Employment and Salary Trends in the Gulf 2012

Introduction

• Employment and job creation remain the hottest issues in the Middle East, including in the six countries of the Gulf Cooperation Council (GCC).

• This research report, produced by online recruiting firm GulfTalent.com, summarises the status of the employment market and forecasts key trends to be expected during 2012.

• “Employment and Salary Trends in the Gulf” is published annually since 2005 and is

the premier publication on employment trends in the Gulf region.

1 © GulfTalent.com 2012. All rights reserved.

Online Survey of Employers

This report is based on in-depth research from a wide array of sources

Selection Criteria

Online Survey of Candidates

Source

Interviews with Top Managers

• Professionals employed by 3,000 largest corporations in the GCC

• Aged 22-60 years

• Earning an annual income in the range USD 12,000 - USD 200,000

• Employing 50 to 20,000 staff

• Across all major industries

• Mix of private sector local and international companies

• Across all major industries

• Based in the 6 GCC countries

(Saudi Arabia, Qatar, Kuwait, Bahrain, Oman, UAE)

News & Research • Relevant reports from the press and news sources across the region

• Macro-economic sources

Research Methodology

Participants

35,000 professionals

2,100 Executives & HR Managers

60 Senior Executives

2

• Economic & Political Background.................................……….. 4

• Nationalisation........................................................................... 9

• Recruitment ..............................................................................13

• Mobility.......................................................................................19

• Salaries & Cost of Living........................................................... 25 • 2012 Forecast...........................................................................32 • Appendix – Useful Information..................................................37

Contents

3

Economic & Political Background

4

Gulf countries are experiencing high economic growth compared to the rest of the world, thanks to high oil prices and government spending

Economic Growth 2008-2012

0

20

40

60

80

100

120

2009 2010 2011 2012

Crude Oil Price USD per Barrel

Source: Economist Intelligence Unit Source: Dow Jones & Company

2008 2009 2010 2011 2012 Forecast

5.2%

0.0%

4.2%

6.5%

4.7%

1.4%

-2.3%

4.1% 2.7% 2.2%

GCC Economic Growth World Economic Growth

5

Gulf Economic Overview 2011

Qatar

Oman

Saudi Arabia

Bahrain

UAE

Size of Economy ($bn)

588

67

163

358

26

GDP Growth

Kuwait

179

7.0%

4.7%

4.4%

3.3%

2.2%

17.6%

Source: Economist Intelligence Unit, GulfTalent.com Interviews

Key Factors Affecting Growth

High oil price, Huge government spending programme

Government spending, some limited unrest

High oil price, Government spending, US troops withdrawal from Iraq

High oil price, Tourism boost following Arab spring, Dubai debt restructuring, Financial sector weakness

Domestic unrest

Completion of gas projects, Government spending on infrastructure, 2022 World Cup preparation

During 2011, Qatar and Saudi Arabia led economic growth in the Gulf, while Bahrain saw the region’s lowest growth

6

2011 was a year of political turmoil in the Arab world

UAE

Qatar

Bahrain

Saudi Arabia

Syria

Egypt Libya

Tunisia

Yemen

Oman

Iraq

Kuwait Jordan

Lebanon’

Revolution / Overthrow of Government

Public Demonstrations

On-going armed conflict

Arab World – Key Popular Movements 2011

7

GCC governments have undertaken massive wealth distribution measures among their citizens

Source: News reports

Pay Rise for Nationals in Public Sector 2011

Qatar

Bahrain

UAE

Oman

Saudi Arabia

Kuwait

50-100 Omani Rial per month

60-120%

35-100%

up to 37.5%

25%

15%

Other Government Measures 2011

Saudi Arabia − $130bn subsidy programme − SAR 2,000 per month unemployment benefit − Minimum wage raised to SAR 3,000 − Large scale housing programme

Oman - 50,000 new jobs in public sector - Minimum wage increased to OMR 200 - OMR 150 per month unemployment benefit

Bahrain - One-off grant of BHD 1,000 per family - Minimum wage increased to BHD 402

UAE - $2.7bn fund to provide loan assistance for low

income citizens

8

Kuwait - One-off grant of KD 1,000 per citizen

Nationalisation

9

Job creation for citizens through nationalisation of expatriate jobs continues to be a top priority for most GCC governments

Increase in Nationalisation % of companies reporting an increase in their nationalisation rate during 2011

Oman

Saudi Arabia

Kuwait

Bahrain

UAE

10%

20%

5%

7%

1% Qatar

14% 82%

78%

54%

38%

28%

17%

Average Nationalisation Rate Nationals employed in private sector as % of total private sector employment (2011)

Source: GulfTalent.com Survey of HR Managers, GCC Labour Ministries

Pressure on Employers % of employers reporting nationalisation as a key human resource challenge

59%

17%

27%

17%

15%

36%

Overview of Nationalisation in Private Sector

10

GCC governments have historically used a range of measures to increase employment of nationals in the private sector

Targets & Limits Support & Facilitation Incentives & Enforcement

• Targets by sector (e.g. Banks, Oil

and Gas, etc.)

