11/10/2018 08:37 AST

Gulf Cooperation Council (GCC) countries’ labor market nationalization policies aim to provide more jobs for a rapidly growing population, but they are also likely to raise labor costs and hamper diversification, Moody’s Investors Service said in a report released Wednesday.. The report, “Sovereigns – GCC, Labor Market Nationalization” aims to curb unemployment but may raise labor costs and hamper diversification.”

Rapid GCC population growth is leading to increased demand for jobs as new entrants join the market and only modest numbers of workers retire. Social changes will compound higher employment demand, particularly if more women enter the workforce, the report noted.

Relative to the current size of the job market, the number of new jobs for nationals needed in the next two decades to meet labor market and social objectives is highest in Saudi Arabia (A1 stable), Oman (Baa3 negative) and to a lesser extent Kuwait (Aa2 stable).

“The size of the challenge is greatest where nationals comprise a relatively large share of their total populations, unemployment is relatively high, and there is less capacity to absorb new entrants into the public sector. Among the GCC these conditions apply to Saudi Arabia and Oman in particular”, said Thaddeus Best, a Moody’s analyst and co-author of the report.

By contrast, despite their young demographics, pressures are less marked in the UAE (Aa2 stable) and Qatar (Aa3 stable), where expatriate numbers are higher relative to nationals which indicates greater scope to create jobs for nationals as long as skills requirements are met.

Nationalization strategies can have both credit positive and negative implications for sovereigns. It will be credit positive if these strategies are effective in providing wider job opportunities for nationals, while preventing a rise in unemployment and as a result maintain social and political stability.

However, large increases in public sector wage bills for the government to accommodate an increasing number of nationals in the administration would reduce fiscal flexibility and in some cases weaken fiscal strength.

Bans and quotas could increase labor shortages, while a rise in labor costs as the private sector at least partially closes the wage gaps with the public sector in order to employ nationals would hamper competitiveness, the report further revealed.

Tensions could rise if the nationalization plans fail to increase employment sufficiently. Nonetheless, the authorities will find it challenging to create sufficient private sector opportunities to halt rising unemployment, at least over the near-term, the report added.


Saudi Gazette

Ticker Price Volume
QNBK 196.99 124,786
APPC 53.30 133,976
SAICO 11.92 520,367
SABIC 119.80 1,240,718
JARIR 154.40 89,382
STC 84.50 76,808
ALMARAI 50.90 239,969
Saudi tech startup sector rapidly evolving to help in economic expansion

10/12/2018

Saudi Arabia’s tech startup ecosystem may be nascent, but is rapidly evolving to support economic growth, a new report by Wamda, in collaboration with OC&C Strategy Consultants, shared at the Riyadh

Saudi Gazette

Leading Emirates health care, education investor eyes Saudi Arabia

10/12/2018

Since launching Foundation Holdings in 2016, Abhishek Sharma has scoured the GCC and India for investment opportunities. Now, the prominent UAE health care and education investor is closing in on ta

Arab News

Qatar Chamber, Indonesian delegation discuss promoting cooperation

10/12/2018

The Qatar Chamber (QC) has discussed prospects of promoting cooperation in different investment fields, with a visiting Indonesian trade delegation headed by Head of Investment Division at the Indone

The Peninsula

Boosting trade & investment key to GCC growth: IMF

10/12/2018

Trade and investments are key to the diversification and growth in the GCC. Diversification of the GCC economies, supported by greater openness to trade and higher foreign investment, can have a larg

The Peninsula

Economic recovery expected to improve profitability of GCC banks in 2019

10/12/2018

The GCC banking sector is set for improved profitability, better asset quality and stable balance sheet strength in 2019, thanks to a better operating environment supported by higher government spend

Gulf News