Kuwait Financial Centre “Markaz”
R E S E A R C H
GCC Demographic Shift Intergenerational risk-transfer at play
“At some point around 1800, after untold millennia of human history,
the global population reached its first billion. The world’s population
now grows by 1 billion about every 12 years” -2010 World
Population Datasheet, Population Reference Bureau.
The demographic structure of a country or region has wide-ranging
implications, from health and education, to labor force make-up and fiscal budgeting. The population is the driving force of an economy; it is
the unit by which economic output is realized and as such, should be invested in and shaped in a manner to better influence economic
growth.
That being said, population – no matter the structure – constitutes a burden on the country’s fiscal budget. An old population will be exiting the workforce, and hence their productivity will drop, while at the same time their retirement compensation, i.e. social security, will be drawn
upon, draining fiscal reserves. Conversely, a very young population also
requires a great deal of government expenditure, particularly in welfare-based states such as the Gulf, in terms of , education,
subsidies, and wages.
The GCC is in a unique position of having an extensive welfare system based on hydrocarbon revenues; this has created a growing drain on
fiscal reserve as the demographic structure is skewed towards the younger population which is entering the labor force in higher numbers
each year.
The GCC has a low population, when compared with other regions,
totaling 45 mn people in 2011, less than 1% of the global population. Moreover, the region is young with 54% under the age of 25, though
this is expected to rise to about 36 by 2050.
The current demographic structure has created several pressure points for the GCC economies. The report pinpoints these pressure points,
explains their implications and offers alternative reforms for them.
Figure 1: GCC Population Pyramid – 2010/2050
Source: US Census
June 2012
Research Highlights:
Analyzing the demographic structure of the GCC in
addition to implications on various economic and fiscal
aspects
Markaz Research is
available on Bloomberg
Type “MRKZ” <Go>
M.R. Raghu CFA, FRM Head of Research +965 2224 8280
Mai Sartawi
Intern
Kuwait Financial Centre
S.A.K. “Markaz”
P.O. Box 23444, Safat 13095, Kuwait
Tel: +965 2224 8000 Fax: +965 2242 5828
www.markaz.com
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Table of Contents
1. Overview .................................................................................................... 3
GCC Demographic Structure ................................................................................. 6
2. Pressure Points ........................................................................................ 13
Welfare ............................................................................................................. 13
Housing ............................................................................................................ 15
Education.......................................................................................................... 16
Employment ...................................................................................................... 20
3. Policy Agenda .......................................................................................... 25
Housing Reform ................................................................................................ 25
Education Reform .............................................................................................. 25
Governance and Regulation of Education Sector .................................................. 26
Labor Reform .................................................................................................... 26
Appendix 1: MENA Statistics ......................................................................... 28
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1. Overview
The global population currently stands at just under 7 billion, nearly 40% of
which are in China and India. The third most populous country, the United States, is far behind at 312mn.
By 2050, the UN projects the world population to hit 9 billion, with India and
China’s share of world total declining to 30%. Nigeria will have usurped the United States as the third most populous nation, at 433mn. Russia and Japan
will have dropped out of the top ten, making way for Ethiopia and the
Philippines with 174mn and 150mn, respectively.
Table 1: World’s Most Populous Countries
2011 2050
Country Population (mn) Country Population (mn)
1 China 1,346 India 1,692
2 India 1,241 China 1,313
3 United States 312 Nigeria 433
4 Indonesia 238 United States 423
5 Brazil 197 Pakistan 314
6 Pakistan 177 Indonesia 309
7 Nigeria 162 Bangladesh 226
8 Bangladesh 151 Brazil 223
9 Russia 143 Ethiopia 174
10 Japan 128 Philippines 150
Source: 2011 World Population Data Sheet, Population Reference Bureau
Billion after Billion
The world is adding people at an alarming rate, adding over 80 mn people a year, despite world population growth rates declining to about 1.2% p.a. Birth
rates around the world are highly variable, with the number falling to two children per family in some countries while the same has barely decreased in other countries.
As seen below, the first billion total population was reached in the 1800s,
encompassing all of human history to that point, while the second billion was reached just 130 years later, in 1930. The rate of addition declined exponentially thereafter, with the fifth, sixth, and seventh billion milestones
reached in 12 year intervals.
This pattern suggests that the world could hit 8 billion in another decade, with 9 billion reached by 2035, i.e. 15 years ahead of the UN projection
Figure 2: Billionth Milestones
The global population currently stands at just under 7 billion,
nearly 40% of which are in China and India
The world is adding people at
an alarming rate, adding over 80 mn people a year
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The Population Clock
Almost all of the world’s population is in less developed countries; consequently
the main driver of the global population is in those regions, where 27 infants are born per minute in developed countries, 239 are born in less developed
regions. Health care divergences and life expectancy have decreased the number of deaths per minute in developed countries at 23 versus 84 in their
less developed counterparts. Predictably, infant mortality is also higher is less developed countries, at 11 per minute or over 16,000 per day.
Table 2: The Population Clock
World
More Developed Countries
Less Developed Countries
Population 6,986,951,000 1,241,580,000 5,745,371,000
Births per Year 139,558,000 14,070,000 125,488,000
Day 382,351 38,548 343,803
Minute 266 27 239
Deaths per Year 56,611,000 12,201,000 44,410,000
Day 155,099 33,427 121,671
Minute 108 23 84
Natural Increase per (Birth-Death) Year 82,947,000 1,869,000 81,078,000
Day 227,252 5,121 222,132
Minute 158 4 154
Infant Deaths per Year 6,078,000 77,000 6,001,000
Day 16,652 211 16,441
Minute 12 0.1 11
Source: 2011 World Population Data Sheet, Population Reference Bureau
How Does the GCC Measure up?
As a region, the GCC has a very small population, with just around 45mn, less
than 1% of the global population. However, in contrast to the small population, the GCC is one of the wealthier regions, in terms of GDP/capita (at just under
$32,000), well above the MENA Ex. GCC, and in line with North America and
Europe.
Figure 3: Population versus GDP/capita
Source: IMF Note: Size of the Bubble indicates population percentage.
Asia
North America
MENA
Europe
GCC
0
10,000
20,000
30,000
40,000
50,000
60,000
0 1000 2000 3000 4000 5000
GD
P/
ca
pit
a (
US
D)
Population (Millions)
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The Four Phases of Demographic Transition
(Excerpt - 2011 World Population Data Sheet, Population Reference Bureau)
In the parish of Mouy, north of Paris, there were 47 burials recorded in 1693; in 1694, the number jumped to
an appalling 262. This is a dramatic example of life during Phase 1 of the demographic transition (albeit a somewhat modern one compared to the 50,000 years of human existence that preceded Phase 1). A rise in
the price of grains meant more people could not afford food, a situation that nearly always led to excessive
mortality, as happened in Mouy.
