and methods Research methods Interviewees Limitation of the methodology Findings Company A: introduction and outline of its approach to Emiratization Figure 1 The nature of Emiratization Top management commitment to Emiratization The process of Emiratization Measuring the success of Emiratization Employees’ attitudes to Emiratization Challenges associated with Emiratization The future of Emiratization Discussion and conclusions Read More