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Nationalization of the Omani workforce

Introduction

The AGCC states are not alone in identifying the need to provide income through labour as a major policy issue. The World Bank is highlighting a global crisis in youth unemployment.

“Youth unemployment, the theme of this year’s International Youth Day, is one of the biggest challenges facing most countries. According to the International Labour Organization, in 2002 young men and women made up 41 percent of the world’s unemployed, amounting to an estimated 74 million people. ( ) There is a strong case for supporting a strictly economic rationale for investing in youth. The costs of neglecting youth can be measured in terms of depletion of human and social capital and in terms of lost growth.”

No government desires the problems that unemployment brings in its wake – disaffection, the rise of poverty and increased crime. At the personal level, work not only provides a livelihood, but also ‘anchors’ the individual within a society that recognises his or her identity based on occupation and income level.

A society with high unemployment is economically inefficient. Each earning member of the labour force contributes to gross domestic product. In the past, unwaged dependents (for example, women, children and the old) have been ostracised simply for being non-earning. The view often taken was that they absorbed resources without appearing to contribute to them. Happily, this view has become outmoded particularly in the light of His Majesty’s support of women as active members of a working society, and recognition that the future of the state depends on its support of its children.

Unemployment

Unemployment is a real and worrying issue. Khalil bin Abdullah Al Khonji, secretary to the Businessmen’s Council, stated last year that unemployment in Oman stood at 9%. For the Gulf as a whole, unemployment is reckoned at 5% of the total labour force, but 18% of the national labour force.

Oman’s population is growing at something like 3% per year and may reach 5 million by 2050. Currently, some 40% of the population is aged 15 or under. According to Economic Trends in the MENA region, (ERF, Cairo), Oman is experiencing the second highest rate of growth of young people between 15 and 24 in the MENA region. 591,502 students are enrolled in school for this academic year alone. These young people are going to want the opportunities to build a better life for themselves and their own families. The opportunities to earn an income are not going to be equal.

Figures from a recent report by the International Labour Organization (2003) show that the rate of increase of the population of Oman is higher than the rate of increase of its economy. This means that there will be less to share out between everybody in the future, unless each member of society has the means to become economically productive. It also means shedding expatriate employees who share the use of scarce land and water resources with the indigenous population, often paying less than the real cost of such resources. Most of Oman’s expatriates are employed in low income, low productivity occupations.

Expatriates send up to 70% of their earnings back to their country of origin. If the earnings are not very high in the first place, it can be hard to see that this is a significant drain on the economy. On the other hand, demobilising all expatriates would depress domestic demand and dampen economic growth.

It is not the domestic servant, nor the construction worker nor the oil pipeline worker who removes funds from the country of employment, so much as the long-term senior, expatriate manager who has formed a relationship with his Omani sponsor.

Training places

This summer, Sultan Qaboos University announced that it would only accept 2,400 candidates out of 41,568 matriculating from school this year. Where are the others going to find the training that they hope will equip them with the skills that will secure them a job or profession? Private universities, such as at Sohar and the planned Nizwa institution, will be able to accept other students, mainly for business administration, ICT and applied science courses. The private medical college in Muscat will be able to accept just 40 students, as will the new Oman Pharmacy College. It has been estimated that if the 14 private, licensed institutions can provide an additional 2,400 places, only 11% of matriculating students will be able to pursue higher studies. A few lucky students with families of means will study overseas. Other young people will attend the seven colleges of technology being established around the country where they can learn a trade and vocational subjects.

1,500 additional training places will be available through Ministry of Manpower programmes. The ministry is putting greater emphasis on the encouragement of entrepreneurship, self-reliance and direct training input from the private sector, as well as sponsoring training through approved training companies.

Late in July this year, the ministry signed pacts worth more than RO2.6 million with 10 local training companies to train 961 Omanis for the private sector in information technology, retail sales, operation of heavy vehicles, printing, printing design, photography, production and selling of printed materials, sea port operation and roles in hotels and tourism.

The most notable of the ministry’s programmes is the SANAD initiative established after the 1st National and Manpower Employment Symposium held at the behest of His Majesty Sultan Qaboos in October 2001.

The SANAD (Sanad means support in Arabic) programme aims to provide young Omanis with the confidence and means to become self-employed. To date, it has mostly been used to assist Omanis in taking foodstuff shops over from expatriates throughout Oman. Several major food companies have taken on trainees to demonstrate business and retail practices, bookkeeping and sufficient IT skills to operate a Point-of-Sale system.

The public sector

Government has absorbed many Omanis in the past but there is a limit to which the civil service can grow. For one thing, the civil service is not economically productive. It saps national income in order to pay salaries and build national infrastructure. Retrenchment of the government sector, for example, by retiring older employees, also has a follow-on effect on the private sector, which often finds that it has to downsize (ILO 2003).

Despite an acknowledged need to curb the growth of the civil service, 6,278 more Omanis were employed by government in 2002 than in 2001, albeit, many were recruited into education and health as teachers and nurses. Over 1,000 newly trained Omani junior nurses are expected to join the health service by 2004.

Company training programmes

There is much to praise in the drive to Omanise the private sector. Banking is already 95% Omanised. PDO predicts virtually full Omanisation by 2007.

