DUBAI, Oct 27, (Agen-cies): Investors fear a big push by Mideast states to boost jobs for citizens, especially in the Gulf which has national quota programs and where higher salaries are demanded, will push up costs for businesses in the region.
A slew of state moves in recent months, accelerated by regional unrest partly rooted in a lack of job opportunities, has seen Gulf states raise salaries for citizens and attempt to reduce their expatriate workforce.
“All these different HR-related issues are relevant (as investment risk) because they obviously have a political parameter to them now,” said Mohieddine Kronfol, chief investment officer for Middle East and North Africa fixed income and global sukuk at Franklin Templeton Investments.
Executives at the Reuters Middle East Investment Summit said concerns are growing about finding qualified local talent — at salaries they can justify — and the cost of job creation measures on economic growth.
As public sector jobs dwindle and more fresh graduates appear on the scene, Gulf Arab states are increasingly looking to private sector employment.
Saudi Arabia, with its burgeoning youth population, is keen to get its youth working and has stepped up inspections to enforce an updated quota system in the kingdom where nationals make up just 10 percent of private sector employees.
Private sector firms who fail to comply face penalties, including a limit on foreign worker visas.
“The Saudisation is the most challenging but in business there is no free lunch. You just have to deal with it,” Pinak Maitra, chief financial officer of Kuwait Projects Co. , said of risks in investing in the Saudi market. “In the region, we have made the mistake of depending on expats. It was easy. We’re focused on trying to grow local talent.”
For Saudi firms, the risk is less about finding staff and more about keeping them. So-called withdrawals, where employees who have been trained by one firm jump ship for another after a short period, has become endemic.
“The rate of withdrawals is among the highest worldwide. In our company, it has reached 60 percent,” said Abdulmajeed Alhokair, head of Saudi retailer Fawaz Abdulaziz Alhokair Co.
“There must be a contract that employees abide by. Just as employers (can not fire them) ... The labor ministry must enforce employees to complete their contracts.”
In the United Arab Emirates, Abu Dhabi has been trimming expatriate jobs while in gas-rich Qatar, salaries for citizens in some private sector firms were raised 60 percent, matching a similar hike for government sector employees.
“I would love to hire more (nationals) but I can’t afford them,” said a senior executive at an international bank.
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KUWAIT CITY: Revenues of OPEC member Kuwait surged 40 percent in the first six months of the fiscal year due to higher oil prices and output, posting a huge surplus, according to official figures released on Thursday.
Income between April and September hit $50.8 billion compared to $36.3 billion in the same period last fiscal year, according to figures posted on the ministry of finance website.
Revenues in the first half of the current 2011/2012 fiscal year surpassed income forecast in the budget for the whole year of $49.1 billion, the figures showed.
The surge is mainly attributed to a sharp increase in oil revenues due to a hike in its price and output.
Oil income in the six months rose 42 percent to $48.5 billion compared to $34.2 billion in the first half of 2010/2011 fiscal year, and was above oil revenues projected for the whole year at $44.9 billion.
Kuwait’s fiscal year runs between April 1 and March 31.
Kuwait calculated oil income in the budget at a conservative price of $60 a barrel while actual prices during the past six months was above $100.
The budget also assumed a daily production of 2.2 million barrels per day in accordance with OPEC quota but Kuwait has been producing 2.9 million bpd.
Spending in the first half reached $18.5 billion, just 26 percent of projected expenditures in the budget of $71 billion. It is expected to increase later in the year.
This leaves a provisional budget surplus of $32.3 billion. Local economic reports have forecast Kuwait to post record income and surplus in the fiscal year.
Kuwait has ended the past 12 fiscal years in the black, amassing surpluses of around $200 billion.
Kuwait, which says it sits on 10 percent of proven global crude reserves, also holds assets of more than $300 billion run by the Kuwait Investment Authority, the country’s sovereign wealth fund.