Saturday, July 16, 2011

Education and Employment - The Gulf Challenge

Saudi Labor Minister Ghazi Al-Ghosaibi serves burgers at a Jeddah Fuddruckers to encourage Saudi employment.

As the Gulf kingdoms face down increasing, but still low levels of discontent related to the “Arab Spring,” they are scrambling both to pay off their citizens and to find them decent jobs.  Higher education in the Gulf has been insufficient, as many nationals do not require college education for the public sector jobs they covet.  For those who do attend college, their job skills often do not match employers’ needs.  For example, although a great deal of technical projects are being started in the Gulf, the proportion of science and engineering graduates there lags behind even other Middle Eastern states.[1]  In Saudi Arabia, 82 percent of nationals in the private sector are high school graduates or less.  Forty-six percent have a middle school education or less.  Only 0.76 of the private sector work force (5,774 nationals) holds a masters degree or higher, despite the fact that 19,000 expatriates with such education are currently working in the Kingdom.[2]

Rulers across the Gulf have recently set about improving their educational systems.  Qatar, which had one of the weakest primary and secondary systems in the world, commissioned a RAND study and adopted the experts’ recommendations for overhauling the system in full.  Using the country’s prodigious wealth, the Emir has attracted six top American universities to the new Education City on the outskirts of Doha, moving faculty and staff from the U.S. to ensure the educational experience lives up to the branding.  The Emirates and Saudi Arabia have funded similar grand projects and all the Gulf states have turned toward improving their higher education in some form.[3]

Despite these efforts, few nationals fill the growing number of private sector jobs in the region, even though high population growth rates and an abnormally young society are pushing more people into the job market every day.  In Dubai, nationals make up only one percent of the private sector workforce.[4]  In Oman, where there is less government wealth to distribute, the nationals still only make up 15 percent of the private sector workforce, despite repeated government interventions to improve this number.[5]  In Saudi Arabia, a country with a much larger population to employ, nationals make up only 13 percent of the private sector.  In the critical and growing industrial sector, Saudis make up only 8.4 percent of the total.[6]  In Qatar, the private and mixed sectors provide only 11 percent of the total employment for nationals and nationals make up only 1 percent of the private and mixed sector workforce.[7]  Governments hoping to decrease their distribution and increase their development will have to greatly increase the private sector employment of nationals, especially as growing populations clamor for dwindling resource rents.

While militaries have been a key source of trained and motivated workers into some developing economies, military service in the Gulf states is not a conduit for the spread of nationalist feeling or modernization throughout society.  Positions in some units, in some states are highly respected, but morale, discipline, and capability are generally low, sometimes appallingly so.  Officer billets are generally well compensated and are held mostly by nationals, but are often just a form of state distribution to key families.  Most units spend little time training and officers spend at least half of their day in other pursuits.  The enlisted corps generally consists of at least some expatriates, making up over 20 percent of the UAE ranks and most of the Qatari force.  Other states also rely on foreign soldiers and some key security tasks are even assigned to non-state entities, such as the Saudi Aramco security force.[8]

Economies across the region have undergone a great deal of expansion over the past several years as states turned abnormally high resource profits to work in projects of diversification, but the disconnect between the society and economy means that many nationals are seeing little improvement, especially for those who are unqualified or unmotivated to enter the private sector.  In fact, the standard of living is declining for many due to rising inflation and declining government support.  Gulf states’ per capita gross domestic product at purchasing power parity has declined significantly since 1980.[9]  By contrast, Arabs from outside the Gulf are coming to the region in droves to fill newly created jobs, transferring the wealth, and eventually the initiative and social freedoms expatriates experience in the Gulf, back home.[10]