In Phase 2 of the transition—roughly the beginning of the Industrial Revolution—death rates began to fall more regularly, although the preference for larger families may have remained for a time. Next, increasing
urbanization lessened the need for children even as early public health measures improved life spans. Now the transition was really underway. By the 20th century, the development of modern medicine and the desire to
limit family size combined to cause the low death rates and very low birth rates we see today. That, at least,
is what happened over the centuries in Europe and North America. Most developing countries arrived in the 20th century still in the first phase of the transition. In the aftermath of World War II, however, the benefits
of public health and modern medicine became available to them in a comparatively short period of time. Mortality fell with unusual rapidity but the desire for large families remained. Then, with mounting concern
over record rates of population growth, birth rates did begin to fall in many countries.
Today, we can find examples around the world of all four stages of the transition.
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GCC Demographic Structure
Size and Growth
The GCC has a low population, when compared with other regions, totaling
nearly 45 mn people in 2011. The most populated country is Saudi Arabia with 28 mn (65% of the total), followed by nearly 8 mn in the UAE. The
International Monetary Fund forecasts a compounded growth rate (CAGR) of
2.41% in the next 5 years, increasing the population further to 49 mn in 2016. The growth rate is substantially lower than the CAGR throughout 2004-2008 of
5.9%.1 By 2025, the GCC is expected to have a total population of 57mn, to grow by
about 14mn more by 2050.
As of 2011, the lowest median age in the GCC is 24 yrs in Oman and the highest is 31 yrs in Qatar. The average age in the entire GCC region is 27 yrs
with over 20% below the age of 15.
Table 3: GCC Population Statistics
Population mid-2011 (mn)
Births per 1,000 pop.
Deaths per 1,000 pop.
Rate of Natural Increase
%
Projected Population
(mn)
2050 pop. as
multiple of 2011
Infant Mortality Rate
Total Fertility Rate
% of population
ages
mid-2025
mid-2050
<15 65+
World 6,987 20 8 1.2 8,084 9,587 1.4 44 2.5 27 8
Saudi Arabia 27.90 21 4 1.8 36.0 44.6 1.6 18 2.9 31 3
United Arab Emirates
7.90 13 1 1.2 9.9 12.2 1.5 7 1.8 18 1
Oman 3.00 29 3 2.6 3.9 5.3 1.8 12 3.3 24 2
Kuwait 2.80 19 3 1.6 3.7 5.2 1.8 9 2.3 26 3
Qatar 1.70 11 1 1.0 2.1 2.4 1.4 8 2.1 14 1
Bahrain 1.30 15 2 1.3 1.7 2.0 1.5 7 1.9 20 2
GCC Total* 44.6 18 2 1.6 57.3 71.7 1.6 10 2.4 22 2
* All GCC averages denote the average of six member nation figures Source: 2011 World Population Data Sheet, Population Reference Bureau
The Pyramids
The population pyramid in more developed countries (Figure ) is relatively uniform, with a small tapering at the higher age range. The median age for the
developed world is over 35. By contrast, developing countries have a bottom heavy pyramid, indicating support for the aging population through youth
entering the labor force; here the median age remains below 30, with some
countries having a median age of 24. But developing countries’ pyramids are liable to change with modernization, increased life expectancy, and family
planning.
By 2050, the developed world pyramid becomes more column-like, with the bulk of the population in the higher age brackets; the median age will have
increased to 45 in some cases such as Europe, while remaining in the low 40s
in the US.
1 GCC Population Forecast to Reach 50 Million in 2013, Business Intelligence Middle East, 18 February 2012
The GCC has a low population,
when compared with other regions, totaling nearly 45 mn
people in 2011
By 2050, the developed world
pyramid becomes more
column-like, with the bulk of the population in the higher age brackets
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In the developing world, the pyramid also bulges at the mid-age range by 2050
as the younger population ages and birthrates decline or slow. The median age
will increase to around 37 by then.
Figure 4: Population Pyramids – Developed World vs. Developing World 2010/2050
Source: US Census
GCC Pyramids
The fertility rate in the GCC has been declining as there is greater awareness of
family planning. With the exception of Oman, all other GCC countries’ fertility rates have decreased by more than 50%.2 This could also be correlated to the
increased cost of living as well as increased education opportunities for women. As the age of marriage increases, this decreasing trend in birth rates is
expected to continue.
Moreover, GCC pyramids have a skewed bulge in the male bracket, specifically working age, which is due to the high number of male expatriates in the
countries.
Saudi Arabia’s population pyramid is expansive3 showing that the majority of
the population is below the age of 30, with a median age of 26. This alludes that there is a high birth rate as well as a high death rate and a relatively short
life expectancy. However, a decreasing birth rate suggests that the pyramid will
2 Arab Human Development Report, United Nations Development Program, 2010 3 Smaller Old age population and the number of people in each age group increases as we move down the population pyramid
The fertility rate in the GCC
has been declining as there
is greater awareness of family planning
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transform into a contractive pyramid where the majority of the population is in the middle ages as seen in the 2050 chart.
Figure 5: Saudi Arabia and Kuwait Population Pyramids - 2010/2050
Source: US Census
Kuwait’s pyramid is less expansive than Saudi Arabia’s, with most of its
population below the age of 35 yrs, but over 20. There is also more discrepancy between the higher numbers of males to females, particularly in the 20-40 age
brackets. This is attributed to the high flow of expatriates looking for
employment, usually in this age bracket. The high expatriate rate is expected to decrease as more nationals enter the labor force and demand jobs. Similar to Kuwait, UAE also has a very high expatriate rate. UAE’s population
pyramid would look more expansive if it was exclusive to the national population. However, its total population, including expatriates, is a more
contractive pyramid with the majority of the population between the ages of
20-60. The UAE population’s growth is expected to continue, driven by a steady inflow of expatriates.
Qatar has the highest expatriate rate in the region. Its population pyramid alludes to it with the higher percentage of males in all working age groups,
above the age of 20. Qatar’s demographic boom is accompanied by its economic boom that gave rise to many opportunities for expatriates. However,
population growth is expected to decrease as expatriates exit to be replaced by local talent
Kuwait’s pyramid is less
expansive than Saudi
Arabia’s, with most of its population below the age of
35 yrs, but over 20
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Figure 6: Qatar and UAE Population Pyramids – 2010/2050
Source: US Census
Oman’s population pyramid is the most expansive in the GCC region. Similar to
Saudi Arabia, Oman has the second highest population of nationals compared
to expatriates in the region. The majority of Oman’s population is also under the age of 25. The pyramid is projected to become more contractive as the
fertility rate decreases and health care services are availed of.
Bahrain is the least populated country in the GCC. Its population pyramid shows
that there is no huge discrepancy between the age groups. There is also an equal distribution of males to females, with exception of the 40-60 yrs age
brackets. Bahrain population is expected to grow.
