Money for Nothing at U.A.E. Firms Shows Breakdown of Jobs Plan

Jan 26, 2014 6:49 pm ET

Jan. 27 (Bloomberg) -- When Areej al-Hammadi was studying at university she was also a registered employee at a bank in the United Arab Emirates, which she says paid her more than $1,000 a month for doing nothing.

“I never even went to the bank’s office” during the three month scholarship program, al-Hammadi, 27, said in a phone interview, declining to name the company. Behind such largesse is a program called “Emiratization,” in place for almost a decade, which encourages Emiratis to work for private companies, and employers to give them jobs.

It’s part of the U.A.E.’s effort to improve the skills of its citizens, a minority in the expatriate-dominated workforce, and prepare the oil-rich economy for life after the crude runs dry. In Dubai and Abu Dhabi, the two main sheikhdoms, about nine out of 10 locals in employment are on the state payroll. Al- Hammadi’s experience suggests that the plan to lure them into the private sector isn’t working.

As part of the Emiratization plan, the U.A.E. introduced rules in 2005 that required banks and insurance companies, as well as trade firms that employ at least 50 people, to increase their Emirati workforce every year, by as much as 5 percent. Many employers meet the quota by granting “scholarships” to students who are then listed as employees, according to Habib Al Mulla, a partner at law firm Baker & McKenzie Habib Al Mulla, who has helped the government draft legislation.

On Paper

On paper, companies may have as many as 100 Emiratis working for them, Al Mulla said, declining to identify any examples. In practice, they “pay them 5,000 dirhams a month, give them no performance reviews, no training, and even when they finish the program, they aren’t encouraged to work” for the firms.

The Ministry of Labour and Social Affairs said in 2005 it would “suspend dealings” with companies that don’t comply with the Emiratization quotas. The UAE Banks Federation didn’t immediately respond to e-mailed questions.

The U.A.E. is a regional hub. For international companies that want offices there, paying salaries for minimal work is “a form of taxation,” said London-based Emad Mostaque, a strategist for the Middle East and North Africa at Noah Capital Markets, who travels to the U.A.E. to meet with bankers and government officials. Emiratis interested in the private sector typically want managerial jobs, and employers often aren’t convinced by their qualifications, he said.

Generous Employer

The government’s generosity as an employer may also be undermining its own plans.

New recruits get an average $10,000 a month at government jobs in Abu Dhabi, the richest of the U.A.E.’s seven sheikhdoms, according to government data.

The government can’t afford to pay Emiratis “high salaries for minimal work” indefinitely, Mostaque said. “At some point the oil will run out, the government handouts will dwindle, and Emiratis will need vocational skills to survive.”

Starting salaries in the U.A.E.’s private sector range from 7,000 dirhams ($1,900) to 18,000 dirhams a month for graduates of Ivy League universities, Suha Mardelli, human resources director at Bayt.com, a Dubai-based jobs website, said by phone.

“If you’re going to ask private sector companies to pay those salaries, they’d have to realign most of their pay structure to reflect that,” she said. “That would require them to double or triple their revenues,”

Low Expectations

As well as the money, “the shorter working hours and the longer vacations” also attract Emiratis to government jobs, John Sfakianakis, chief investment strategist at MASIC in Saudi Arabia, said in a phone interview. Plus, “the government doesn’t expect much out of Emiratis, and they become ill equipped to join the private sector.”

Emiratis make up less than 20 percent of the U.A.E.’s 5.5 million population, according to the CIA World Factbook. Unemployment among Emiratis in Dubai was more than 20 percent in 2012, while in Abu Dhabi the figure was above 10 percent, according to government data.

The government spent about 30 percent of its budget in 2012 on wages, subsidies and transfers, the International Monetary Fund estimates. Most of the revenue comes from oil, which accounts for more than a third of the country’s economy. The U.A.E.’s reserves, about 6 percent of the world’s total, will run out in about 80 years at current rates of production, according to Bloomberg calculations based on BP Plc estimates.

‘Easy Excuses’

Companies must share the blame if Emiratis aren’t progressing in the private sector, said Essa Al Mulla, executive director of the WorkForce National Development Program, part of the Dubai government’s Knowledge and Human Development Authority.

“Often we find that poor line managers can make easy excuses for ignoring their Emirati employees by accusing them of being lazy, etc.,” he said by e-mail. “We ask companies to take a ‘BB’ approach -- to look beyond the balance-sheet, and invest resources to develop the Emirati employees.”

A career outlook that offers “unique experience, prospects and guidance from the best in the business” can outweigh the appeal of higher salaries working for the government, he said.

The Abu Dhabi Tawteen Council, which helps Emiratis seeking jobs in Abu Dhabi, didn’t respond to requests for interviews by telephone and email.

While private firms offer good benefits, they’re “geared toward expatriates, not nationals,” Baker & McKenzie’s Al Mulla said. “When you say health insurance, ticket home and so on, these are benefits that are of no relevance to U.A.E. nationals.”

Al-Hammadi, who speaks fluent American English, completed at least two emiratization programs before joining the Dubai Media Inc. as a graphic designer more than three years ago. The government broadcaster runs television channels including Dubai One. Al-Hammadi designs on-air graphics and animations, and helps to develop branding for the TV stations.

“I do think people don’t expect much out of you if you’re Emirati, but they’re wrong,” she said.

--Editors: Ben Holland, Francis Harris