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Labour Market in the GCC Headed for Sharp Growth

Middle East : 05 October 2010

GCC nations are encouraged to regulate the movements of foreign workers around the region.

A swell in jobs for both GCC nationals and expats should be the result of forecasted expansion in the Gulf oil producing economies over the next number of years.  Rising crude prices should cause the boom in the GCC private sector.

The FGCCI (or Federation of the GCC Chamber of Commerce and Industry) released a recent study stating that because GCC nations rely so heavily on foreign workers, steps should be taken to regulate the movement of that group before the expected growth comes to pass.

The report forecasted that this year’s rising oil prices combined with increased public spending will boost the combined GDP (nominal data) of the GCC by 4.4 per cent, bring it up to $983 billion.  The GCC alliance, which has economic, political and defensive aims, could see nominal GDP figures continue to rise in the future with strong oil prices and rising inflow of capital.

The flow of foreign investments into the region is forecasted to rise to $64.4 billion this year, up from $48 billion last year.  In 2011, that figure should reach $81.3 billion.  The GCC region controls almost 45 per cent of the global extractable crude supply and is expected to see private capital climb to $55.9 billion this year and $68 billion next, up from $50.7 billion in 2009.

As such, the labour market is forecasted to experience sharp growth throughout the next few years as the regional economies expand.  There will be an increased demand for qualified workers, both nationals and expats, according to the FGCCI out of Dammam and representing the wealthiest and most expansive private sector.

During this growth, the pressures exerted by international labour organizations will rise, prompting the GCC members to put regulations and laws in place that meet the needs and interests of all involved parties, as well as coming in line with the nation’s membership to the WTO (World Trade Organization).

The FGCCI study also noted that these developments in the GCC would improve coordination within the existing labour regulations and policies.

Coordination is vital and should be a major priority.  Since the Gulf common market was formed last year both national and foreign workers have increased freedoms to move around the region.

GCC nations need to consider implementing regulations collectively in an effort to maintain stability and meet the needs of all parties (and nations) involved.

Two banks released a joint study recently that encouraged governments in the GCC to take away barriers in investing and help bring about a private sector expansion, ensuring job creation for citizens outside of the limited scope of the public sector.

The National Bank of Kuwait together with the International Bank of Qatar (IBQ) noted that the various public sectors in the GCC region are filled to capacity and there is a distinct challenge to create positions for the quickly growing national population.

Study figures showed that over 50 per cent of nationals who came into the 2008 GCC job market were working in the government sector.

In Saudi Arabia, the study data showed that half of the total national work force was in the public sector.  In the UAE that figure is 85 per cent, Kuwait figures indicate 82 per cent and in Qatar, 88 per cent of nationals are employed in the government sector.

GCC nations have two challenging hurdles facing them in the next ten years.  More jobs need to be created for the people of the region and large deficits may return again to the budgets of GCC members.

Only a limited amount of new employees can fit into the capacity of the public sector and there may be even less room in the future.  Also, a decrease in oil prices would put higher public spending on hold and create shortfalls in the budgets of the GCC nations.

The IBQ noted that these challenging situations should push the GCC states towards regulations that allow the private sector to take the lead and offer positions to nationals newly entering the workforce.  Foreign workers are still in the majority in most GCC member nations.

The private sector needs to be given a larger role in the local economies of the GCC nations.  According to the study, private companies should become the leading provider of public services in place of the government.  But to implement this, governments need to put policies in place that will allow the private sector to expand and remove unwarranted barriers to investment.  There is much work to be done, said the study.

There was a 4.4 per cent increase forecasted by the FGCCI for the collective nominal GDP, which constitutes over 40 per cent of the entire Arab economy.

The GDP, which came in at $940 billion last year, is expected to climb to $983 billion this year.  This figure is the second largest current prices level to be seen since 2008, when it hit a record of approximately $1,054 billion.

The high levels of 2008 were reached due to the boost in average crude prices that reached almost $95 per barrel.  At that time the six GCC member nations with pumping close to full capacity.

According to the FGCCI, the indications strongly show that economies in the GCC nations are headed for steady growth on the backs of rising oil prices, expanding public spending and growing industrial production alongside rising exports.

Figures also put the average GCC project value for 2010 at $2 trillion.  This is slightly lower than the 2009 average of $2.1 trillion and the 2008 average of $2.4 trillion.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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