Bahrain is the least populated country in the
GCC. Its population pyramid shows that there is no huge discrepancy between the age group
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Figure 7: Bahrain and Oman Population Pyramids – 2010/2050
Source: US Census
While the younger age group (15-24) comprises the bulk of the Arab population, growth rates among countries differ greatly and are falling over
time, indicating that this bracket will experience declining growth rates going forward. Between 1995-2010 Yemen had the highest rate among Arab
countries, with the youth population nearly doubling, however this is expected
to grow by under 40% over the next 15 years.
Saudi Arabia saw its youth population grow by 66% over the last 15 years, but this rate is expected to fall to just 15% through 2025.
It is interesting to note that the youth population aged 15-24 will decline in
Iran, Algeria, Morocco, Tunisia, Lebanon, and Turkey over the next 15 years,
indicating sharply declining birth rates and/or increased infant mortality rates.
While the young bracket (15-
24) comprises the bulk of the Arab population, growth
rates among countries differ greatly and are falling over time
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Figure 8: Youth Population Growth
Source: 2011 World Population Data Sheet, Population Reference Bureau
The “Expat” Factor
The majority of the GCC population consists of expatriates. Based on 2010
data, Credit Suisse reported Qatar as having 86.5% expatriates, the highest percentage of international migrants in the world, although these tend to have
a transient quality and migrate in and out on a seasonal basis. This is followed
by 70% and 68.8% in Kuwait and the UAE, respectively.
The GCC region as a whole has an average of 53.43% of expatriates compared to an average of 9.5% in the MENA region. Qatar has the largest immigration
rate in the world with 40.62 of 1,000 people entering the country being expatriates. None of the GCC countries have a negative net immigration rate
which indicates that there is always a higher rate of expatriates entering than
leaving the region.
Source: Credit Suisse
The high inflow of expatriates is reflected in the GCC labor force. The positions
filled by expatriates range from low-paying, low-skilled construction jobs to highly professional and specialized jobs. Nearly, , 4.5 million nationals are
potentially entering the job market compared to 5 million nationals who were
employed in 2010. IMF predicts that an additional 2 to 3 million nationals will not be able to find employment.4
4 Meeting the Unemployment Challenge, Masood Ahmed, 19 January 2012
Table 4: Expatriates Population 2010
Qatar 86.5%
UAE 70%
Kuwait 68.8%
Bahrain 39.1%
Oman 28.4%
Saudi Arabia 27.8%
The majority of the GCC population consists of expatriates
The GCC region as a whole has an average of 53.43% of
expatriates compared to an
average of 9.5% in the MENA region
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Fiscal Situation
The GCC is a distinctive region due to its unique hydrocarbon reserves
compared to a relatively small, although increasing, national population. Growth in the six economies, in terms of spending and GDP/Capita as well as welfare,
heavily relies on oil rent to attract private investors and to provide extensive public services and subsidies to nationals. With not enough diversification in the
economy, the GCC countries’ government spending will continue to cause a
drain on fiscal accounts.
Based on unchanged policies and historic trend, the International Monetary Fund (IMF) forecast a 2% annual growth in real GDP for the rest of the decade. In addition, IMF also predicted an annual increase in population of 3.5%. The
imbalance in growth rates requires GCC governments to look closer at their policies to better match macroeconomics priorities and objectives.
Fiscal Balance as a % of GDP has been decreasing in all GCC countries, in
standing budget deficit which is expected to increase to 9.7% this year.5 UAE was also severely affected by the financial crisis due to their broad exposure to
the global Oman, Saudi Arabia and Bahrain government expenditures exceeded
revenues in 2009 as the economies were downturned during the financial crisis, causing government budget deficits. Saudi and Oman recovered the following
year, on higher oil prices, yet Bahrain is still suffering from its long market.
Figure 9: Fiscal Balance as % of GDP
Inefficient policies to allocate governments’ budgets will cause the GCC to experience continued and exacerbated fiscal drain. GCC citizens feel
unaccountable for their welfare, the current education systems do not provide
them with world-class, competitive skills, government employment and unemployment benefits remove the incentive for specialization and dynamic job seeking and the lack of skilled national manpower, and consequent dependence on expatriate labor will remain. Reforms are needed to aid countries to diversify
their economies to head away from an unrestrained fiscal drain.
5 Bahrain’s Budget Deficit up 5-fold in 10 Years, SyndiGate.info, 4 April 2012
The GCC is a distinctive region due to its unique hydrocarbon reserves compared to a relatively
small, although increasing,
national population
Inefficient policies to allocate governments’ budgets will
cause the GCC to experience continued and exacerbated fiscal drain
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2. Pressure Points
Welfare
GCC countries are known for their generous and extensive welfare system. The
government distributed its oil revenues for strategic reasons to ensure available essential services. Most government services are either at no cost or at highly subsidized prices such as electricity, water, gas, healthcare and commodities
such as food. Except for Oman where local companies are taxed, taxes in the other GCC countries mainly consist of foreign corporation income taxes.
This welfare system is strained and exasperated by the Elderly Support Ratio,
which calculates the degree to which the youth population is able to support
the aging and retired. Currently, on a global scale, there are 9 working age persons supporting one non-working age person while in the GCC the ratio is
significantly higher, with the UAE and Qatar having the highest at nearly 80 people in support of one senior citizen.
However, a stark reversal is expected in just 40 years, when this ratio is expected to drop to the low single digits across the GCC. This essentially means
that by 2050, Kuwait, for example, will have just 3 working age persons supporting one senior citizen; this will constitute a major strain on resources for
the country.
Table 5: GCC Elderly Support Ratio
Elderly Support
Ratio* Life Expectancy at Birth
(yrs)
2010 2050 All Male Female %
Urban Pop. Per km2
GDP/capita (US$) – 2009
Mobile
Subscribers per 100
inhabitants
World 9 4 69 67 71 50 51 10,030 60
United Arab
Emirates 79 9 77 77 79 83 14 38,960 143
Qatar 78 5 76 75 77 100 152 61,532 131
Bahrain 32 4 75 73 77 100 1,807 17,609 186
Kuwait 32 3 78 76 80 98 175 41,365 100
Saudi Arabia 22 5 76 74 78 81 64 13,901 209
Oman 21 4 72 70 74 72 10 17,280 116
* Elderly Support Ratio = Working age population (age 15-64)/ Population 65+ Source: 2010 World Population Data Sheet, Population Reference Bureau, GDP/Capita sourced from World Bank Data
Kuwait’s welfare system subsidizes many of its citizens’ essential needs such as government housing for employed married Kuwaitis, free healthcare, and free
education. Kuwait’s welfare housing is emphasized more as a form of
sustenance for low-income citizens and Bedouins. Expenses on subsidies and other transfers were almost all of the Kuwaiti government’s expenses after the
Gulf War. In 2010, welfare expenses took up 30% of all government expenses.