State-directed efforts to nationalize the workforce have met with numerous difficulties.  Imposed quotas for nationals have been difficult to fill and the efforts have “effectively priced nationals out of the market.”  The quota system puts a premium on the limited national labor supply and expatriates are generally willing to take much lower salary than nationals.[11]  In 2007, Saudis working in the private sector made 3.6 times more than expatriates, on average.  In the financial services, insurance, and real estate sector, where more skilled expatriates are employed, Saudis made 6.4 times more.[12]  In professional jobs, qualifications, rather than pay, are often at question.  Well-educated and motivated nationals do fill many key positions, but there simply are not enough qualified nationals to meet demand.
Governments have found it nearly impossible to push their citizens into the sort of skilled labor jobs that could provide a decent income without the requirement for high levels of education.  Nationals will attend government-sponsored vocational training for skilled labor positions, ostensibly to receive a stipend during the training, but all too often have no intention of doing such labor as a career due to the stigma attached under the current conception of Gulf culture.  Even when nationals can be enticed to accept well-paying skilled labor jobs, they cannot be counted on to remain at the position long enough for the company to receive a return on their training investment, chafing at issues ranging from criticism and scheduling to the required wear of uniforms or protective equipment.[13] 

Given these difficulties, recent policy initiatives have been focused on squeezing the expatriate labor supply.  UAE has announced restrictions on drivers’ licenses for certain expatriate workers, as well as restricting the availability of visas for workers’ kin.  Oman has vowed not to issue new visas for skilled workers in certain sectors.[14]  Other countries have followed similar policies, as well as offering amnesties to allow workers who have overstayed their visas to leave.  In the end, while some nationals are gainfully employed and the nationalization of the work force is steadily rising, one searching beyond the heart of the Gulf cities can quickly find a great deal of underproductive human capital in the urban outskirts and rural areas of the region.

Interestingly, some of the most underprivileged members of Gulf society have been the quickest to take up increased education and job opportunities.  Gulf women have proven to be much more motivated than their male counterparts in secondary and higher education.  They make up over 70 percent of the student body at Qatar University, for example, and their high performance has been noted at the region’s most elite schools.  Many of these women initially intend to graduate and turn to a traditional family life, but they often undergo a significant transformation as they discover their own potential and the growing demand for their skills in the private sector.  Thus, women may be increasingly significant in the private sector, but it is important to note that these highly capable and educated women are also prone to question the conservative social order, an uncomfortable proposition for many Gulf citizens.[15]

Gulf states already have many of the attributes of the developmental state, but some key shortfalls remain.  Leftwich defined six elements that characterize the developmental state: a determined developmental elite, relative autonomy, a powerful, competent, and insulated economic bureaucracy, a weak and subordinated civil society, the effective management of non-state economic interests, and repression, legitimacy, and performance.[16]  Civil society in the Gulf certainly does not pose a major obstacle to governmental reforms, although the inertia of societal non-productivity may pose challenges of its own.  Likewise, the Gulf states possess relative autonomy and the ability to repress dissent.  Technical competence of the economic bureaucracy is improving by large strides.  These bureaucracies are often dominated by expatriates and foreign-educated nationals, but this was the case with many developmental states.[17]  Reforms must center around the transition of legitimacy to a developmental model and the mobilization of a wider developmental elite.

Though Gulf states are trying to move beyond the oil economy, the distributive state model has proven difficult to exceed.  Even in the development of new economic opportunities, rulers have sought to ensure that supportive elites continue to receive the patronage they are used to through “centralized regulatory intervention to facilitate the creation of rents and their channeling to politically preferred groups.” [18]  States are offering locale and monetary largesse, bringing in resources, labor, and human intellectual capital from elsewhere.  Because the governments are forced to continue seeking rents and because they cannot increase their own societies’ productivity and desire to work, they are not building their own capacity in terms of labor and human capital.

