Emiratisation in the UAE - Case Study Example

EMIRATISATION IN THE UAE: RECOMMENDING A VIABLE STRATEGIC PLAN By Name Course Instructor Institution City/State Date Emiratisation in the UAE: Recommending a Viable Strategic Plan 1.0 Introduction In the last few years, the United Arab Emirates (UAE) has been depending on expatriates to improve its thriving economy and facilitate rapid development of the economy. The ability of the Gulf’s countries to attract global expertise and business has succeeded and both the UAE’s economy and its global competitiveness have improved. Even though the relationship between expatriates as well as nationals has been symbiotic, the dependence of expatriates has resulted in economic, political and social issues. As a result, the nations in the Gulf have started formulating strategies with the objective of ensuring regulation of the employment quotas as part of the nationals’ human capital development. Generating a lot of meaningful jobs particularly amongst the youths has become a concern at the global level; therefore, the UAE’s attributed to the varying regional context and increasing rates of unemployment need innovative solutions. Essentially, job localisation programs have become the ideal policy option since they have an effect on the employment practices both in the private and public sectors. As it will be evidenced in this essay, the issue of Emiratisation has led to increased debate and the government has been forced to develop as well as implement lasting and sustainable solutions. Even though Emiratisation has existed for more than a decade, the outcomes in the private and public sector have been falling back with only 0.5 per cent citizens working in the private sector. The UAE nationals, particularly the graduates are experiencing challenges when looking for jobs. While the public sector cannot absorb more graduates that enter the job market yearly, the private sectors are asking for specific qualifications and skills. Furthermore, because of the social security payments offered by the government, scores of locals prefer working in the menial jobs. Still, the rate of unemployment in the UAE is increasing and although many people agree that Emiratisation is important for political, economic and social reasons, some argue that the organisational efficiency is impacted by localisation. According to Forstenlechner (2010, p.135), Emiratisation can be defined as the nationalisation process of the UAE’s workforce, which has been very successful in the public sector but in the private sector, it is still trailing behind. The reason why Emiratisation is lagging behind in the private sector is because most of the employment decisions are normally made by foreign workers, which normally focuses on the business rationale and also favours expatriates. The purpose of this paper is to recommend effective strategies that would help increase private sector employment of Emiratis from the current 0.5 per cent to 40 per cent by 2021. Furthermore, this paper seeks to correct the perception that localisation reduces organisational efficiency. 2.0 Discussion 2.1 Emiratisation When the UAE was formed in 1971, its economy focussed on the exportation of oil that had newly been discovered. Since then, the economic development strategic focus has shifted and the country is looking to diversify its income and sources of revenue, with the objective of reducing dependence on oil. The GDP contribution of the tourism sector in Dubai was 18 per cent in 2003, which is marginally higher as compared to the oil sector’s 17 per cent contribution to the GDP (Matherly & Hodgson, 2014, p.77). Through the promotion of competitive business environment, the country has been able to follow economic vision with the objective of attracting foreign investors; thus, developing into a global and regional leader in sectors, like renewable energy, tourism, as well as financial services. The Emiratisation was initiated in 2000, and three years later, the banking sector was directed by the government to recruit UAE citizens in all managerial positions. Before 2006, Matherly and Hodgson (2014, p.77) posit that the Emiratisation quota was only applicable to the finance and banking sectors. At that point, the banking sector in the UAE was targeting a 50 per cent Emiratisation rate by 2008. By 2009, the government ordered that companies had over 100 workers to employ only UAE nationals in their HR department and the secretarial positions. Furthermore, the government started targeting jobs in hospitality, insurance and banking sectors for Emiratisation, and also the HRM, PR officers, and secretaries’ jobs. To ensure the Emiratisation is effectively administered, the government started using TANMIA (The National Development and Employment Authority). The strategic goals of TANMIA include: (1) promoting competitiveness and participation of Emiratis in the labour market; (2) ensuring integration between the local institutions and the Authority so as to support the nationalisation policies; (3) partnering with the private sector as well as increasing the national manpower demand. The fourth and fifth strategic objectives included supporting effectual decision-making within the labour market and ensuring every administrative service is in line with the standards of efficiency and quality, respectively. Therefore, the focus of the Emiratisation is on strategies, which would improve the competitiveness of Emiratis as well as facilitate effective localisation after the expatriates’ jobs are filled by the satisfactorily competent nationals capable of meeting the organisation’s needs. Beside the use of TANMIA, the government