Employment & Salary Trends GCC 2012

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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.

© GulfTalent.com 2012. All rights reserved.

1

This report is based on in-depth research from a wide array of sources
Research Methodology Source Participants Selection Criteria • Professionals employed by 3,000 largest corporations in the GCC 35,000 professionals • Aged 22-60 years • Earning an annual income in the range USD 12,000 - USD 200,000

Online Survey of Candidates

Online Survey of Employers

2,100 Executives & HR Managers

• Employing 50 to 20,000 staff • Across all major industries • Mix of private sector local and international companies

Interviews with Top Managers

60 Senior Executives

• 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

2

Contents

• • • • • • •

Economic & Political Background.................................……….. 4 Nationalisation........................................................................... 9 Recruitment ..............................................................................13 Mobility.......................................................................................19 Salaries & Cost of Living........................................................... 25 2012 Forecast...........................................................................32 Appendix – Useful Information..................................................37

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
GCC Economic Growth World Economic Growth

Crude Oil Price USD per Barrel

120 100
6.5%

5.2% 4.2% 4.1% 2.7% 1.4% 0.0%

4.7% 2.2%

80 60 40 20

-2.3% 2008 2009 2010 2011 2012 Forecast

0 2009 2010 2011 2012

Source: Economist Intelligence Unit

Source: Dow Jones & Company

5

During 2011, Qatar and Saudi Arabia led economic growth in the Gulf, while Bahrain saw the region’s lowest growth
Gulf Economic Overview 2011 GDP Growth Key Factors Affecting Growth Size of Economy ($bn)

Qatar 7.0% 4.7%

17.6%

Completion of gas projects, Government spending on infrastructure, 2022 World Cup preparation High oil price, Huge government spending programme Government spending, some limited unrest

179

Saudi Arabia

588 67

Oman

Kuwait

4.4%

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

163

UAE

3.3%

358

Bahrain

2.2%

26

Source: Economist Intelligence Unit, GulfTalent.com Interviews

6

2011 was a year of political turmoil in the Arab world
Arab World – Key Popular Movements 2011

Tunisia

Syria Lebanon’ Iraq
Bahrain

Jordan

Kuwait

Qatar

Libya

Egypt Saudi Arabia

UAE

Oman
Revolution / Overthrow of Government Public Demonstrations On-going armed conflict

Yemen

7

GCC governments have undertaken massive wealth distribution measures among their citizens
Pay Rise for Nationals in Public Sector 2011 Other Government Measures 2011

Qatar

60-120%

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 Kuwait - One-off grant of KD 1,000 per citizen UAE - $2.7bn fund to provide loan assistance for low income citizens

UAE

35-100%

Bahrain

up to 37.5%

Kuwait

25%

Saudi Arabia

15% 50-100 Omani Rial per month

Oman

Source: News reports

8

Nationalisation

9

Job creation for citizens through nationalisation of expatriate jobs continues to be a top priority for most GCC governments
Overview of Nationalisation in Private Sector
Pressure on Employers % of employers reporting nationalisation as a key human resource challenge Average Nationalisation Rate Nationals employed in private sector as % of total private sector employment (2011) Increase in Nationalisation % of companies reporting an increase in their nationalisation rate during 2011

Oman

82%

14%

36%

Saudi Arabia

78%

10%

59%

Bahrain

54%

20%

17%

Kuwait

38%

5%

27%

UAE Qatar

28%

7%

17%

17%

1%

15%

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

10

GCC governments have historically used a range of measures to increase employment of nationals in the private sector
GCC Nationalisation – Common Government Strategies

Targets & Limits

Support & Facilitation

Incentives & Enforcement

• Targets by sector (e.g. Banks, Oil and Gas, etc.)

• Employment fund (subsidising wages of newly employed nationals)

• Withholding visas for expat hires

• Tax on employers for each • Targets by job functions (e.g. HR) • Free training for nationals expatriate employee

• Job centers – putting unemployed in touch with employers

• Public praise / reprimand

Source: Press reports, HR interviews

11

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

Recent Nationalisation Initiatives

Saudisation
(‘Nitaqat’ – introduced June 2011)

Emiratisation
(Introduced December 2010)

• 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.

12

Recruitment

13

Saudi Arabia leads job creation in the Gulf, while Bahrain lags the group with almost no expansion reported
Employment by Country Net % of firms which increased headcount 2011 2010 Observations • 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.