A flourishing real estate market for a time helped stave off painful but needed reforms.  Davidson has termed Dubai as a “post-oil rentier state, with many of its nationals remaining above the wealth creation process courtesy of the land and property they own.”  Land previously doled out by the ruling family has become precious real estate, making key families “’mini-rentiers’ in their own right.”  While the dramatic rise in real estate prices and rents hurt some Gulf residents, it allowed the continuation of the rentier political system as elites reap the benefits of the new real estate and service based economy, even as oil revenues fall in some areas.[19]

The financial crisis of the Asian developmental states held key lessons that were largely ignored in the lead up to the Dubai crisis.  In those states, close personal ties between those in business and government officials created the feeling that, should a crisis arise, the state would surely bail out key businesses.  Not only were the two realms linked by social ties, but governments in Asia had a direct hand in managing and directing the economy.  Surely, they would not turn their backs on businesses in trouble.[20]  Furthermore, policymakers in these developmental states tended to focus on “the long-view;” a conscious choice of economic policy reinforced by cultural values of forbearance.  Companies ran up huge debts in quests to capture greater market shares, dismissing the short-term unbalance by focusing on potential long-term benefits.  The combination of these factors led to disastrous overextension as there was nothing to check risky development policies or to force balanced development.  Overcapacity problems and real estate bubbles plagued the Asian Tigers and indebtedness precipitated a financial collapse there in the late 1990s.[21]

Dubai had its own mini-collapse in the heart of the Great Recession, but Abu Dhabi swooped in, after a time, with the funds to rescue it.  I have not been back to Dubai since just before the crash, so I don’t know what the atmosphere is there today.  I’m hoping to return before long.

[1] RAND Research Brief, “Identifying Priorities for Post-Secondary Education in Qatar,” (2007), Noland and Pack, The Arab Economies, 36. Rouala Khalaf, “A Region Worries About Its Young,” Financial Times, (June 2, 2008).
[2] Saudi Arabia Ministry of Labor statistics, 2007,
[3] Personal interviews, Doha, Qatar, January 2008.  Muscat, Oman, June 2008.
[4] Davidson, Dubai, 206.
[5] Moussa Ahmad, “Analysis:  Oman Racing with Depleting Oil Reserves,” Business Intelligence Middle East, (November 12, 2008),
[6] Saudi Arabia Ministry of Labor, 2007.
[7] Qatar Statistics Authority, “Annual Abstract,” (2008),
[8] Davidosn, Dubai, 268. Personal interviews, Doha, Qatar, January 2008.  Dhofar, Oman, August 2007. Personal observation, Jubail, Saudi Arabia, October-December 2007.
[9] Noland and Pack, The Arab Economies, 40-41, 44-45. Personal interviews, Muscat, Oman, Spring 2008.
[10] Michael Slackman, “Young and Arab in a Land of Mosques and Bars,” New York Times, (September 21, 2008). Katherine Zoepf, “In Booming Gulf, Some Arab Women Find Freedom in the Skies,” New York Times, (December 21, 2008).  Personal interviews, Doha, Qatar, January 2008.  Oman, 2007-2008.  Dubai, UAE, November 2007, June 2008.  Abu Dhabi, UAE, June 2008.
[11] Davidson, Dubai, 207.
[12] Saudi Arabia Ministry of Labor Statistics, 2007.
[13] Personal interviews, Dhofar, Oman, August 2007.  Muscat, Oman, 2007-2008.
[14] Agence France-Presse, “UAE to Ban Some Expats from Bringing Kin,” (January 1, 2009),  Bassama al-Jandaly, “No Drivers’ Licence for 100 Categories of UAE Workers,” Gulf News, (November 29, 2008), Anita Joseph, “Ban on Visas for Several Professions,” Times of Oman, (July 27, 2008),
[15] Siham al-Najamy, “Study Finds Male Pupils Floundering,” Gulf News, (November 7, 2008), Personal interviews, Doha, Qatar, January 2008. Personal observation, Riyadh and Jeddah, Saudi Arabia, November 2007.
[16] Leftwich, “Bringing Politics Back In.”
[17] Leftwich, “Bringing Politics Back In.”
[18] Noland and Pack, The Arab Economies in a Changing World, 8.
[19] Davidson, Dubai, 150.
[20] Perkins, 240-241.
[21] Lucian W. Pye, “’Asian Values’: From Dynamos to Dominos?” in Culture Matters: How Values Shape Human Progress, edited by Lawrence E. Harrison and Samuel P. Huntington, (New York: Basic Books, 2000), 253.  Johnson, Japan: Who Governs? 65.