always perform annual meetings together with the business organisations in order to examine and review solutions that could improve Emiratisation. The Emiratisation Forum which happens every year is used as a platform for both the public and private sectors to discuss and debate how to generate jobs for Emiratis. This has become a national priority, wherein organisations are challenged to demonstrate how they will achieve the targeted workforce quotas (Matherly & Hodgson, 2014, p.78). According to Al Marzouqi (2012, p.16), the unemployment amongst Emiratis is inclined to increase at some point, which consequently would result in a major challenge for the government to find a robust solution. The rate of the national workforce growth is slightly above 10 per cent, but rate of the population growth is expected to decrease in the coming three decades. Al Marzouqi (2012, p.16) mentions that despite the decline in the rate of population growth, the number of Emiratis looking for jobs will continue to increase. The country has substantial resources and ability to meet the expectation of the job seekers. Still, the majority of job seekers do not have skills required in the private sector; therefore, this makes them unattractive. Despite the financial sustainability, the country will continue to experience challenges in supporting its people living standards. 2.2 Private vs. Public Sectors in the UAE In the UAE, employees in the public sector are paid higher as compared to those in the private sector. According to Alnaqbi (2011, p.29), employees in the private sector are normally paid between 1,300 and 2200 US dollars every month while those in the public sector earn between 2200 and 3000 US dollars every month. This difference is attributed to the fact that employees in the private sector labour force have lesser qualifications as compared to those in the public sector. This imbalance affects the work market that offers opportunities for employment, especially in the private sectors. Most private sector employers hold that most Emiratis have inadequate technical skills and poor expertise in spheres like ethics, client customer associations, conversation, as well as social skills. Emiratisation has enormously impacted the employment opportunities, especially within the private sector. Currently, the UAE’s young population (15 years and below) is increasing at 25 per cent annually; therefore, the number of job seekers is expected to increase in the future. Towards the end of 20th century, the majority of graduates preferred to work in the public sectors, rather than the private sector (Alnaqbi, 2011, p.30). Early in the 21st century, the attempts of developing managerial capabilities in the public services amongst the Emiratis were very few since there were no work policies like the on‐job training. Therefore, to develop the Emiratis’ managerial potential, the public sectors are currently basing its promotion on particular employment standards like the secondary education, course deployment, as well as grade and key reforms applied in retrospect for nearly a decade. As a result, the Emirati graduates have been forced to look for employment opportunities within the private sector. Economic factors according to Alnaqbi (2011, p.31) have compelled some workers to resign their jobs; therefore, having a sound labour market can help create stability in the organisation. Bigger companies in UAE can offer Emiratis a suitable opportunity to grow, and with an increased wages, the employees become attached to the organisation. More recently, the UAE Government as mentioned by Sabry (2013) have started new Emiratisation efforts in the private sector, wherein Emiratis make up 0.5 per cent of the total workforce. Currently, there are more than 900,000 Emiratis in the United Arab Emirates, but only 4, 500 are working in the private sector (Sabry, 2013). The job opportunities created by the private sector every year is approximately 6,000; therefore, there is need for a strategic plan to coordinate the higher education institutions and the private sector so as to increase the number of jobs created. There is an increasing need for the private sector to create a partnership with the government so as to increase the number of Emiratis in its workforce. This can be achieved by providing ample work environment, increasing wages, and promotions so as to facilitate employee retention. Presently, the rate of unemployment is aggravated by Emiratis’ lacking interest in employment positions offered by the private sector. The public sector has made enormous efforts to promote Emiratisation in the UAE; still, this is yet to be achieved completely in the private sector. As mentioned by Khamis (2013) The private sector should increase participation in the councils, committees and bodies that focus on improving the quality of vocational, technical and education training as well as actively contributing to funding and designing training and curricula programmes. Private organisations according to Khamis (2013) should diversify their investments so as to include other sectors such as technological and scientific research. Given that the private sector job capacity is more than four million, the private sector should attract national talent and also improve its training programmes. (Swan (2015) posits that Emiratisation can become successful if rewards and conditions offered in both private and public sectors for Emiratis are well balanced. 