Saudi Arabia

62%

55%

Oman

56%

57%

Kuwait

51% 51%

25%

Qatar 37%

45%

UAE 8%

22%

Bahrain

23%

Source: GulfTalent.com Survey of HR Managers

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
Recruitment Volume by Location % of vacancies advertised on GulfTalent.com *
Oman Bahrain Kuwait Qatar Saudi Arabia UAE (excluding Dubai)
2% 6% 9% 8% 14% 20% 20% 18% 4% 4% 6% 14% 3% 4% 4% 16% 3% 3% 4% 17%

13% 18% 21% 22%

Dubai

48% 31% 31% 37%

2008

2009

2010

2011

* 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

15

Oil & gas, healthcare and retail sectors are enjoying the largest headcount expansion, while banking and construction fare the worst
Employment by Sector Net % of firms which increased headcount in 2011 Observations

Oil & Gas Healthcare Retail Telecoms/IT Engineering Travel & Hospitality Transport & Logistics Real Estate Banking Construction 50% 46% 43% 41% 33% 28% 27%

63% 61% 60%

• 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.

Source: GulfTalent.com Survey of HR Managers

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
11% 10% 9% 8% 7%

Private Sector Pay Increase – Global Comparison % 2011

India France Philippines UK Canada GCC

12.6%

6.7%

5.5%

Australia
6%

4.4%

Australia
5% 4%

UK

3.1%

US
3% 2008 2009 2010 2011

2.7%

Canada

2.7%

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
Impact of Arab Spring on Gulf Employment
Key Trends

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

Employment of Nationals

• 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.

Expatriate Employment

• 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

Mobility

19

The UAE and Qatar remain prime destinations for expatriates, with Saudi Arabia in third place
Attraction of Expatriates % of GCC-based expats outside the country who wish to relocate into it Observations

70% 60% UAE 50% 40% 30% 20% 10% 0% 2008 Saudi Arabia Oman Kuwait Bahrain 2009 2010 2011 Qatar

• 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.

Source: GulfTalent.com Surveys

20

Dubai remains by far the region’s most attractive city for expatriates
Ranking of Gulf Cities – By Attractiveness to Expatriates % of GCC-based expats outside the city who wish to relocate into it Overall
Dubai Doha Abu Dhabi Jeddah Muscat Kuwait Madina Riyadh Makkah Dammam Manama Sharjah
4% 3% 3% 3% 3% 2% 2% 2% 7% 22% 20% 37%

Western Expats
46% 21% 26% 3% 8% 1% 1% 2% 0% 0% 3% 1%

Asian Expats
35% 20% 20% 7% 4% 4% 3% 3% 3% 2% 2% 2%

Arab Expats
38% 25% 17% 9% 2% 3% 3% 3% 2% 1% 1% 1%

Source: GulfTalent.com Survey

21

In terms of attractiveness to expatriates living within the country, the UAE once again retains the lead position
Retention of Expatriates % of expats within the country who wish to remain there 2012 2011 Observations

UAE

81%

72%

• 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.

Kuwait

64%

59%

Saudi Arabia

49%

50%

Qatar

49%

51%

Bahrain

46%

50%

Oman

45%

50%

Source: GulfTalent.com Survey

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

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

5.4% 3.4%

5.4%

2.2%

1.0% 1.1% 1.1%

0.9%

1.1%

1.3%

2007

2008

2009

2010

2011

2007

2008

2009

2010

2011

Source: GulfTalent.com Surveys

23

Governments across the Gulf are continuing to encourage labour mobility within their countries, through easing NOC requirements *
Domestic Labour Mobility
Country Bahrain Labour Mobility Recent Developments NOC requirement abolished in 2009

Oman

NOC requirement abolished in 2007

UAE

NOC not required after completing 2 years (Jan. 2011). Already removed fully for free zones. New sponsorship system plans to remove NOC requirement altogether, but not implemented yet NOC not required if previous employer below required nationalisation targets (June 2011) Most strict in the Gulf. NOC fully enforced. No indication of an imminent easing.

Guide to chart Full labour mobility (NOC not required) No labour mobility (NOC fully enforced)

Kuwait

Saudi Arabia

Qatar

* No Objection Certificate – issued to expatriate employees by their employer, giving consent to the expatriate being hired by another firm Source: Press reports, HR interviews

24

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

11.4% 9.0%

6.2%

6.1% 5.5% 5.6%

2007

2008

2009

2010

2011

2012 Forecast

Source: GulfTalent.com Surveys

26

During 2011, Oman enjoyed the highest average increase in pay, followed by Saudi Arabia and Qatar
Private Sector Salary Increase by Country 2011 2010 Observations