• Targets by job functions (e.g. HR)

• Employment fund (subsidising

wages of newly employed nationals)

• Free training for nationals

• Job centers – putting unemployed

in touch with employers

• Withholding visas for expat hires

• Tax on employers for each

expatriate employee

• Public praise / reprimand

GCC Nationalisation – Common Government Strategies

11

Source: Press reports, HR interviews

More innovative approaches are being tried in some countries, introducing elements of choice, competition and commercial incentive

• Companies within each sector are ranked by their Saudization rate and grouped into 3 categories.

• Companies in lowest ranks (‘red zone’ ) would face difficulties in applying for new visas or even renewing existing visas.

• Companies in highest ranks (‘green zone’) would be able to hire expats from companies in the ‘red zone’ without acquiring ‘no objection certificates’ (NOC).

• Zone boundaries vary by industry, and are determined based on the average of each peer group.

• Companies are placed into one of 3 categories - according to their Emiratisation level, diversity of nationalities and compliance with proposed minimum wage levels.

• Companies in lower categories pay significantly higher government fees for their visa requirements.

Saudisation (‘Nitaqat’ – introduced June 2011)

Emiratisation (Introduced December 2010)

12

Recent Nationalisation Initiatives

Recruitment

13

Saudi Arabia leads job creation in the Gulf, while Bahrain lags the group with almost no expansion reported

Observations

Employment by Country Net % of firms which increased headcount

UAE

Qatar

Kuwait

Bahrain

Saudi Arabia

Oman

• Almost all Gulf countries had higher rates of job creation compared to 2010.

• Saudi Arabia had the highest rate of job creation thanks to its strong economic growth and high government spending.

• Bahrain had almost no job creation in 2011 following severe political tensions in the country.

• UAE had a significant rise in job creation, but it was still much lower than most Gulf countries.

62%

56%

51%

51%

37%

8%

Source: GulfTalent.com Survey of HR Managers

2010

57%

25%

45%

22%

23%

2011

55%

14

Dubai’s share of regional recruitment activity has started to increase after two years of slowdown – due to a combination of jobs growth and staff turnover

* Based on 68,000 vacancies advertised by employers and recruitment agencies on GulfTalent.com website over the specified period Note: Internet penetration and prevalence of online recruitment varies across the countries Source: GulfTalent.com

Recruitment Volume by Location % of vacancies advertised on GulfTalent.com *

31%

22%

20%

16%

4% 4% 3%

2010

37%

18%

18%

17%

4% 3% 3%

2011

31%

21%

20%

14%

6% 4% 4%

2009

48%

13%

14%

8%

9%

6% 2%

2008

Oman

UAE (excluding Dubai)

Dubai

Saudi Arabia

Qatar

Kuwait

Bahrain

15

Oil & gas, healthcare and retail sectors are enjoying the largest headcount expansion, while banking and construction fare the worst

Observations Employment by Sector Net % of firms which increased headcount in 2011

• Oil & Gas had the highest rate of employment due to expansion plans following two years of high oil price.

• Healthcare also had high employment for a second year mainly due to continued government investment.

• Retail continued to enjoy high growth on the back of higher consumer spending and net disposable income.

• Banking had one of the lowest growth rates, with some banks announcing fresh rounds of redundancies, following increased worries about the Euro crisis.

• Construction continued to have a low employment growth rate due to completion of old projects and lack of new ones.

Healthcare

Telecoms/IT

Engineering

Transport & Logistics

Retail

Construction

Oil & Gas

Real Estate

Travel & Hospitality

Banking

63%

61%

60%

50%

46%

43%

41%

33%

28%

27%


16

With Western countries facing high unemployment and low pay rises, Gulf employers are finding hiring Western nationals easier than Asian candidates

Unemployment Rate in Western Countries 2008-2012

Private Sector Pay Increase – Global Comparison % 2011

3%

4%

5%

6%

7%

8%

9%

10%

11%

2008 2009 2010 2011

Australia

Canada

UK

France

12.6%

6.7%

5.5%

4.4%

3.1%

2.7%

2.7%

Australia

Canada

Philippines

India

GCC

UK

US

Source: Economist Intelligence Unit Source: Aon Hewitt, Hay Group, GulfTalent.com

17

The popular uprisings across the wider Middle East have had a mixed impact on attraction and retention of talent in the Gulf

Employment of Nationals

Expatriate Employment

Key Trends

• Nationalisation targets: Government pressure on private sector to hire more nationals has intensified.