Similar to Kuwait, the Saudi Arabia housing program exists to guarantee housing for lower income nationals. Saudi Arabia successfully implemented
developmental plans from 1970 to 1995 encompassing social services and free
healthcare and a system of free enterprise, which requires and encourages the private sector to play a bigger role in the economy.6 Saudi’s subsidies alone
6 A Welfare System, Kingdom of Saudi Arabia Ministry of Foreign Affair
GCC countries are known for
their generous and extensive
welfare system
In 2010, welfare expenses
took up 30% of all Kuwait government expenses
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make up a large percentage of total expenditure. For example, subsidies expense on electricity accounted for 9% of total expenditure in 2009.7
UAE’s welfare system is as encompassing as the other GCC countries. Welfare expenses fell to a little more than 10% of total expenditure in 2009 after
steadily increasing to reach 25% of expenditure in 2006 (Figure 4). The retail price of fuel increased three times in the UAE. The volatile world oil prices have
made most GCC countries more aware of a need to reform their subsidies and
welfare system. For example, Qatar increased fuel prices by 25% and Saudi reduced domestic wheat production which relies on heavy subsidies. Regional
inflation is better controlled with measured reduction on state subsidies. Qatar’s Ministry of Labor and Social Affairs provides free education and health
services as well as assistance for those in need such as orphans and widows. Free healthcare extends to all residents of Qatar, regardless of nationality.
Qatar’s expenses on welfare equaled a little more than 20% of total expenditures in 2009.
Bahrain’s welfare system includes a social security system which provides
citizens with several benefits. Foreign corporations contribute to the system as
well as employers. Benefits contain health care payments, housing benefits, and unemployment benefits. Health care is free for citizens. A state pension
scheme is also available for citizens of the country but require a percentage payment of income to be accessed.
Bahrain’s expenses on welfare in 2008 reached its highest since 1990 reaching
around 20% of all government expenses.
Oman’s welfare average expenses as a percentage of government expenditure is the lowest in the GCC region. Healthcare subsidies alone are 5% of total
expenditure.8 In addition to education and interest on housing, Oman subsidizes development loans, farmers and fishermen equipment, and some
exemptions from in income tax for some companies. Oman is expecting to
allocate 8.5% of total expenditure on welfare for its 2012 budget.9
GCC governments use welfare to provide a high standard of living for their citizens. Citizens of the GCC rely on their country’s welfare system without
feeling any sense of accountability, unlike when citizens pay taxes for public services. In return, citizens’ expectations for welfare grow as they remain
unconscious of the expensive cost of their governments’ far-reaching subsidies
and transfers.
With the help of an extensive welfare system, GCC citizens’ wealth has been increasing at the cost of a fiscal drain on government accounts. Citizens can
afford unemployment, living off the paradise supply of transfers from their
governments which derive from unsustainable oil rent. Welfare in the GCC is creating adverse incentives to its citizens by indirectly demotivating dynamic job seeking attitudes since there is little fear of unemployment. Kuwait’s government spending and welfare spending was the highest recorded in 2009.
Welfare spending included a one time payment of KD 5.5 billion for the Public Institution for Social Security.10
7 Employment and Salary Trend in the Gulf 2010, GulfTalent, 2011 8 The State General Budget for 2012, Omanet, 2011 9 Oman Budget 2012, Ministry of National Economy, 15 January 2012 10 Assembly Closes Term by Approving ‘Crazy’ Budget, Kuwait Times, 30 June 2011
Qatar’s expenses on welfare equaled a little more than 20% of total expenditures in 2009
Oman’s welfare average
expenses as a percentage of government expenditure is the lowest in the GCC region
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Figure 10: Welfare as % of Government Expenses
Source: IndexMundi Database and UAE National Accounts 2009
Housing
In addition to public services and subsidies, increasing demand for housing with
a rising population requires additional spending on infrastructure. Governments in the GCC are aware of the demographic boom and its resulting pressure on
the government’s fiscal budget.
Some residential markets in the GCC are already facing shortages due to
increasing demand for housing. Sale prices for residential properties increased in 2011 compared to 2010. There is a strong demand for compounds and a
short supply, leading to growth in the rental segment. Riyadh’s office market is facing an oversupply and moderate demand.11
Similar to Saudi Arabia, Kuwait is facing a strong demand for residential housing. Growth in the real estate market is mainly driven by the residential
segment. Only Kuwaiti nationals are permitted to buy residential property.12 National Bank of Kuwait sourced robust credit growth which is stimulating
private residential segment growth.13
Dubai’s real estate suffered the most in the GCC region. There is an oversupply
of rental apartments which caused downward pressure on prices. Oversupply is due to delayed projects from 2011, which are adding to residential units. Office
space rental prices declined and are expected to continue to decline in 2012. In Abu Dhabi also commercial segment faces low demand.
In Oman, the demand for higher-end properties has been decreasing as the demand for affordable housing increases. The residential property market is
expected to improve in 2012. The lower priced areas Bowsher and Mawaleh face increased demand, and villas in the Waves and Muscat are still demanded
by foreigners due to their higher quality and modern design as they are short in supply.14
Qatar was the least affected country by the global financial crisis. Qatar is suffering from an oversupply in the residential and commercial property market.
Rental prices have been declining in Doha. The Qatari government is expected
11 Real Estate Commentary, Kuwait Financial Centre’Markaz’, 26 February 2012-03 March 2012
12 GCC Real Estate- Back on Growth? Al Masah Capital, 13 March 2011 13Real Estate Market Commentary, Kuwait Financial Centre ‘Markaz’, 25 March 2012 14 Real Estate Market Commentary, Kuwait Financial Center ‘Markaz’. 12 February 2012
In addition to public services and subsidies, increasing
demand for housing with a
rising population requires additional spending on
infrastructure
Growth in the real estate
market is mainly driven by
the residential segment
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to increase spending for infrastructure in preparation for the 2022 World FIFA Cup. Qatar’s current main concern is attracting foreigners to buy property and
hosting them in 2022, benefiting Qatar’s real estate market. However,
foreigners’ ownership permits are limited to designated areas. Similar to Saudi Arabia, Qatar has potential for growth as demand rises for affordable housing.
The Bahraini residential market is slowing down in both the free-hold and
leasehold segments. There has been a declining trend in the residential rental
market and are expected to remain flat throughout the year. Office Rentals have declined compared to the third quarter of 2011. This is due to supply-side
competition between demanded small offices against large unfitted units.15 Residential supply is also expected to decrease due to the political unrest in the country. Bahrain and UAE are expected to face declines in the real estate
market due to an over supply and decreased demand for rentals.