Oman

6.5%

6.4%

Saudi Arabia

6.0%

6.7%

• 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

5.6%

6.8%

Kuwait

5.1%

5.7%

UAE

4.9%

5.2%

Bahrain

4.5%

4.9%

Source: GulfTalent.com Survey

27

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

Real Salary Increase by Country *

Salary Rise

Inflation

Observations

Bahrain

4.9%

4.5%

-0.4%

UAE

4.0%

4.9%

0.9%

• 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

3.7%

5.6%

1.9%

Oman

2.5%

6.5%

4.0%

Saudi Arabia

1.0%

6.0%

5.0%

Kuwait

0.4%

5.1%

4.7%

* 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
Salary Increase by Job Category %, 2011 Observations

HR

6.4%

IT

6.3%

• 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

5.5%

Sales

5.3%

Engineering

5.3%

Admin

4.9%

Marketing

4.6%

Source: GulfTalent.com Survey

29

Among sectors, Healthcare and Retail offered the highest pay rises, while Real Estate had the lowest
Salary Increase by Industry %, 2011
Healthcare Retail & FMCG Telecoms & IT Oil & Gas Engineering Construction Travel & Hospitality Transport & Logistics Education Banking Real Estate Source: GulfTalent.com Survey 6.4% 6.2% 5.7% 5.7% 5.6% 5.4% 5.1% 5.0% 4.6% 4.5% 4.3%

Observations

• 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.

30

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
Inflation % 2011 2010
Abu Dhabi Saudi Arabia Kuwait Oman Qatar UAE Bahrain 0.9% -0.4% 1.9% 5.0% 5.4% 4.0% 3.2% -2.4% Manama 0.9% 2.0% Jubail Jeddah Khobar 670 670 550 Riyadh Dammam Doha Dubai 4.7% 4.0% Muscat Kuwait Sharjah 1,000 960 910 840 710 670 1,930 1,650 1,590

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

Source: Economist Intelligence Unit

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

31

2012 Forecast

32

Gulf salary rises during 2012 are expected to be broadly in line with 2011
Expected Average Pay Rise %, 2012 Forecast 2012 2011 Observations

Qatar

6.4%

5.6%

• 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.

Saudi Arabia

6.2%

6.0%

Oman

5.6%

6.5%

UAE

5.1%

4.9%

Kuwait

4.9%

5.1%

Bahrain

4.5%

4.5%

Source: GulfTalent.com Survey of HR Managers

33

Job creation is expected to be moderately higher in 2012, with Saudi Arabia continuing to lead
Employment Growth by Country Net % of firms increasing headcounts 2012 2011 Observations

Saudi Arabia

77%

62%

• 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

73%

56%

Kuwait

68%

51%

Qatar 51%

65%

51%

UAE

37%

Bahrain

42%

8%

Source: GulfTalent.com Survey of HR Managers

34

Oil & gas, retail and healthcare will continue to dominate jobs growth, while banking and construction continue to have the lowest growth rates
Employment Growth by Sector Net % of firms increasing headcounts 2012 2011 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

Oil & Gas Retail Healthcare Telecoms & IT Transport & Logistics Travel & Hospitality Engineering Real Estate Construction Banking 48% 46%

73% 72% 65% 63% 62% 62% 58% 57%

63% 60% 61% 50% 41% 43% 46% 33% 27% 28%

Source: GulfTalent.com Survey of HR Managers

35

A number of external uncertainties can impact the Gulf economy and labour market during 2012
Political & Economic Uncertainties

Economic Factors

Political 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.

• 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.

Source: Economist Intelligent Unit, GulfTalent.com Interviews

36

Appendix – Useful Information

37

Useful Information
Salary Rise by Country % Rise in Base Salary Country Bahrain Kuwait Oman Qatar Saudi Arabia UAE Inflation Country Bahrain Kuwait Oman Qatar Saudi Arabia UAE 2010 2.0% 4.0% 3.2% -2.4% 5.4% 0.9% 2011 -0.4% 4.7% 4.0% 1.9% 5.0% 0.9% 2012 F† 2.2% 4.4% 3.7% 2.1% 4.3% 2.1% 2010 4.9% 5.7% 6.4% 6.8% 6.7% 5.2% 2011 4.5% 5.1% 6.5% 5.6% 6.0% 4.9% 2012 F† 4.5% 4.9% 5.6% 6.4% 6.2% 5.1% Economic Growth % Real GDP Change Country Bahrain Kuwait Oman Qatar Saudi Arabia UAE 2010 4.5% 3.1% 5.0% 14.0% 4.1% 1.4% 2011 2.2% 4.4% 4.7% 17.6% 7.0% 3.3% 2012 F† 3.1% 5.4% 4.5% 7.6% 4.8% 3.5%

Population (millions) Country Bahrain Kuwait Oman Qatar Saudi Arabia UAE 2012 1.3 3.9 3.4 1.8 28.9 7.5

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

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