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The growth problem

The numbers speak for themselves. According to the country's 2005 population census 8 out of 10 people living in the UAE were born abroad.

Image Credit:Illustration by Ramachandra Babu/Gulf News
In the economic context, a mere one per cent, some say even less than that, of Emiratis are employed in the private sector.
Gulf News

The numbers speak for themselves. According to the country's 2005 population census 8 out of 10 people living in the UAE were born abroad.

Of the total population of about 4.5 million, about 20 per cent or 900,000 are Emiratis, and the rest, and that's a staggering 80 per cent or 3.6 million, are foreigners. Of the 900,000 Emiratis about 45 per cent are under the age of 15.

In the economic context, a mere one per cent, some say even less than that, of Emiratis are employed in the private sector. And labour productivity in the private sector for the past decade (1993-2004) declined almost 20 per cent due to manpower increasing at levels higher than the annual GDP growth rate.

Given future projections that the population will double in the next 10 years with economic growth continuing at the same pace, the scenario isn't likely to get better; in fact, as some suggest, it might and rather will get worse, in terms of the ratio of nationals and foreigners.

Looking into the future, it's not just the overall imbalance, but also the extremely skewed ratio in the private sector that is raising concerns among experts and politicians.

Now whether the imbalance has had - and will have a positive or negative impact on the make-up of the country's identity is up for debate.

An identity of a group (nation) is defined by its economic empowerment, among various other factors, including social and cultural. And economic empowerment comes about by pursuing a particular development policy.

If the policy empowers and makes people wealthy and happy but at the cost of making its own people a minority in the demographic make-up of the country, that could have a blurring impact on the identity of the group. That is one view. There are people who disagree with that view.

The UAE of today is a far cry from an underdeveloped country comprising seven desert principalities about three decades ago. It's an economic success, a miracle one could say, few would have imagined even a decade ago.

People are wealthier with high standards of living, its infrastructure is of global standards, educational institutions are gearing up more and more towards world-class standards and we have a broadening economy with tourism, real estate and financial services boosting the GDP of the country.

With diversification the mantra of the UAE's economic policy to lessen its dependence on oil and gas, the high real GDP growth rate (9.4 per cent in 2006) will continue for the foreseeable future. And that means the influx of expatriate workers and professionals into the country will continue unabated.

To start with, there are those who question whether we are really in need of the breakneck speed of development being so vigorously pursued given the demographic imbalance.

"Imbalance is a problem, you can see it clearly in the UAE," says Dr Mohammad Al Rimathi, assistant professor of economics at UAE University.

"We need a high rate of development in every sector and at the same time we talk about demographic balance. We cannot do this...The formula doesn't work that way. We need to slow our rate of development. We should change our target. Does the country need this high rate of development?"

"All the Gulf countries need foreigners. There is no question about it. We need labour as much as we want to expand our projects. But if we put our projects according to our need, if we match our real need with our projects, we may not need so many foreigners."

Conflict of interest

Al Rimathi is not so sure whether the local governments are interested in addressing the issue. After all, there is a conflict of interest.

"The private sector will never be interested in addressing issues of labour - the demographic imbalance and employing of nationals etc. After all they are there for profit. It is the governments who should address the issues.

"But how can local governments solve issues of labour when they own shares in many companies, [in many cases majority shares]. The government is part of the private sector. We should decrease their role in the private sector.

"The government must shrink its role in private investments. Then only it can address the issues of labour and national identity. The main problem in the UAE is we have contradictory policies between the local government and the federal government," he said.

There are others who argue that economic growth promotes the social, political and economic well-being of citizens and so it is not inconsistent with the development of human liberty, dignity and national identity.

"Whatever way we define national identity, wealth is what allows us to keep our habits and traditions," says Hugo Toledo, associate professor of economics at the American University of Sharjah.

"My advice would be not to view economic development and national identity as mutually exclusive. Prosperity and national identity go hand in hand."

Dr Jamal Al Suwaidi, director-general of the Emirates Centre for Strategic Studies and Research, agrees that the labour issue should be placed in the context of reaching the development goals of the country and how one prioritises.

"One way of looking at the importation of workers is to think of it as a necessary step to the road to our development. On the other hand, I trust that our national identity is resilient enough to withstand the pressures of exposure to others but also to learn from them."

"We should couple our development plans with detailed and accurate organisation," adds Dr Al Suwaidi. "Our ambitions must be executable in manageable time-frames. This would specifically mean that we only strive to do those things that could be done. Actually, this could mean that we slow down a bit."

In the days ahead, however, having a better representation of UAE nationals in the rapidly expanding private sector workforce is almost an economic imperative. With 45 per cent of the population of the UAE under 15, they will soon be in the market looking for jobs.

The public sector not in a position to accommodate them and it's going to be a challenge for the private sector to create high- paying jobs for them.

The private sector's dependence on the large army of cheap subcontinental labour is a result of the labour market model that is pursued in this part of the world, consultants McKinsey & Company say this does not augur well in the long term.

It is important to note the private sector's labour productivity has declined at an annual growth rate of two per cent, with businesses relying on labour-intensive production due to abundant labour supply and low wages. Modern economies encourage capital-intensive investments that generate value through productivity.

But it is also a fact, Emiratis, as one survey carried out by the Department of Human Resources in Sharjah noted (UAE Yearbook 2006), have "a poor record in matching their qualifications to the demands in the job market, while those who have relevant degrees are deficient in professional skills and job-oriented training."

While Emiratisation (or nationalisation) as a policy have led to initial success in the banking sector, its overall impact is questionable.

It is largely acknowledged that attitudes of both parties must change to accommodate more Emiratis in private companies. Perhaps no more can one expect to work for a shorter number of hours as in the government.

But also, the private sector companies should come up with training programmes or internships for students by tying up with colleges.

It's not just the numbers but the mix of workers that has cultural repercussions and thereby a possible impact on national identity. A large majority of the workforce are from South Asia.

"We should try to import more from the Arab countries because they have the same language and a similar heritage," Dr Al Suwaidi says.

Tomorrow: Voices and perspectives

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