2.3 Why Private Companies are disregarded by Emiratis These days, the majority of Emiratis are focussing their career perspectives on public and government entities. Therefore the government organisations have become the major employers of UAE nationals. Basically, the low percentage of Emiratis in the private sector’s workforce can be analysed from two dimensions: the employee’s perspective as well as the employer’s perspective. From the employees perspective, Mashood et al. (2009, p.5) posits that Emiratis graduates normally consider themselves as natural middle class; therefore, they only accept work that is in line with their expectations. Such expectations include managerial jobs even when they do not have the needed qualifications. Furthermore, industries like the service and retail are less likely to meet the Emiratis’ aspirations. The UAE government is currently facing the challenge of convincing the Emiratis to accept technical and manual jobs as well as other private sector jobs. The Emiratis prefer the public sector because it offers attractive remunerations and working conditions. On the other hand, the private sector is perceived to offer lower salaries, long working hours, and poor working conditions with less or no non-monetary benefits. Furthermore, the Emiratis do not see the prospects of career development in the private sector and also promotion is difficult to achieve while working in the private sector. Therefore, the only way the private sector can attract the Emiratis is by offering better wages. From the employers’ perspective, mot private companies are reluctant to hire Emiratis because of numerous reasons; for instance, the employers in the private sector perceive the UAE nationals as more expensive and less productive. The Emiratis are no just perceived as less productive, but also as unmotivated and under skilled. According to Al-Ali (2006, p.18), the Emiratis are rarely employed in the private sector because of their low trust levels and poor English fluency, which create barriers to employee participation. Additionally, the expatriate labour cost is very low than that of the national labour (Mashood et al., 2009, p.5). Forstenlechner et al. (2012) posit that Emiratisation has three important doctrines; the first tenet is the continuing intention of diversifying away from over-depending on the hydrocarbons sector, which is capital-intensive. The second tenet involves overhauling the UAE educational systems and ensuring that they are aligned closely to the skills needed in the labour market. The last tenet involves the espousal of different direct intervention measures in the labour market, like introducing quotas and assigning particular job roles such as managerial positions only to the Emiratis. Still, the impact of Emiratisation in the private sector has been insignificant. Therefore, diversifying the knowledge economy has become more important. According to Schilirilo (2013, p.14), diversification is very crucial in promoting economic development so as to generate employment opportunities for the local force that is growing rapidly. Given that high quality education, innovation and technology are the key drivers for developing a knowledge economy in the UAE, the government should centre its government policies on the research and development process as well as higher education. 2.4 UAE’s Workforce Localisation Policies The shrinking opportunities in the GCC’s public sector by the mid-1990s forced the governments to place emphasis on how to integrate the local employees effectively into the private sector. Therefore, the process of Emiratisation in UAE sought to identify and generate meaningful and sustainable employment for Emiratis by reducing the percentage used to match the employers and Emiratis job seekers in both the private and public sector. Still, the Emiratisation emphasis was to increase the proportion of Emirati employees in the private sector workforce. According to Waxin et al. (2015, p.613), three forms of localisation policies have been adopted by nearly all GCC countries: economic diversification far from over-dependence on oil, enhancement of education, as well as labour market regulation. In UAE, the regulatory approaches according to Forstenlechner (2010) have been operationalized through different elements, such as the introduction of quotas in Emiratis employment in the private sector companies having over 50 workers. The UAE government has also introduced some mandates, which restrict companies for hiring expatriates in specific job categories; for instance, a decree was issued in 2005 that required only Emiratis Public Relations Officers (PROs) to process immigration paperwork such as Visas at the public offices. In 1999, the government established TANMIA with the objective of facilitating the espousal of the Emiratisation policies. However, the TANMIA has been ineffective in ensuring that Emiratis fraction is the private sector workforce is increased; as a result, numerous individual Emiratis have created their own organisations such as Dubai‘s Emirates National Development Programme as well as Abu Dhabi Emiratisation Council with the objective of implementing the Emiratisation policy. To ensure that the Emiratisation objectives are realised, the government decided to introduce new rules intended for encouraging workforce nationalisation in the private sector. The new rules as cited by Waxin et al. (2015) set strict minimum Emiratisation levels as well as financial penalties (for non-complying companies) and incentives (for companies that achieve high Emiratisation levels). 