The Gulf’s private sector enjoys privileges that are rarely made available to their counterparts elsewhere in the world. These facilities to investors and businessmen take the form of access to top-notch services and subsidised prices for energy resources as well as exemption from taxes, including that on profits.
By doing so, the GCC encourages the local private sector, increase its capacity and attract more foreign investments to the non-oil sector, so as to diversify their sources of income and offer job opportunities. This approach, alongside government investments, contributed to bringing about a qualitative shift in the development of the non-oil sector and increase its contribution to GDP over the past four decades.
Historically, the private sector has been the main driver for economic and social development, particularly in the areas of trade, finance, health care and education. Nevertheless, the discovery of oil and the growing role of the state in undertaking the almost full responsibility of its development have changed the nature of the private sector’s economic and social role. As a result, it turned from being a key player in economic management into being reliant on the state in getting services and flexible facilities.
Over the past decade, there have been a series of economic and social developments that turned this equation upside down, putting the ball back in the private sector’s court. In addition to the significant increase in the number of the Gulf’s citizens, expatriates too have increased many times over, bringing the GCC’s total population to 40 million compared to 20 million 20 years ago. This has prompted the GCC to set up more infrastructure projects, which now have a larger proportion of state budgets.
This has led to consequences that need to be addressed. These, however, exceeded the capacity of the state to resolve them on its own, and require the private sector to contribute, since its share of the GDP now measures 40 per cent.
Incentives and privileges
Although there are multi-faceted employment constraints, the GCC states have made serous approaches to encourage Gulf citizens to work in the rapidly growing private sector. In the UAE, for example, senior government officials suggested a long-term federal programme to develop a strategic partnership with the private sector. This includes incentives to encourage citizens to work in the private sector.
The programme’s key items are based on bridging gaps between incentives and privileges provided in the public and private sectors, and which can be taken up by other GCC countries. More so, as the job market will see significant changes in the next few years thanks to the presence of the younger in these societies; the Emirati workforce will surpass 400,000 over the next five years.
Earlier experiences signify that such programmes in the six GCC states could not achieve the desired results without meaningful co-operation from the private sector. Apart from gaps between pay and privileges, the private sector usually refers to the poor qualification credentials of Gulf citizens and their low productivity compared to expatriate workers. In this respect, the board of trustees of the UAE’s National Human Resources Development and Employment Authority indicates that there are programmes to train citizens to work in the local private sector by filling in the gaps that impede their work.
There are similar programmes in all the GCC countries, including where the state bears part of the wages of citizens in the beginning of their work in the private sector until the qualification and training of citizens is completed. This is the case in Saudi Arabia and Bahrain.
The changes that affected Gulf economies in the past two decades have imposed their agenda and led to the growing role of the private sector, which is moving towards regaining its leadership in generating economic growth. This requires the private sector to play a similar role in job creation commensurate with its economic weight. And especially where state institutions have become saturated with employees.
Certainly there will be a cost to the disparity in size between the citizens and expatriate manpower. But compare that with the savings the private sector makes out of the low tax regime compared with Europe and the US.
Stability
The private sector, in exchange for tax exemptions, must contribute to resolving some aspects of the demographic and economic changes in the GCC, such as the increase in population numbers and job seekers. This is a must to maintain economic and social stability, without which no private sector institutions can make a lot of profit.
These approaches coincide with significant developments in the job market in some of the major labour exporting countries, such as India, China, and South Africa, which have made impressive economic progress over the past years. Being emerging markets have led to an increase in wages and a significant rise in living standards. These developments have encouraged many of their citizens to return home.
It is clear that the structural changes that have occurred in the Gulf economies require similar changes in the job market. These need to be in harmony to avoid any discrepancies that may prompt the authorities responsible for labour to take certain measures to restore balance. The perfect ratio must be attained in the public and private sector contributions to GDP.
This is logical and much needed, since the next phase would mainly rely on the private sector in creating jobs in the non-oil sectors, while maintaining and attracting foreign talent due to their very important role in the development of the GCC.
