Pros and Cons of Scarcity of Manpower Resources in the UAE - Research Paper Example

Microeconomics Microeconomics Resources in a country can be ified into two groups; tangible and intangible resources. Goods such as food and drinks, electronic goods, vehicles etc are tangible resources whereas services like education, healthcare, tourism, business consultancy etc are intangible resources. UAE is a country which is blessed with immense oil resources whereas it lacks scarcity in manpower resources. In fact UAE is currently facing demographic imbalances because of the huge expatriate workforce available there. The number of overseas population is more than the number of locals in UAE. Abdullah (2007) has pointed out that “8 out of 10 people living in the UAE were born abroad as per the statistics available in 2005. Moreover, the percentage of non-citizen will reach 90 per cent by 2015”(Abdullah, 2007). At present, UAE is trying to reduce the number of expatriate workforce in the country by injecting more locals in the employment sector. This paper analyses the pros and cons of scarcity of manpower resources in UAE. Pros and cons of scarcity of manpower resources in UAE Even though the major revenue source of many of the Gulf countries are oil resources, the case is entirely different for UAE. Business is the major revenue source for UAE. In fact UAE is the business hub of Middle East. Majority of the prominent companies all over the world has business units in UAE. Educated and skilled manpower resources are a must for the business units in UAE. The number of educated UAE locals is less than the demand created by the employment sector in UAE. In other words, supply of UAE labour force would become inadequate to meet the demands crated by the business sector in UAE. Under such circumstances, expatriate workforce is helping UAE immensely in meeting the demand for professionals and skilled workers in industrial and business sector. In short, scarcity of skilled workforce in UAE is helping UAE to bring professionals from all over the world to UAE soil so that the business sector will always get the services of skilled people from different countries. In other words, scarcity of workforce helps UAE to provide diverse workforce from all over the world to UAE business units. It should be noted that diversity of workforce is extremely important in current extremely globalized business environment. Scarcity of domestic workforce helps UAE to strengthen its trade ties with other countries. For example, UAE is successful in establishing string trade relations with India because of the huge number of Indians working in UAE. Dubai world, Dubai media city like big companies are currently investing in India as part of their business expansion. “In 2004 Cochin Port granted DP World the permission to operate the existing Rajiv Gandhi Container Terminal and to develop the International Container Transhipment Terminal (ICTT) at Vallarpadam” Kerala, India (India, Vallarpadom, n. d) However, the major drawback of lack of workforce in UAE is the capital out flow from UAE soil to other countries. Majority of the expatriates working in UAE are sending huge amounts of their savings to their domestic countries and therefore UAE is not benefiting out of the huge employment opportunities created by the employment sector. Many of the UAE nationals are not educated or competent enough to meet the demands in employment sector. They are not ready to accept any hard working professions and therefore UAE forced to keep an adequate amount of expatriate workforce in its hard labour oriented sectors. For example, UAE is a country in which heavy construction works are going on. It is impossible to think that any of the UAE nationals accept a worker profession in construction sector. Zacharia et al, (2002) has mentioned that changes in the immigration policy of the UAE government, completion of major infrastructure projects and economic recession in the region have reduced substantially the demand for unskilled and semi-skilled labourers in the UAE. These new policies are part of the demographic balancing or the emiratization process in which UAE has taken steps to ban visas for unskilled Asian workers (Zacharia et al, 2002). It should be noted that no country would like to have majority of expatriate population. Expatriate population may keep their identity and culture so that the indigenous or domestic culture could be spoiled. For example, Indians in UAE speak Hindi whereas Pakistanis speak Urdu. They will never bother to learn or speak Arabic language. Lazaridis (2003) has mentioned that “a country may benefit from foreign immigration because of the increased availability of cheap labor, but encounter problems from xenophobia and social unrest” (Lazaridis, 2003, p.1). Expatriates working in low income employment sector may not get enough salary to meet their expenses. So, they may engage in antisocial activities such as robbery, theft, violence etc. To conclude, scarcity of workforce brings benefits as wells drawbacks to UAE economy. The major benefit of scarcity of domestic workforce is the opportunity to bring diverse workforce from other countries and to use their expertise in the building process of UAE. On the other hand, the major drawback of scarcity of domestic workforce in UAE is the capital outflow from UAE soil to other countries, demographic imbalances, increased reliance on other countries etc. In my opinion, UAE should encourage its locals to increase their skillsets as much as possible. The government should encourage people to acquire quality education from UAE universities or other universities. At the same time, the government should never think in terms of avoiding the expatriate community completely from the employment sector. The government should keep sufficient number of expatriate community in UAE soil till UAE becomes successful in building enough domestic