2.5 Education and Training Education trends at the global level points out the need for a serious reform and review of the UAE education status quo. According to Al-Ali (2006, p.3), a strong workforce can be built in the UAE through improved education standards; therefore, the government should strive to offer and maintain a suitable learning atmosphere that could ultimately strengthen the community. Without a doubt, education has become the foundation of development; therefore, its importance has increased in the current working environment that is influenced by globalisation as well as technological change. More importantly, education improves the distribution of knowledge in addition to the creation and integration of knowledge flow mechanisms within the society. Knowledge and skills needed in the UAE private sector can only be developed through education; therefore, improving the country education systems can improve Emiratis ability to perform their work productively and effectively. Education’s strategic leadership in UAE according to Al-Ali (2006, p.3) has been partly important since apolitical and socio-economic change has been dramatic and significant in the last few decades. The adult illiteracy, for example, declined to 23% in 2004 as compared to 48% in the 1970s. The UAE’s education systems require some expansion and improvements in order to effectively serve country’s development. The country’s school curriculum, for example, should be changed into a technology-based that would enable Emiratis graduates to have problem-solving and technical skills. Furthermore, the quality of educators in UAE has been cited to be exceedingly low when compared to international education standards; therefore, the government should start outsourcing best qualified teachers from countries with high education standards like the United States, the United Kingdom, and Australia. Al-Ali’s (2006) study findings demonstrated that the ratio of the student to personal computer in scores of the UAE’s government schools was exceedingly low; therefore this explains why most employers in the private sectors consider Emiratis as unproductive. Creating a learning environment and providing training opportunities is one way that private sector would be able to attract Emiratis graduates. Importantly, training can help change the Emiratis attitudes, skills or knowledge by means of the learning experiences, which consequently, can enable them to perform effectively in their jobs. Currently, UAE do not have an employment culture that focuses on training; hence, employers prefer employing expatriates who already have the required skills. 3.0 Strategic Plan to Increase Emiratis Employment in the Private Sector Currently, only approximately 4,500 (Emiratis) are employed in the private sector; therefore, there is need for strategic plan so as to increase the percentage from 0.5 to 40%. First, the UAE government should set control procedures and meaningful targets for occupations, which can be filled by the qualified Emiratis. Therefore, the government should start manpower planning in the private and public sector in order to find the capabilities and skills that match the private sector’s job requirements. In consequence, this would facilitate in focusing the Emiratis’ human capital development so as to meet the UAE’s needs. Besides that, the government should start providing incentives to Emiratis with the objective of enabling them start business enterprises. By improving the working conditions in the private sector, local workforce participation would increase tremendously. More importantly, the government should help the private sector come up with programs such as training and development that would encourage the Emiratis to remain in their jobs while working for the private sector. The government should also regulate the private sector so as to ensure that the wages offered together with job security and working hours are almost in balance with that of the public sector. Measures should be taken to ensure that the private sector offer career development opportunities, good pay and better working environments. This can be achieved by offering tax reliefs and subsidies. The number of expatriates working in UAE is exceedingly high; therefore, the government should ensure that the investment made by private sectors on the expatriate expertise does not lead to knowledge drain after the expatriates leave the country. For this reason, mechanisms must be implemented so as to facilitate the exchange of high levels of knowledge between the expatriates and Emiratis. The exchange of knowledge can be achieved by increasing the percentage of Emiratis in the private sector. As suggested by Matherly and Hodgson (2014, p.86), having a high ratio of nationals/expatriates in the private sector offers the UAE government an opportunity to motivate both groups so as to facilitate the transfer of knowledge. Creating sufficient high-paying jobs in the private sector for Emiratis need far-reaching reforms across in different areas. Since the growth of the non-oil private sectors has been sluggish in the previous years, the private sector can currently only absorb 30% of the expected entrants in the labour market if the latest connection between job creation for Emiratis and private-sector growth holds. Given that the UAE’s young population is growing rapidly, the public sector cannot absorb a large percentage of the entrants; therefore, the government should do major reforms to increase the labour force capacity of the private sector. Diversifying the economy is the only viable way of improving job creation for Emiratis in the private companies. In order for the increasing Emirati job seekers to be successfully absorbed in the private sector, there is a need for structural reforms in order to sustain the growth of the non-oil private sector and facilitate diversification, sustained education investment as well as labour