• Competition for nationals: Pay hikes awarded by governments to public

sector employees, which were partly prompted by the Arab Spring, has made it harder for the private sector to attract nationals.

• Availability of Arab expats: More Arab expatriates are available from countries which experienced political turmoil.

• Visa restrictions: Some Gulf governments have made it more difficult to apply for employment visas for expats from troubled countries.

• Western expats: Some employers are finding it difficult to attract Western candidates, as they perceive the region to be unsafe following the press coverage of the Arab spring.

18

Impact of Arab Spring on Gulf Employment

Mobility

19

The UAE and Qatar remain prime destinations for expatriates, with Saudi Arabia in third place

Observations Attraction of Expatriates % of GCC-based expats outside the country who wish to relocate into it

0%

10%

20%

30%

40%

50%

60%

70%

2008 2009 2010 2011

Saudi Arabia

Qatar

Bahrain

UAE

Kuwait Oman

Source: GulfTalent.com Surveys

• UAE has strengthened its position as the most popular destination among Gulf-based expatriates.

• Qatar, which was rapidly closing the attraction gap with the UAE, remains in second place and has lost some momentum, as sentiments about the UAE economy becomes more positive.

• Saudi Arabia remains in third place, with its attractiveness stable, following a sharp rise in popularity at the onset of the crisis.

• Bahrain dropped from fourth place to the bottom,

becoming the Gulf’s least attractive destination for expatriates, following political tensions in the country.

20

Ranking of Gulf Cities – By Attractiveness to Expatriates % of GCC-based expats outside the city who wish to relocate into it

Source: GulfTalent.com Survey

Overall

Abu Dhabi

Dubai

Doha

Jeddah

Kuwait

Riyadh

Muscat

Sharjah

Manama

Dammam

Madina

Makkah

Western Expats

Asian Expats

Arab Expats

37%

22%

20%

7%

4%

3%

3%

3%

3%

2%

2%

2%

26%

46%

21%

3%

1%

2%

8%

1%

3%

0%

1%

0%

20%

35%

20%

7%

4%

3%

4%

2%

2%

2%

3%

3%

17%

38%

25%

9%

3%

3%

2%

1%

1%

1%

3%

2%

Dubai remains by far the region’s most attractive city for expatriates

21

In terms of attractiveness to expatriates living within the country, the UAE once again retains the lead position

UAE

Saudi Arabia

Kuwait

Oman

Bahrain

2011

59%

50%

51%

50%

50%

2012

Qatar

72%

Observations

• UAE’s already high retention rate has increased further, due to a rebound in business confidence, declining rents and the country’s high level of political stability.

• Kuwait benefits from the long-term nature of its

expatriate population, with social and family ties formed over the years discouraging expats from leaving the country.

• Qatar’s retention rate remains significantly lower than

UAE mainly because of laws preventing expatriates from changing jobs.

• Bahrain’s retention rate has dropped for a second year, following political tensions and slow economic growth in the country.

Retention of Expatriates % of expats within the country who wish to remain there


81%

64%

49%

49%

46%

45%

22

Abu Dhabi continues to serve as an employment hub for a portion of Dubai residents, while Bahrain’s role as a base for working in Saudi has taken a hit

Dubai-residents working in Abu Dhabi As % of all working professionals living in Dubai

1.1% 1.1%

3.4%

5.4% 5.4%

1.0% 0.9% 1.1%

2.2%

1.3%


Bahrain-residents working in Saudi Arabia As % of all working professionals living in Bahrain

23

2008 2009 2010 2011 2007 2008 2009 2010 2011 2007

Governments across the Gulf are continuing to encourage labour mobility within their countries, through easing NOC requirements *

Recent Developments Labour Mobility Country

Qatar

Saudi Arabia

Kuwait

UAE

Bahrain

Oman

NOC not required if previous employer below required nationalisation targets (June 2011)

New sponsorship system plans to remove NOC requirement altogether, but not implemented yet

NOC not required after completing 2 years (Jan. 2011). Already removed fully for free zones.

