Dubai: The cost of energy subsidies, use of public services and infrastructure, security and social risk borne by the government and local authorities on foreign labourers is estimated at Dh50 billion per year, according to a study published yesterday.
Most of the subsidies go to support unskilled workers that collectively represent 80 per cent of the four million workforce in the UAE.
According to Mouawiya Al Awad, Director of the Institute of Social and Economic Research (ISER) at Zayed University in Dubai, every foreign worker costs the country Dh14,066 per annum of which her or his company pays Dh2,506 in fees. What he described as a social cost forms almost 20 per cent of the total cost of workers.
However, the study says, foreign workers have enhanced the competitiveness of the UAE. Al Awad said the return on investment in foreign workers was quite rewarding, nearly five times.
The country spends around Dh0.20 for every dirham worth of productivity. The considerably low cost of labourers has contributed positively to the productivity of the country's economy, he said.
"The low cost of unskilled labourers proved to be highly profitable, thanks to the subsidies of the government which represent around 20 per cent of the total cost of workers.
The competitiveness of the UAE economy is linked strongly to the use of cheap labour and it would be very costly to shift from unskilled to skilled labour under the current circumstances," he said.
"There is nothing wrong with the government subsidising the private sector, but such a system cannot go along simply because it is not sustainable," he said. He said part of the subsidies should be borne by the private sector employers in order to shift to the knowledge-based economy.
Experts and representatives of the government and private sectors gathered at a day-long workshop held at the Address Hotel Downtown in Dubai. The event was organised by the Dubai Economic Council in cooperation with the Ministry of Labour.
Al Awad said the ratio of the social cost has been growing and has become a considerable burden on the government. A change in the current balance of the system would have a negative impact on the competitiveness of the country as a whole.
He said that the government should set up a central entity to manage the influx of foreign workers in a bid to determine the suitability of their qualifications for the needs of the development plan and to ensure their maximum contribution to the economy.
"The proposed authority should make sure that there are better training programmes to enhance the qualification of local workers before allowing foreigners to come and work here," he recommended. He said the shift to a knowledge-based economy would be very costly for the private sector and businesses would not volunteer without incentives.
Currently, he said the ratio of skilled workers to unskilled workers is around 20 to 80 per cent and the country must invest Dh22 billion to change the ratio to 40 and 60 per cent.
The UAE Government, he said, must introduce policies that encourage the shift to a knowledge-based economy. "This can be achieved by introducing extra fees for the recruitment of unskilled workers. Such fees can be re-invested in training UAE nationals to become skilled workers in their own country," he said.