Generally, GCC real estate is stabilizing in terms of commercial rentals due to an oversupply.. Most GCC countries are facing an increased demand for
affordable housing, which demands extensive spending on infrastructure. As population increases, GCC countries should allocate infrastructure spending to
provide their citizens with affordable housing needs before accommodating
expatriates and attracting foreign investments.
a) Government Developmental Plans
GCC governments’ fiscal balances could face a severe drain with the rising pressure on infrastructure and housing. GCC countries are already taking
initiatives with infrastructure and development plans. Kuwait’s development plan
is allocating KD995 mn on human and social development agencies. Effectively, for the years 2009-2010 and 2010-2011, respectively, 5,169 and 6,740 housing
units and houses were built. 16
In Saudi Arabia, Alwaleed Bin Talal Foundation initiated a Housing Development Program in 2003. The project identified low-income families in need. In addition,
King Abdulla has allocated $62 billion to build 500,000 homes in Jeddah with an
addition of $15 billion to fund 1.65 million homes in over five years. Such immediate public spending ambitiously provides incentive for short-term
development in construction and other support sectors.17
Education
Except for Oman, all GCC citizens belonging to the matching age group are
enrolled in primary education.18 Oman primary gross enrollment ratio was 75% in 2008 which causes a high illiteracy rate in the country, reflecting its high
unemployment rate of 15%.
15 Real Estate Market Commentary, Kuwait Financial Centre “Markaz”, 08 April 2012-14 April 2012 16 The Supreme Council for Planning and Development- State of Kuwait 17 Saudi Construction Leads the Region, Construction Week Online, March 31 2012 18 Primary education is preceded by nursery or pre-school and is also known as elementary school.
Secondary education is preceded by elementary school, and is also known as high school. Tertiary education is usually preceded by high school and is also known as higher education such as college or university curriculum.
Qatar is suffering from an oversupply in the residential
and commercial property
market
GCC governments’ fiscal
balances could face a severe
drain with the rising pressure on infrastructure and housing
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Figure 11: Gross Enrollment Ratio (2008)
Source: Alpen Capital Report
In 2008, GCC’s secondary education gross enrollment ratio average was a high
93.3% with Bahrain leading at 96.8% and Oman lagging at 88.1%. Having a
primary gross enrollment ratio lower than a secondary gross enrollment ratio forecasts a lower secondary gross enrollment ratio in future, which could be
problematic for Oman. On the other hand, Oman is focusing on tertiary education. ; however, this will create a great imbalance between its citizens’
education. Primary education is necessary to increase the literacy rate of Oman, which was recorded as 86.6% in 2008.19
For the year 2020, Alpen Capital forecast that primary and secondary enrollment to reach 100% in all GCC countries. Bahrain’s tertiary enrollment is
predicted to be the highest in the region at 57.6% by 2020. Qatar’s tertiary enrollment is forecast to improve but growth is expected to be slow, resulting in
the lowest enrolment among the GCC nations at 15.7% in 2020. The GCC
average for tertiary enrollment is forecast to improve by 14.6% to reach 38.6% in 2020.
Figure 12: Tertiary Enrollment Forecast
Source: Indexmundi
With rising GDP/capita, the GCC population has become more aware of the necessity of education. Primary completion rate has risen as well as secondary
enrollment throughout the region. For 2010, IMF estimated Secondary enrollment to reach an average of 96% in the GCC region. UAE secondary enrollment has been increasing at the fastest pace. This is coupled with the rise in UAE’s exposure to global standards through its international economy (Figure
6).
19 Indexmundi Database
Bahrain’s tertiary enrollment is predicted to be the highest
in the region at 57.6% by 2020
With rising GDP/capita, the GCC population has become
more aware of the necessity of education
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Figure 13: Secondary Enrollment
Source: World Bank Report
Bahrain also has the highest tertiary gross enrollment ratio in the GCC of 32.8% compared to GCC’s average of 24.0%. Qatar reported the lowest tertiary gross
enrollment ratio of 11%. This fact brings to light that a majority of Qatar nationals are meer high school graduates, endorsing our previous statement
that Qatar has the least number of nationals in its workforce. However, Qatar is attempting to increase their low tertiary gross enrollment rate by trebling
spending on tertiary education.
Arab states have the second lowest rate of tertiary enrollment following the
Sub-Saharan African countries. Since 1970, Asian, European and American students have constituted around 80% of the student body in tertiary
education. Their needed skill sets are apparent in GCC’s high expatriate rate,
particularly workers from America and Asia.
Figure 14: Student Enrollment in Tertiary Education
Source: UNESCO Institute for Statistics
The country spending highest on education in the GCC is Saudi Arabia, allocating 5.6% of GDP on education expenditure (Table 6). Saudi Arabia is
ranked 40 in the world. The second highest is Oman, with only 3.9% of GDP
spent on education expenditure. Oman is ranked 108, followed by Kuwait at 111, Qatar at 120, Bahrain at 136 and, finally, UAE at 161. The top 5 countries
spending the highest percent of GDP on education are Timor-Leste, Cuba, Lesotho, Marshall Islands and Maldives.
Qatar reported the lowest tertiary gross enrollment ratio of 11%
The country spending
highest on education in the GCC is Saudi Arabia, allocating 5.6% of GDP on
education expenditure
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Table 6: Education Expenditure
% of GDP Country Rank Year
Bahrain 2.9 135 2008
Kuwait 3.8 111 2006
Oman 3.9 108 2006
Qatar 3.3 120 2005
Saudi 5.6 40 2008
UAE 1.2 161 2009
Source: CIA World Factbook
a) Education Shortcomings
Most nationals enroll in the public sector, attracted by its free cost. As a result, private schools have less than 50% enrollment. Other than private schools being expensive, there are notable differences between private and public
education. Government schools use Arabic as the primary language and focus
on humanities, most importantly Islamic Studies. On the other hand, private schools usually use English as the main language and accord importance to
sciences and mathematics. All GCC countries scored lower than the Organization for Economic Co-operation and Development (OECD) nations in
the International Trends in International Mathematic and Science Study test
(TIMSS) for 8th grade.
Figure 15: Grade 8 TIMSS Score (2007)
Source: World Bank Note: The test is conducted every four years; 2011 results will be published end of 2012.
GCC countries have the resources to enhance their human capital. As projected
by the World Bank, 20.5 million nationals will enter the labor force by 2020. Unemployment is expected to rise only if GCC governments do not tackle the
core of the problem. Governments in the GCC should commit to investment
opportunities in the education sector, the healthiest and most vital long-term investment.
Predominantly, GCC primary and secondary education does not prepare its
citizens for modern industries and is not united with world-class qualifications. The stability of the economy mainly lies in the education system which should
prepare national manpower to better integrate in the workforce. Especially with
the rising need of the GCC countries to diversify their economies, governments should insure that their citizens have the opportunities and resources to excel in
needed specializations.