* No Objection Certificate – issued to expatriate employees by their employer, giving consent to the expatriate being hired by another firm

NOC requirement abolished in 2009

NOC requirement abolished in 2007

Most strict in the Gulf. NOC fully enforced. No indication of an imminent easing.

Source: Press reports, HR interviews

Guide to chart

Full labour mobility (NOC not required)

No labour mobility (NOC fully enforced)

24

Domestic Labour Mobility

Salaries & Cost of Living

25

Average private sector salary increase in the Gulf has remained stable, but much lower than pre-recession levels.

GCC Average Salary Increase %, 2007- 2012

9.0%

11.4%

6.2% 6.1% 5.5% 5.6%

2008 2009 2010 2011 2007 2012 Forecast


26

6.5%

6.0%

5.6%

5.1%

4.9%

4.5%

During 2011, Oman enjoyed the highest average increase in pay, followed by Saudi Arabia and Qatar

Observations

• Oman had the highest salary increase in the Gulf, in part driven by widespread strikes by Omani employees and the pay hike awarded in the public sector.

• Saudi Arabia and Qatar continued to have high

salary increases on the back of strong economic developments.

• Bahrain had the lowest salary increase due to lower economic growth following the political unrest.

Qatar

Oman

Saudi Arabia

Bahrain

UAE

2010

6.7%

6.8%

5.7%

5.2%

4.9%

2011

Kuwait

6.4%


Private Sector Salary Increase by Country

27

4.9%

4.0%

3.7%

2.5%

1.0%

0.4%

Average pay rise net of inflation, was highest in the UAE and Bahrain

Observations

• Despite having the lowest salary increases in the Gulf, Bahrain and UAE enjoyed the highest increases in real terms due to very low inflation rates.

• Saudi Arabia and Kuwait had the lowest salary increases in the Gulf in real terms, due to relatively high inflation.

Qatar

Bahrain

UAE

Saudi Arabia

Kuwait

Salary Rise

4.9%

5.6%

6.5%

6.0%

5.1%

Real Salary Increase by Country *

Oman

4.5%

Inflation

0.9%

1.9%

4.0%

5.0%

4.7%

-0.4%

* Defined as nominal pay rise net of inflation rate Source: GulfTalent.com Survey, Economist Intelligence Unit

28

HR professionals enjoyed the highest pay rise, while Administration and Marketing had the lowest

Observations

• HR had the highest salary increase for a second year, reflecting the rising profile and growing sophistication of the HR role, as well as leaner HR operations supported by fewer staff following the crisis.

• IT had one of the highest increases last year, due to global shortage and on-going demand for IT professionals.

• Admin candidates continued to have one of the lowest increases, as companies continue to automate processes and seek staffing efficiencies.

Finance

HR

IT

Admin

Engineering

Sales

Marketing

6.4%

6.3%

5.5%

5.3%

5.3%

4.9%

4.6%


Salary Increase by Job Category %, 2011

29

Among sectors, Healthcare and Retail offered the highest pay rises, while Real Estate had the lowest

• Healthcare had the highest salary increase, due to increased investments by GCC governments, specifically Saudi Arabia.

• Retail sector continued to have high salary increase in line with strong growth in the sector, generated by high consumer spending.

• Banking sector continued to suffer for a third year, following a slow rate of recovery and fresh rounds of redundancies on the back of the European debt crisis.


Healthcare

Oil & Gas

Retail & FMCG

Telecoms & IT

Engineering

Construction

Travel & Hospitality


Education

Banking

Real Estate

6.4%

6.2%

5.7%

5.7%

5.6%

5.4%

5.1%

5.0%

4.6%

4.5%

4.3%

Observations Salary Increase by Industry %, 2011

30

Rent for Two-bedroom Apartment US$ per month, 2012*

Inflation %

Abu Dhabi

Dubai

Doha

Sharjah

Muscat

Manama

Kuwait

Jubail

Riyadh

Jeddah

Dammam

Khobar

* Average figure. Wide variations based on location and quality Source: GulfTalent.com Survey

Source: Economist Intelligence Unit

Qatar

Bahrain

UAE

Saudi Arabia

Kuwait

2011

Oman

2010

3.2%

4.0%

-2.4%

0.9%

2.0%

5.4% 5.0%

4.7%

4.0%

1.9%

0.9%

-0.4%

1,930

1,650

1,590

1,000

960

910

840

710

670

670

670

550

Cost of living has continued to rise in Saudi Arabia, Kuwait and Oman. In absolute terms, however, it remains low compared to UAE and Qatar

31

2012 Forecast

32

Observations 2011 2012

Expected Average Pay Rise %, 2012 Forecast


Gulf salary rises during 2012 are expected to be broadly in line with 2011

• Gulf employers generally expect similar salary increases in 2012 compared to the previous year

• Qatar and Saudi Arabia are expected to have the highest increase in the Gulf and slightly higher than their 2011 levels, as companies expand to capitalise on the two countries’ strong economic growth

• Bahrain is once again expected to have the region’s lowest salary increase in 2012 due to a stagnant economy following domestic unrest in 2011.

