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Oil Revenue Reaches New High in GCC as Investment Plans Set to Trigger Growth in UAE and Labour Reforms Create 600,000 Jobs in Saudi Arabia

Middle East : 22 March 2013

New Record Set for Oil Income in the GCC

Surging crude prices and high output levels drove GCC oil revenues to a new high last year. Rising from about $695.9bn in 2011, GCC oil income reached $737.5bn in 2012, based on data provided by the IIF out of Washington.

This figure represents the highest income level reported in the history of the Gulf Cooperation Council, and greater than double the 2005 revenue figure of $305bn.

Last year’s income surge resulted from impressive annual average prices, hovering at $110 per barrel and up from the $106 price the previous year. Greater output also drove production up across the GCC.

Saudi Arabia pumped about 9.88 million bpd last year, up a significant amount from the 2011 level of 9.24mn bpd. Production rose in the UAE, moving from 2.55mn bpd in 2011 to almost 2.68mn bpd in 2012. Kuwait also reported an increase in production, jumping from 2.57mn bpd to 2.78mn bpd. Oman saw a slight increase, climbing from 0.78mn bpd in 2011 to 0. 81mn bpd in 2012. Output in Qatar dropped from 0.81mn bpd to 0.8mn bpd.

Oil export revenue grew in Saudi Arabia, increasing by $25 billion over the course of last year to reach $351 billion. Income in the UAE rose from $119.2bn in 2011 to $124.7bn in 2012.

Qatar reported a $3 billion oil income increase last year, with Oman’s oil revenue rose from $34.6bn to $35.9bn and Bahrain income increased from $16.3bn in 2011 to $16.5bn in 2012.

Projections from the IIF state a slight drop in oil revenues across the GCC, falling to $720 billion next year and experiencing a further drop to $705 billion the following year. These levels remain higher than previous years.

Investment Plans to Trigger Growth in the UAE

Abu Dhabi plans to invest almost Dh 30bn from 2013 through 2017, as part of a development plan to trigger growth across the UAE, generate 5,000 new jobs and increase the non-hydrocarbon sector.

The plan met with approval at the Executive Council of Abu Dhabi and is included in the long-term intentions termed Vision 2030, set to drive the emirate into the future with socio-economic developments.

Implementation of Vision 2030 is expected to create radical transformations in the UAE, in the social arena as well as in the economy. Enhancing the welfare of
UAE citizens is the major objective, according to local economist Mohammed Al Asumi.

More diversified sources of revenue and greater employment opportunities should result from the five-year plan. Around 5,000 jobs should open up next year, helping to address the significant amount of national grads set to descend upon the UAE job market.

Growth should speed up as a result of the planned investment, moving from the forecasted 4 percent level in 2013 to 6.4 percent by 2017, according to the IMF estimations.

Asumi noted that construction and services will receive much of the new investment, with a particular emphasis on housing and infrastructure. Expansion at the Abu Dhabi International Airport, road projects, the Etihad Rail network and various communication projects are included. Approximately Dh 3bn is marked for housing loans in 2013, driving that sector to recover and even grow.

Sustainable development remains a major priority, with solar energy projects and environmental preservation playing key roles. The Executive Council plans to establish strategic industries.

Although the UAE has managed to move past the worldwide financial crisis, the current investment approach should avoid further impact.

Based on official data, Asumi stated that Abu Dhabi has increased the ratio of spending on developments to levels seen before the global crisis. Up from Dh 23.7bn in 2010, that ratio reached 15.2 percent or Dh 27.3bn in 2011. This spending has spurned several development projects throughout various economic sectors, with many more in different emirates recently receiving presidential approval.

A partnership between the public and private sectors has also been forged with the five-year investment plan, which helps with larger projects and job creation. This approach drives for greater economic diversification, and in turn, greater development, according to Asumi. Higher standards of living and quality job opportunities should also result.

Labour Reforms in Saudi Arabia Create Massive Block of Jobs in Private Sector

In a sharp labour market shift, recent changes have resulted in 600,000 Saudi locals obtaining jobs in the private sector, according to Mofraj al-Haqbani, the Kingdom’s deputy Labour Minister.

The deputy minister noted that unemployment rates among males fell to 6.1 percent, the lowest level seen in thirteen years.

Saudi remains the largest economy in the Middle East and saw 6.8 percent economic growth in 2012. However, businesses in the private sector have long been reluctant to hire nationals, based on their need for higher wages and greater job security.

After low employment levels helped to trigger political uprising in nearby nations, the kingdom viewed the situation in Saudi as a challenge to address.

According to figures from 2011, almost 90 percent of working Saudis held jobs in the public sector and greater than 6 million expat workers were employed in the private sector. As such, reforms have been driven by the Labour Ministry with reformations to existing quotas and the implementation of fines to businesses employing higher levels of expat workers.

Certain businesses have protested the reforms, stating their difficulties in finding Saudi workers to complete menial work. This is a particular problem in the construction sector.

A push for higher levels of female workers was also witnessed in recent years, with twice the number of females working in Saudi’s private sector this year, compared to the previous year. The ministry is working on several initiatives to enhance employment within the private sector, such as the ability to monitor wages and detect situations where the employer cheats the requirements.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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