Most nationals enroll in the public sector, attracted by its
free cost. As a result, private
schools have less than 50% enrollment
Predominantly, GCC primary and secondary education
does not prepare its citizens
for modern industries and is not united with world-class
qualifications
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According to Alpen Capital, students in the region are expected to grow “from
9.5 million in 2010, to 11.3 million in 2020” (2010). Educating the new wave of
students at global standards would require 163,200 additional teachers. The GCC has a student to teacher ratio of 11:1 compared to developed nations’
ratio of 15:1. Even though the GCC’s average is better, the teachers lack the required skill-sets to be as effective. GCC countries have a very low percentage
of vocational training compared to the 10% global average (Figure 8). .
Figure 16: Technical and Vocational Training Enrollment (2007)
Source: UNESCO
Employment
More dangerously, GCC governments dominate the economy by being the
biggest employers of their citizens. Nationals lose motivation to compete on a global level in the private sector as public sector employment offers them
higher wages with more attractive benefits and requires fewer skills.
This overstaffed safe haven of employment for GCC citizens exacerbates the
most problematic factors for doing business in Kuwait which, according to the World Economic Forum, are an inadequately educated workforce and an
inefficient government bureaucracy. The bureaucratic system of GCC countries is saturated with public workers. This increasingly complicates the regulatory
framework which undermines and slows down private ventures and risk-taking.
From 2000 to 2010, an estimated 7,072 thousand jobs were created in both the
private and public sector. Only 1.15% of the jobs were created by the public sector. Out of those 7,072 thousand job openings, only 25% were taken by
nationals. Based on the following estimates, Qatar created 96.4% new jobs for
expatriates, which is justified by its high expatriate ratio. Only 3.6% new jobs were taken by nationals. Nevertheless, Out of the six GCC countries, Qatar has
the lowest population of nationals. Their dependence on expatriate labor is necessary to spur economic growth and to maintain the highest GDP/capita in
the region.
The GCC has a student to teacher ratio of 11:1
compared to developed nations’ ratio of 15:1
More dangerously, GCC
governments dominate the
economy by being the biggest employers of their
citizens
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Table 7: 2000-2010 Job Creation
Source: International Monetary Fund Middle East and Central Asia
Throughout 2000 to 2010, Saudi Arabia witnessed the highest population growth in the region as well as the highest job creation, an estimate of 2,598
thousand jobs. Exactly one half of the new jobs were taken by nationals. Yet,
Saudi Arabia’s unemployment rate is still high at 10.8%. Bahrain and Oman have even higher unemployment rates and only 19% and 30%, respectively, of
new jobs created were taken by nationals.
The average unemployment rate is higher than the world’s average which was
estimated to be 8.7% in 2010.20 However, the GCC average does not account for masked unemployment and underemployment which have similar
implications as unemployment. Unemployment is masked by bloated bureaucracies with ineffective and overstaffed employees. In addition, the
nationalization quota system has also resulted in private employers who deploy nationals without utilizing their labor. For this reason, the unemployment in the
GCC is swayed to look lower and less challenging than its actual connotations,
especially with the rising population.
a) Expatriate Labor
Job creation is not the biggest challenge of the GCC as much as the mismatch between national labors’ demand and supply in the job market. For GCC
countries, expatriate labor is more attractive than national labor. Even though
the latter is more robust, expatriate labor is cheaper, highly skilled and more flexible. In addition, the types of jobs experiencing steady growth are
unappealing to nationals, such as jobs in services, construction, and trade. On the other hand, Expatriates accept lower wages, longer hours and come with
more foreign experience and skill.
20 Indexmundi Database
Throughout 2000 to 2010, Saudi Arabia’s population
witnessed the highest population growth in the
region as well as the highest
number of job creation
Oman has the highest
unemployment rate of 35%
and Kuwait’s 0.5% unemployment rate is the
lowest in the GCC
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Figure 17: Salary Increases for 2010
Source: GulfTalent
Expatriate labor, especially Asian, has become harder to attract with the growing opportunities in their domestic economies and the rising cost of labor
such as in India. A survey by Gulf Talent showed that westerners in the GCC received the lowest salary increases; this is rationed by the high unemployment rate in western countries which make it harder for them to find better job
opportunities. Nevertheless, another Gulf Talent Survey indicated that in both UAE and Saudi Arabia, Western professionals in mid-management received a
higher average salary than Emiratis and Saudis, reflecting their superior skills. Nationals in the private sector did not receive the highest salary increases,
supporting nationals’ lack of appeal to the private sector compared to the better paying public sector.
The restrictions on expatriate labor make them even more attractive to be hired by employers. The No-Objection Certificate (NOC) requirement prohibits
expatriates to switch from one employer to another. This restriction makes employers have better control on expatriate labor in terms of pay and mobility.
Qatar uses NOC strictly as a retention tool, attracting professionals with high
job offers and forcing them to relocate when they want to change jobs. NOC has been liberalized in Bahrain and Oman resulting in higher payments to
expatriates as competitive pay offers arise.
b) Nationalization Policies
GCC countries are aware of their dependence on expatriate labor in the private sector and the threat of higher unemployment as young nationals enter the
labor force. Since governments can no longer absorb the large pool of
graduates, GCC countries have implemented nationalization policies in an attempt to increase the percentage of nationals in the private sector. GCC
countries are trying different approaches such as subsidizing salaries in a firm willing to hire nationals, or in the case of Bahrain, taxing companies for hiring
foreign employees.
The aim of nationalization policies is to decrease the dependence of one foreign
nationality in certain specialized fields and to make the GCC country nationality the highest single nationality in each sector. In Saudi Arabia, “visa slots” are given to each employer based on the nationality of expatriates being hired. UAE
uses a similar approach and charges higher visa fees when a certain nationality visa slot is being exceeded. By contrast, when UAE employers surpass the
Emiratisation minimum employment requirement, they are rewarded with lower visa fees.
Job creation is not the biggest challenge of the GCC
as much as the mismatch
between national labors’ demand and supply in the
job market
Expatriate labor, especially
Asian, has become harder to attract with the growing
opportunities in their domestic economies and the
rising cost of labor such as in
India
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Nationalization targets in the GCC are more pragmatic in some countries than in others. Bahrain removed its unsuccessful quota system all together before
implementing its tax on companies who hire expatriate employees. Some
nationalization policies focus on target benchmarks of nationals in different sectors and others focus specifically on positions in organizations.
The Saudization policy mainly aims at growing Saudi manpower by requiring
companies to increase Saudi employment by 5% annually. The quota-system
sets different targets for different sectors. For instance, the media industry, commercial sector, insurance companies and public schools have a target of
19% nationalization compared to a low 6% in construction and a 49% target in the banking sector.