and product market reforms. Aside from the identification of the strategic areas to diversify, the UAE government should ensure the business environment is improved and also ensure that the small- and medium-sized enterprises (SMEs) play a greater role in the country. Additionally, the government alongside the private sector should develop programs for skill improvement and also ensure that the Emiratis’ vocational training and educational quality is improved to meet the international standards. Another strategy is increasing the emphasis on attracting expatriates who are highly-skilled so as to boost the job opportunities and productivity of lower-skilled Emiratis in the private sector. The existing evidence points out that the high inflow of low-skilled expatriates in UAE have resulted in poor remunerations in the private-sector wages; thus, decreasing the Emiratis’ willingness to take jobs that require lower skills in the private sector. Therefore, introducing wage restrictions and labour market tests within the private sector would tremendously decrease the negative wage impact, and in so doing, encouraging private sectors’ employers to employ low-skilled Emiratis. Although UAE is still depending on expatriates, the government should use employment quotas so as to allow only highly-skilled expatriates to work in the private sectors. Furthermore, the government should raise the Emiratis’ employment quotas so as to provide incentives that could be used by UAE nationals to develop their skills. As a result, this could increase the number of skilled Emiratis that could work in the private sector. Another viable strategy is improving the quantity and quality of education in UAE considering that the current UAE skills mismatch the international standards. Furthermore, the UAE’s education systems are of poor quality and this has resulted in labour shortage; thus, forcing employers to search for skilled expatriates. For this reason, the government should increase its investment in the education system so as to improve both the education quality and enrolments since they are important in improving the labour productivity as well as employment outcomes. The government should bear in mind that the education weaknesses cannot be addressed easily through active policies in the labour market such as job training. Furthermore, the government should improve the labour market outcomes by reinforcing safety nets and increasing mobility in the labour market. Basically, increasing the expatriates’ mobility could facilitate in progressively narrowing the wage differentials as well as improve the resource allocation in the labour market. By cutting the redundancy costs, the UAE government would be able to promote flexibility in the labour market. Through entrepreneurship strategies, the government would succeed in promoting entrepreneurship and leveraging the ability of the private sector to create jobs for the nationals. Furthermore, the government should start encouraging business start-ups amongst the Emiratis. In so doing, the country would start creating many fast-growing and new companies that would increase job opportunities of Emiratis in the private sector by a greater margin. Furthermore, by promoting entrepreneurial values amongst the Emiratis through education or training, the government would be offering substantial support for the new entrepreneurs. Basically, training and supporting young Emirati entrepreneurs could result in improved skills as well as individuals the nationals successfully joining the entrepreneurship bandwagon. Embedding entrepreneurship training in the school curricula could successfully promote a culture of risk-taking and innovation. In addition, the entrepreneurship programs at the university-level should focus on incubating and encouraging real business start-ups. In addition, the entrepreneurship training should facilitate the young Emiratis ‘personal development by teaching practical as well as leadership skills, which promote individual success. 3.1 Localisation Strategies with View to Organisational Efficiency In his study, Al-Ali (2006, p.18) noted the need for the UAE government to monitor as well as regulate Emiratisation process in the private sector, which could be achieved by increasing investment in the education. For example, the government should increase its spending on the educational structure monetary anchored on the empowering the Emiratis at large. Furthermore, UAE should consider implementing the dual partnership system between educational organisations and the private sectors, which is commonly utilised in Germany. This system would be important because it would offer young Emiratis a good opportunity to learn, graduate, and work in the private sector companies that have trained them; therefore, they have a guaranteed job security and an opportunity to advance their education. The dual partnership system can only be successful if there is an effective communication between the private sectors as we; as the education institutions. That is to say, a close connection is required between the public and private sectors on one hand and the education institutions on the other hand. Besides that, Al-Ali (2006, p.19) observed that the private sectors should have both long-term and short-term manpower planning so as to be able to meet their organisational structural requirements; in so doing, hiring nationals would become more effective since the process of recruiting them is rooted in numerous practical and successful criteria like career development planning as well as succession planning. The UAE’s labour regulations and production techniques should be modernised in