workforces. The effects of global financial crisis upon UAE real estate sector Dubai’s liability is estimated around 80 billion dollars and out of these 80 billion dollars, 3.5 billion belongs to a single business group Nakheel which is functioning under the main culprit, Dubai World. Dubai government has washed their hands from the crisis, even though Dubai world is a public company. Investors in Asia and Europe are in anxiety since Dubai World has taken massive loans mainly from British and European banks and many Asian investors invested in Dubai world and working for Dubai World (A financial sandstorm 2009). The recent global financial crisis has affected the real estate sector in UAE drastically. Many of the biggest real estate companies in UAE struggled for survival during this period. In fact Dubai struggled a lot because of the recent recession. Dubai government failed to respond properly to the recession problems. The government thought that Dubai’s economy is strong enough overcome any challenges. However, such calculations were absolutely wrong and in the absence of assistance from Abu Dhabi, it would have been difficult for Dubai to come out from the pathetic situations. “Fewer real estate projects were launched than had been anticipated, although these included the unveiling of the $95bn Jumeirah Gardens development, Nakheels 1km tower and Tameers 120-storey green tower”(What does the global financial crisis mean for Dubai real estate?, 2008). Before recession, rents were skyrocketing in UAE. It was absolutely difficult for a layman to stay in UAE before the recession times because of the increasing life expenses. However, recession brought huge dip in the demand in the real estate sector and rents started to come down. Now real estate business people are looking for customers to sell out their flats and buildings. Construction activities are going on only at a slow rate because of the problems in real estate sector. In other words for the first time in recent UAE history, supply became more than the demand in the real estate sector and the property prices started to crash. The following illustrations clearly show the relationships between supply, demand and prices. (Economics Basics: Demand and Supply, 2011) The market price of a commodity is determined by the supply and demand of that commodity in the market. From the above graphs, it is evident that when supply increases, demand and prices will come down whereas when the supply decreases, demand and prices will increase. In other words, prices are inversely proportional to supply and directly proportional to the demand. “The property crash hit Dubai at the time - house prices fell 50 pc in six months” (Spencer, 2009). In other words, when demand comes down, prices will automatically come down as per the supply and demand theory of economics. It should be noted that heavy construction works were going on in UAE before recession. In fact business people and ordinary people struggled to find enough space for business and living in UAE before recession. Real estate companies never thought that the demand may come down drastically in the near future. However, the recession came quite unexpectedly and all the calculations of the real estate business people went wrong. Supply and demand were almost in equilibrium before recession. However, once the recession was started, demand came down drastically and supply became increasingly surplus. Thus real estate sector in UAE started to collapse once the global financial crisis was started. It should be noted that market is a mixture of sellers and buyers. In a market with numerous buyers and sellers, neither the sellers nor the buyers may have any influence on prices. Such a market is often termed as competitive market. Before recession, UAE real estate market was seller dominant at the time of recession, it became buyer dominant. In other words, the power shifted from buyers to the sellers at the time of recession and therefore the bargaining power of the buyers increased a lot. Subsequently prices of flats and villas in UAE have come down drastically as result of this shift in power from the seller to the buyer. To conclude, global financial crisis has negatively impacted the construction sector in UAE. Property prices have come down drastically because of the low demand and excess of supply. UAE government should regulate construction activities in the country so that supply and demand reaches equilibrium. Supply should go in parallel direction with the demand in order to future problems in construction sector. References 1. A financial sandstorm (2009). The Economist Nov 30th 2009. Retrieved from http://www.economist.com/node/15004072 2. Abdullah A. (2007), UAEs demographic imbalance, Gulf News, April 14, 2007, Retrieved from http://gulfnews.com/opinions/columnists/uae-s-demographic-imbalance-1.172314 3. Economics Basics: Demand and Supply (2011). Retrieved from http://www.investopedia.com/university/economics/economics3.asp#axzz1hYutzjxO 4. India, Vallarpadom, (n. d), Retrieved from http://portal.pohub.com/portal/page?_pageid=761,248793&_dad=pogprtl&_schema=POGPRTL 5. Lazaridis G, (2003), Foreign immigration and economic development in Greece, International Journal of Economic Development, Retrieved from http://findarticles.com/p/articles/mi_qa5479/is_2_5/ai_n29064779/ 6. Spencer R. (2009). Dubais financial crisis: a Q&A. The Telegraph. 27 Nov 2009. http://www.telegraph.co.uk/finance/financialcrisis/6668281/Dubais-financial-crisis-a-QandA.html 7. What does the global financial crisis mean for Dubai real estate? (2008), Retrieved from http://www.ameinfo.com/171697.html 8. Zachariah K. C., Prakash B.A and Irudaya R. S (2002), Gulf migration study: Employment, wages and working conditions of Kerala emigrants in the United Arab Emirates, Centre for Development Studies, India, Retrieved from http://ideas.repec.org/p/ind/cdswpp/326.html  Read More