Gulf labor nationalization may preserve social stability, but also raise labor costs – Moody’s

Gulf Cooperation Council countries have been largely dependent on expatriate labor. (AFP)
Updated 10 October 2018

Gulf labor nationalization may preserve social stability, but also raise labor costs – Moody’s

  • ‘Nationalization strategies can have both credit positive and negative implications for sovereigns’
  • Currently, most Gulf nationals prefer public sector jobs over private sector employment

DUBAI: Efforts by Gulf Cooperation Council (GCC) countries to employ their nationals may meet social objectives, but it would be at a higher price and cost to diversification, Moody’s Investors Service said in a report this week.
“Rapid GCC population growth is leading to increased demand for jobs as new entrants join the market and only modest numbers of workers retire. Social changes will compound higher employment demand, particularly if more women enter the workforce,” the credit ratings agency noted in its report “Sovereigns — GCC, Labour market nationalization aims to curb unemployment but may raise labor costs and hamper diversification.”
“Nationalization strategies can have both credit positive and negative implications for sovereigns. It will be credit positive if these strategies are effective in providing wider job opportunities for nationals, while preventing a rise in unemployment and as a result maintain social and political stability,” Moody’s said. “However, large increases in public sector wage bills for the government to accommodate an increasing number of nationals in the administration would reduce fiscal flexibility and, in some cases, weaken fiscal strength.”
The Gulf nations’ dependence on expatriate labor, as a 2013 UAE study has shown, indicates that as much as 95 percent of Qatar’s workforce are non-nationals; 94 percent in the United Arab Emirates; 83 percent in Kuwait; 71 percent in Oman; 64 percent in Bahrain and 49 percent in Saudi Arabia. GCC states have launched their own nationalization initiatives: Emiratization in the UAE; Saudization in Saudi Arabia; Qatarization in Qatar; Kuwaitization in Kuwait; Bahrainization in Bahrain and Omanization in Oman.
“Relative to the current size of the job market, the number of new jobs for nationals needed in the next two decades to meet labor market and social objectives is highest in Saudi Arabia, Oman and to a lesser extent Kuwait,” Moody’s said. “Social and political tensions could rise if the nationalization plans fail to increase employment sufficiently. Nonetheless, the authorities will find it challenging to create sufficient private sector opportunities to halt rising unemployment, at least over the near-term.”
Currently, most Gulf nationals prefer public sector jobs over private sector employment because of better work conditions, higher salaries, shorter working hours, greater job security and more comprehensive packages. This job preference means higher public sector wage bills, and could reduce the Gulf governments’ fiscal flexibility and, in some cases, weaken fiscal strength.
“The size of the challenge is greatest where nationals comprise a relatively large share of their total populations, unemployment is relatively high, and there is less capacity to absorb new entrants into the public sector,” said Thaddeus Best, a Moody’s analyst and co-author of the report.


UAE-based companies turn to Bangladesh to build their ships

Updated 14 October 2019

UAE-based companies turn to Bangladesh to build their ships

  • Vessels worth $160 million were exported by the South Asian country last year

DHAKA: At present, Bangladeshi ships are being exported to around 12 countries in Asia, Africa and Europe.

“Made in Bangladesh ships have a huge potential in India, Pakistan, Saudi Arabia, the United Arab Emirates (UAE), Norway, Sweden, Denmark, Finland, Italy, Germany and some African countries. Now, our focus is to have more orders from different international buyers and Bangladesh government is also formulating the policies for this export oriented industries,” Dr. Abdullahel Bari, president of the Association of Export Oriented Shipbuilding Industries of Bangladesh (AEOSIB) told Arab News.

Bari, who is also the chairman of Ananda shipyard, said that the country has more than 100 shipyards which produce different kind of ships for the local and international markets. Of them, 12 large shipyards have the capacity to meet the demand of the international market. He said that Bangladesh will have a “golden period” in the next five years in the ship-building sector with both the government and private sector investors keen on exploring new opportunities.

“If everything goes according to the plan, our export earnings from shipbuilding will exceed the benchmark of $1 billion per year within the next five years,” Bari said.

He added that, as a Muslim nation, Bangladesh enjoys goodwill in the Middle East especially in Saudi Arabia and the UAE.

“To bag the opportunities in the Gulf countries, from now onwards, we should have more active participation in different marine fares in Saudi Arabia and UAE,” Dr. Bari said.

FASTFACTS

• At present, Bangladeshi ships are being exported to around 12 countries in Asia, Africa and Europe.

• Ananda Shipyard began exploring the European market by exporting a multi-purpose cargo vessel to the Germany.

• Bangladesh’s export earnings will exceed the benchmark of $1 billion per year within the next five years.

UAE-based shipping company Al Rashid shipping is already in talks with Bangladeshi shipbuilders to source its ships, with Western Marine Shipyard Limited (WMS) – one of the leading shipbuilders in the country – securing orders for the construction of two oil tankers worth $6.8 million. 

“With government support, shipbuilding could play an important role in export diversification. The main challenge for this sector is arranging working capital for projects. If banks and financial institutions come forward in supporting this sector, we can secure more orders from local and foreign buyers,” Saiful Islam, WMS Chairman, said. The shipbuilding company is expecting more orders from the UAE market after the successful delivery of these oil tankers.

“According to our capacity, Bangladeshi shipbuilders can only concentrate on building medium-sized vessels which is within 15,000 Dead Weight Tonnage (DWT) capacity and various utility vessels like OPV, TUGS, offshore vessels, survey vessels, inland container vessels, multi purpose cargo vessels, survey vessels, landing crafts, ro-ro ferries, passenger ships,” Captain Sohail Hasan, managing director of WMS told Arab News.

In 2017, Western Marine also exported one Landing Craft namely “Ajman Trans” to the same company making it the 43rd ship to be exported from Bangladesh.