order to facilitate the creation of more job opportunities for the Emiratis. Clearly, the major obstacle to job satisfaction amongst the Emiratis in the private sector is a lack of experience and training; therefore, new policies should be introduced for the private sector in order to allow Emiratis to have adequate training. As mentioned earlier, the majority of the private sectors, especially multinational companies do not employ Emiratis because of poor English fluency. Without a doubt, English is considered to be a business and communication language, especially in the majority of the private sectors; therefore, the government should ensure that the standard as well as the level of English that Emiratis learn in schools matches the international labour market requirements. This can be achieved by recruiting English teachers from English-speaking countries like the UK, the US, New Zealand, and Australia. Currently, there is retirement policies inconsistency between the private and public sector. This can be reduced by combining the social security scheme in the private sector so as to reduce the inconsistency. The government should also order all companies in the private sector to recruit Emiratis as their HR managers so as to Emirati HR managers to hire the nationals. The argument behind this recommendation is that an Emirati HR manager will obviously give priority to Emirati job seekers over the foreign workers. In order to localise the UAE workforce, the private sectors should a resilient employee value propositions as well as well-defined employment brand which matches the motivations of the Emiratis. Basically, this could enable the private sector to attract high-skilled applicants, and would be able to compete with the public sector jobs. Rather than using a lot of time to promote favourable work conditions as well as high salaries, the private sectors should focus on promoting employee training and development so as to attract talented Emiratis. Furthermore, the private sectors should start organising joint or sectoral initiatives in order to achieve a mass effect. This can be achieved by fortifying the private sector relationships with the UAE nationals by taking part in career fairs, special events and forums associated with localisation. Given that that the current UAE’s educational system have a lot of shortcomings, the private sector should focus more on introducing effective employee training and development programs. As a result, this could result organisational efficiency a well as the inclusion of the Emiratis in the private sector workforce. Learning and development in addition to career growth are key factors for both organisational efficiency as well as the nationals’ employee engagement. Therefore, if the private sectors manage Emiratisation effectively; then, localisation would not lead to organisational inefficiency. In view of the provided recommendations, the UAE private sectors should ensure that the localisation programs are managed strategically. Private companies that intend to use Emiratis talent in order to realise their strategic objectives must consider Emiratisation as a tool for managing talent. For this reason, the private sectors should create effective processes for talent management processes in order to ensure that they define the capability gaps and filling them so as to meet the strategic intent of the organisations. 4.0 Conclusion In conclusion, this paper has provided viable short-term and long-term strategies that could help increase private sector employment of Emiratis from the current 0.5 per cent to 40 per cent by 2021. In addition, that paper has corrected the perception that localisation reduces organisational efficiency. As evidenced in the essay, the UAE economy depends heavily on the foreign labour. The majority of Emiratis prefer working in the public sector because of suitable working hours, higher remunerations and favourable working conditions. On the other hand, the employers in the private sector prefer foreign workers because they are cheap, hard-working and less demanding. However, over-reliance on the expatriates results in long-term social, political and economic consequences. For this reason, the UAE government have come up with programs that seek to reduce over-reliance on expatriates through Emiratisation. The key element of Emiratisation as mentioned in the essay is the quota system as well as training and development of the Emiratis. Still, the Emiratisation has achieved desirable results in the private sector. Although it has been successful in some sector such as financial services and banking, other sectors are struggling to achieve the set quotas. However, the majority of Emiratis consider the private sector to be unattractive, and are only willing to occupy high positions, yet they do not have the needed skills and qualifications. For this reason, some strategies have been recommended so as to improve the proportion of Emiratis in the private sectors workforce: improving education quantity and quality; adopting the dual partnership system, offering tax reliefs and subsidies, and so forth. 5.0 References Al Marzouqi, N.M., 2012. Emiratisation Strategy at Jumeirah and its objectives (Emiratis perspective). MSc Thesis. Dubai, United Arab Emirates: The British University in Dubai. Al-Ali, J.A., 2006. Emiratisation in the Local Labor Force of the UAE: A Review of the Obstacles and Identification of Potential Strategies. In Proceedings of the 20th ANZAM Conference on "Management: Pragmatism, Philosophy, Priorities. Melbourne, 2006. Central Queensland University. Alnaqbi, W., 2011. 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