The actual policies put in place are mainly associated with Article 45 of Labour and Workman Law of Saudi Arabia: “Saudi workers shall not comprise less than
75% of the total number of the company/establishment [and] their wages shall not be less than 5% of total wages of workers; the employer shall vocationally
train his Saudi workers to replace foreign workers” and should keep a record of the replacements’ names.21 The policy has enforced a responsibility on
employers to train nationals and increase Saudi manpower. Companies are
rated as Red, Green or Yellow depending on their commitment to the policy and face resultant consequences.
The Kuwaitization policy is considered to be more of a nationalization approach
“by decree”, aiming to increase employment of nationals simply by enforcing
strict quotas in different sectors and professions (Figure 6). In an attempt to fill the quotas, employers are offering nationals a pay worth double of expatriates
even when the latter is being more productive. With such rigorous policies, employers look for policy exemption rather than seek a long-term collective
alternative.
In 1997, Kuwait experienced a sudden increase in unemployment and in
response organized the Manpower and Government Restructuring Program (MGRP). MGRP is a government organization aiming to increase the percentage
of nationals in the private work force while improving Kuwaiti manpower. MGRP’s creation aims to help the economy meet the Kuwaitization policy
quotas.
MGRP recognize that nationals prefer working the public sector due to better
working conditions and higher wages. To bridge the gap between the private and public sector, MGRP implemented a social allowance limited to nationals working in the private sector in an attempt to decrease their unwillingness to
work in the private sector. Also, MGRP imitated the public sector by paying social allowances for private sector’s national employees’ children. However,
conflictingly, the government faces societal pressures to increase government wages and continuously responds with public salary increases. Other than an
increased cost of living, and influencing inflationary problems, the government is countering MGRP motives by increasing the salary gap between the private
and public sector.22
21 Human Resource Management (HRM) in Saudi Arabia: A Closer, 11 March 2011 22 MGRP- The Kuwaitization Engine, Ahmad Saeid, 16 August 2009
Since governments can no
longer absorb the large pool
of graduates, GCC countries have implemented
nationalization policies in an attempt to increase the
percentage of nationals in the private sector
Nationalization targets in the GCC are more pragmatic in
some countries than in others
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Table 8: Nationalization policy by sector
Saudi UAE Kuwait Oman Qatar Bahrain
Local Workforce 28% 12% 18% 46% 17% 45%
Oil Refinery 30% 50-90%
79%
Contracting 5%
30-80%
Construction 30%
5%
Banking 49% 50% 60% 90%
Investment 40%
Transport 78-95%
Communication 56% 50-80%
Hotels and Restaurants 75-100%
Agriculture 2%
Manufacturing 2%
Source: WikiLeaks, Qatarization, Arabian Business, Zawya Note: Local Workforce percentages represent private sector quotas states by nationalization policies
The Emiratization policy also consists of different quotas in different job sectors. The banking, insurance, and trade sectors are imposed to increase the Emirati
employees by 4%, 5%, and 2% respectively. Human resources and secretarial
positions were also nationalized in 2006. Emiritization policies also increase the costs of the firm when the proportion of expatriate to national employees rises,
constituting an implicit tax on firms. This form of penalizing indirectly lowers the ability of employers in the private sector to employ national employees who
require a higher labor cost.
Even with their unemployment rate still highest in the GCC, Oman’s
nationalization policies are more encompassing with their encouragement of citizens to work in private semi-skilled positions and increased enrollment in
vocational training.23 The government set different quotas for different job
sectors: 60% in transport, storage and communication sectors; 45% in finance, insurance and real estate sectors; 35% in industries; 30% in hotels and
restaurants; and 20% in wholesale and retail trading. Employers who successfully reach the corresponding quotas are rewarded by press recognition
and privileged treatment by the government. The most thriving aspect of the Omanization policies is its alignment with Oman’s educational reform. The
government instituted federal universities to train Omani workers. Omanization
also supports The Committee for Vocational Training with compensation schemes for the private sector and subsidizing salaries for Omani workers
during their training period.
Bahrain’s nationalization policy began in the early 1980s with the introduction of a committee instituted to tackle unemployment problems among nationals. However, time has proven that Bahrainization policies increase the employment
of nationals in the public sector and decrease their employment in the private sector due to the former’s better pay and working conditions. In 2001,
Bahrain’s Ministry of Labor and Social Affairs initiated a project which consists of a training program for employees combined with wage subsidies for
employers who replace expatriated with Bahraini citizens.
Many employers find their governments’ targets unrealistic such as the 15%
Emiratisation target in the engineering sector or the 60% Kuwaitisation target
23 Work Nationalization in the Gulf Cooperation Council States, Kasim Randeree, 2012
The government faces societal pressures to increase government wages and
continuously responds with public salary increases
The Emiratization policy also
consists of different quotas in different job sectors
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in the banking sector. Employers are unable to find such high percentages of qualified nationals. Qatar realizes that the educational gap and low rate of
competition between expatriates and nationals is the main problem that
Qatarization is facing. With the public sector saturated, Qatar realizes that the lack of competition specifically between nationals and expatriates in the labor
market will cause unproductive nationalized allocation of supply and demand for skills in the private sector. For this reason, Qatar is focusing on increasing
the education and skills of its national labor force through increased spending
on tertiary education, vocation education and post-compulsory training.
3. Policy Agenda
Housing Reform
Housing projects are low yield investments, making it harder to attract companies to manage housing projects. Private public partnerships would help
make housing projects more attractive to foreign investors. Instead of government spending face value on housing and infrastructure project (includes
hospitals and amenities), foreign private investors would bid for the
government contract. The government would offer the land where a city needs to be constructed. Specific criteria will be given listing the specific amenities
needed. The private investor with the most efficient project, in terms of time and space, would hire the contractors needed to initiate and construct the
project. The investment would be similar to a bond. Yearly, or depending on the terms of the contract, the government would pay back the investment at a
bargained interest rate.
City development projects could also be used to create more jobs in the private
sector. The government contract would also impose the private investor to abide by nationalization policies. Government would create incentives by
creating more attractive yields for private investors who dynamically seek local
contractors.
Education Reform
GCC governments should allocate more of their budget towards education
expenditure. Saudi Arabia increased their budget allocation on education by 13% to reach 25% of their budget in 2010. Education expenses included the construction of 1,200 new schools, rehabilitation of 2,000 existing schools.
However, the challenges of education are graver than infrastructure-related issues. Like the rest of the GCC, Saudi students are weak in English,
Mathematical and Science subjects. With exception to Bahrain and the UAE, investments in research and development are very low in the region, less than
1% of Saudi Arabia’s budget allocation. Saudi schools curricula are not unified
and lack national standards. Parallel to the UAE, there is a gap between local universities subjects and private sector job requirements, mainly due to the
inflexibility and dearth of varied courses.