Oman

Saudi Arabia

Kuwait

Bahrain

UAE

Qatar

5.1%

6.5%

5.6%

4.9%

4.5%

6.0%

6.4%

6.2%

5.6%

5.1%

4.9%

4.5%

33

Job creation is expected to be moderately higher in 2012, with Saudi Arabia continuing to lead

• All Gulf economies are expected to have higher rates of job creation in 2012 compared to the previous year.

• Saudi Arabia is expected to continue to have the highest rate of job creation in the Gulf, thanks to high economic growth and government spending.

• Bahrain is expected to rebound partially from a stagnant job market in 2011, but will continue to have the region’s lowest rate of job creation.

Oman

Kuwait

Bahrain

UAE

Qatar

77%

73%

68%

65%

51%

42%


Employment Growth by Country Net % of firms increasing headcounts

Observations 2011 2012

56%

51%

51%

37%

8%

62% Saudi Arabia

34

Oil & gas, retail and healthcare will continue to dominate jobs growth, while banking and construction continue to have the lowest growth rates

Observations

• Oil & Gas is expected to have the highest expansion in 2012 due to new projects in the sector.

• Retail is expected to continue growing at a high rate due to higher net disposable income and consumer spending.

• Banking is expected to have the lowest rate of job creation in 2012, due to continuing credit concerns and the Euro-zone financial crisis

Healthcare

2011 2012

63% Oil & Gas

60% Retail

61%

Telecoms & IT 50%

Engineering

41%

Construction

43% Travel & Hospitality

46%


33%

Banking

27%

Real Estate

28%

73%

72%

65%

63%

62%

62%

58%

57%

48%

46%


Employment Growth by Sector Net % of firms increasing headcounts

35

Source: Economist Intelligent Unit, GulfTalent.com Interviews

A number of external uncertainties can impact the Gulf economy and labour market during 2012

Political & Economic Uncertainties

Political Factors

• Arab spring: Significant uncertainty remains over the outcome of the conflict in Syria, the kind of governments which are likely to emerge in place of those that have fallen, and the extent to which developments in the wider Arab world will impact Gulf countries.

• Iran tensions: A possible military conflict with Iran

could have unpredictable consequences for the entire Middle East region including Gulf countries.

Economic Factors

• European debt crisis: Continuing bad news in Europe, including the possibility of a sovereign default, could lead to another global recession – impacting Gulf countries, particularly the UAE which is more exposed to global trade and tourism.

• US Dollar: Given the Gulf countries’ peg to the US

Dollar, any significant fluctuations in the value of the US Dollar against other currencies could impact Gulf employers’ ability to attract and retain expatriates – particularly from major source countries such as India.

36

Appendix – Useful Information

37

Useful Information

† Forecast Source: Economist Intelligence Unit, GulfTalent.com Surveys

Country 2010 2011 2012 F† Bahrain 4.9% 4.5% 4.5%

Kuwait 5.7% 5.1% 4.9%

Oman 6.4% 6.5% 5.6%

Qatar 6.8% 5.6% 6.4%

Saudi Arabia 6.7% 6.0% 6.2%

UAE 5.2% 4.9% 5.1%

Salary Rise by Country % Rise in Base Salary

Country 2010 2011 2012 F† Bahrain 2.0% -0.4% 2.2%

Kuwait 4.0% 4.7% 4.4%

Oman 3.2% 4.0% 3.7%

Qatar -2.4% 1.9% 2.1%


UAE 0.9% 0.9% 2.1%

Inflation

Country 2010 2011 2012 F† Bahrain 4.5% 2.2% 3.1%

Kuwait 3.1% 4.4% 5.4%

Oman 5.0% 4.7% 4.5%

Qatar 14.0% 17.6% 7.6%


UAE 1.4% 3.3% 3.5%

Economic Growth % Real GDP Change

Country 2012 Bahrain 1.3

Kuwait 3.9

Oman 3.4

Qatar 1.8

Saudi Arabia 28.9

UAE 7.5

Population (millions)

38

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39

Documents

Employment and Salary Trends in the Gulf 2012