The challenge all GCC countries face is the low qualification of teachers in
schools, specifically public schools. There is a stark difference between teaching methods in public school and private schools. GCC governments should unify
the training methods of teachers by providing all teachers with a unified training program. Compulsory collective workshops between private and public
school teachers should be initiated and subsidized by the government. Certifications should be renewed yearly for public schools to be aware of the
areas where teachers lack skills and for teachers to be updated with advanced
teaching methods. Governments could take advantage of workshops to recognize public schools subjects that need to be improved or even introduced.
Qatar is focusing on
increasing the education and skills of its national labor
force through increased spending on tertiary
education, vocation
education and post-compulsory training
Private public partnerships
would help make housing projects more attractive to
foreign investors
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Governance and Regulation of Education Sector
For the education sector to grow efficiently, it needs entities that provide
competent regulatory framework. Such entities exist such as the Council of
Higher Education in Saudi Arabia, Dubai Schools Inspection Bureau and the Supreme Education Council in the UAE and the Quality Assurance Authority for
Education in Bahrain. To better govern the increasing number of schools, the number of administrative education committees should rise. Governments
could encourage such entities to form and improve standards in schools by
creating competition between them.
Public schools would be required to run under a certain educational governing institution. The Ministry of Education would provide criteria for the Institution to comply by. The objective of the institution should be to increase research,
develop teaching methods, increase exposure with varied subjects, and integrate new technology and global standards in their schools curriculum. The
institutions will also be responsible for the teaching methods and qualifications of the teachers. Yearly, the Ministry of Education would compose surveys and
introduce standardized tests (measures are derived from workshops). The results would spotlight the improvements in students’ performance and the
curriculum as a whole. Schools would be scored and the institution with the
highest average score would be rewarded with higher wages for both teacher and members of the board as well as grants for infrastructure, rehabilitation
and needed equipment. Entities with the lowest scores could, eventually, be dissolved, or absorbed into a stronger entity. The schools they overlook will be
governed by the institution with better output. Where applicable, private
schools could be imposed with governing entities. Government could encourage private institution to create vocational training programs and foster progressive
competition between them.
There is no doubt that GCC countries could attract global tertiary education standards in the region. This is apparent in the rise of international recognized
foreign universities opening campuses in the region. Some of them are Paris
Sorbonne and New York University in Abu Dhabi, the LSE and INSEAD offering their most distinguished MBA programs in UAE, Qatar Education City which
includes Texas A&M University, Carnegie Mellon University, Georgetown and Northwestern. Through private-public partnerships (PPP), GCC countries are
able to attract private investors with free land and electricity, tax exemption
and monetary grants.
Following the same manner, GCC countries could attract private investors in secondary education and vocational programs by offering them government contracts. Private investors will operate the schools and then transfer them to
the government depending on the terms of the contract. In the mean time, however, the government should train nationals with the expertise of their
international private investors. Governments should create partnerships to bridge the gap between the private sector’s demand and national workforce
required skills as a commitment to long-term economic growth.
Labor Reform
Governments should cease job creation in the public sector before reforming it in addition to taking the initiative to identify unproductive jobs in the public
sector and simplify the framework of its job structure. Vocational training could be given to low skill-set workers, with their salaries still subsidized by the
government. With such training, governments would help the private sector
implement nationalization quotas by subsidizing the training and required skills needed for replacing expatriates.
GCC governments should
allocate more of their budget towards education
expenditure
To better govern the
increasing number of schools, the number of
administrative education
committees should rise
There is no doubt that GCC
countries could attract global tertiary education standards
in the region
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Government workers transferred to the private sector could have half of their wages subsidized by the government for a specific time period. The implication
behind this time period is for employees to easier accept longer hours with their
salaries still unchanged, as they would otherwise drop in the private sector. Private employers will take the time to train the new employee and face a lower
opportunity cost for replacing expatriates with the higher skill-sets and lower wages. In return, the saturation of the public sector will decrease and its
efficiency will increase, clarifying the regulatory framework given to the private
sector.
To better control the flow of expatriates, governments should be stricter with employers’ foreign employees’ visa applications. Before accepting an expatriate workers’ visa application, stricter guidelines for applying should impose
employers to specify the job position, specialization and the necessary skill in the expatriate that nationals lack. One of the criteria for accepting to process
the visa would also verify that the employers seek expatriate’s employment only after advertising the job opening to nationals and only after an extensive search
in the national labor market for such skill. Governments would have a clearer idea of the training needed to provide nationals with the skills of professional
jobs, and could choose to afford it when necessary.
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Appendix 1: MENA Statistics
Country Population Median Age
Internet users GDP
Inflation (%)
Poverty Rate
Current Account Balance
Public Debt
External Debt
Foreign Reserves
Unemployment (USD Bn)
(mn)
% under 25
yrs % (mn)
(USD
bn)
Per capita
($)
(USD
Mn)
(%)
GDP % GDP % GDP
Algeria 34.5 50% 27 10 4.7 172 4,762 5.50 23% 7,010 0.9 - 3.7 161
Egypt 80.5 36% 24 15 20 239 2,998 12.00 20% -4,318 -1.5 74.7 18 35
Jordan 6.4 58% 22 9.2 1.6 30 4,746 11.70 20% -1,711 -5.9 68.3 61.2 14
Libya 6.4 63% 24 15.3 0.35 85 12,951 5.10 25% 15,908 15.9 1.8 6.1 124
Morocco 31.6 50% 27 14.6 13.2 96 2,987 9.50 18% -4,259 -5.2 49.9 28.8 24
Syria 22.1 59% 22 13 4.4 66 3,110 5.50 14% 299 1 - 10.3 -
Tunisia 10.5 42% 30 1.6 3.5 46 4,274 4.10 N/A -2,071 -6 42.1 47.2 9
Yemen 23.4 53% 18 30 2.2 33 1,319 4.50 30% -2,565 -9.7 - 25.5 -
Iran 76.9 50% 26 9.6 8.21 342 4,467 1.50 15% 13,248 3.1 - 4.1 78
Iraq 26.67 49% 20 15 1.2 93 2,827 4.40 N/A 27,133 31.4 - - -
Kuwait 2.5 33% 29 0.5 1.1 128 34,743 1.00 N/A 44,957 38.1 9.9 26.5 21
Saudi Arabia 23.68 51% 25 10.5 9.77 476 17,840 9.80 N/A 49,259 10 10 22.7 507
United Arab Emirates
4.77 59% 30 10.9 3.45 255 48,990 5.50 12% 15,709 9.2 26.4 60 54
Bahrain 1.11 44% 31 13.2 0.42 24 21,605 5.00 4% 1,795 6.6 37.5 132 4
Qatar 1.45 35% 31 2.4 0.56 158 89,320 4.50 N/A 9,908 6.5 12.1 71.5 26
Oman 2.87 67% 24 35 1.47 59 19,135 2.00 45% 4,642 5.1 4.7 22.1 15
Source: IMF, IIF, World Bank, CIA World fact book and Markaz Research
MARKAZ RESEARCH June 2012
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