Companies such as Galfar Engineering, Bahwan Engineering and the Omani Contractors Union have taken on young people to learn trades such as mechanics, welding or carpentry. OPAL (Oman Society for Petroleum Services) signed an agreement with government to train 1,000 Omanis in the oil and gas industry in December 2001, and secured further funding from the Ministry of Manpower in June 2002 to train a further 5,000 over the next five years. However, most employers still insist that they would prefer to train youngsters who have graduated from a college of higher technology. Applicants for skilled and semi-skilled work should at least have been through a course at a government training centre. Correspondents to the local press bemoan that this sort of training is often too little, too late.

It is evident that there aren’t enough training places for everyone, although the Ministry of Manpower is undoubtedly a driving force. There remain an untold number of young people who drop out of school without acquiring qualifications. The problem is worse for young women, given that the proportion of women in the private sector workforce is approximately 18%, and that women may not get the opportunities that young men do.

Omanisation targets

Despite original reservations by the World Bank, Omanisation targets have been set between the Ministry of Manpower and employers, following the 2nd National Manpower and Employment Symposium early this year.

• The Omanisation percentage of the transport and shipping sector will be increased from 26 to 77 per cent and IT sector posts to 25 per cent.
• Omanisation in the telecommunications sector should be increased from 25 per cent to 55 per cent.
• Omanisation in the automobiles sector is to be raised from 25 per cent to a minimum of 70 per cent and a maximum of 90 per cent within 12 years, depending on circumstances in each establishment
• Omanisation of the travel and tourism sector should be increased gradually to 83 per cent in aviation companies, 99 per cent in tourist restaurants, 80 per cent in travel and tourism offices, 75 per cent in hotels and 97 per cent in car rental offices.
• Omanisation in the contracting sector is to be raised from 15 per cent to 30 per cent in big companies (excellent, first and second categories).
• Omanisation in the electricity and water sector, 92% and 76% respectively
• Omanisation in the oil and gas sector will increase in producing and operating companies to 90 per cent, major contractors (direct) to 90 per cent, major contractors (assistant) to 60 per cent, insider contractors to 60 per cent and in local communities companies the percentage should be increased to 50 per cent
• Omanisation of engineering drawing is to be increased by 70 per cent, land survey by 80 per cent, accountants by 60 per cent, engineers by 10 per cent and administrative posts by 90 per cent
• Administration and business directors are to be Omanised by 20 per cent at the end of the 7th year of the plan, 40 per cent at the 10th year, while specialist vocations should be Omanised by 40 per cent at the end of the 7th year and 70 per cent at the end of 10th year of the plan
• Technicians are to be Omanised by 50 per cent at the end of 7th year and 90 per cent at the end of the 10th year
• Clerical positions should be Omanised by 100 per cent within 3 to 5 years.

Most foodstuff shops are to be in the hands of Omanis by October 2003, and from 1st January 2004, only Omanis will be allowed to operate heavy machinery, plant, and cranes.

Education as the basis

Wherever you are in the world, the unqualified and the illiterate are those who are most likely to be out of work, and those who fall below the poverty line. This is why the current educational reform programme is so important in encouraging all youngsters to develop their curiosity, initiative and problem-solving skills. Yahya bin Saud bin Mansour Al Sulaimi, minister of education, said in July, “(The new) assessment system seeks to ensure that the student becomes active and interactive, participates and expresses his/her views, and analyses the learning situations, which he/she experiences.” The aim is to provide young people with the skills, outlook and qualifications, which will equip them for the working world.

Particular emphasis is being laid on providing ICT skills. In the middle to longer term, planners will have to consider that Omani IT professionals, programmers and computer technicians will be competing in a very strong IT outsourcing market, dominated currently by India, Russia and eastern Europe. Other Middle Eastern countries, such as Jordan and Egypt are also aiming for a major slice of this sector. At this point, wage differentials between Omanis and other nationalities become significant. Labour costs are likely to form a large proportion of a competitive tender.

Omanis in the private sector

The numbers of Omani workers in the private sector are increasing. 67,182 Omanis were registered with the Public Authority for Social Insurance at the end of March 2003, an increase of 2% (or 1,303) over the 65,879 registered at the end of 2002. These figures do not necessarily represent the total number of Omanis working in the private sector.

In the same period, the number of expatriate employees also increased by 6,620 from 547,477 to 554,097, a rise of 1.2%. The number of expatriate workers in clerical and sales occupations diminished slightly. Otherwise, numbers of expatriates grew marginally in administration, management, human resources, engineering, agriculture, industrial and scientific work and perhaps most surprising of all, service roles.

Why are employers continuing to take on more expatriates than Omanis, even when government has openly declared a policy of preference towards companies that have positive Omanisation policies? The World Bank report on Sustainable Growth and Economic Diversification for Oman stated, “private sector expatriate employers have revealed a tendency, for linguistic or cultural reasons, to favour their own nationals over Omanis when hiring new workers.” The report may be nine years old, but the sentiments may still be valid.

There are several ways of looking at this. Young people with qualifications and training will become disillusioned if they are put into roles in which there appears to be no career development. To be fair, many successful business people in the West have started as tea boys and messengers, but could see that through hard work, initiative and application, they could impress their co-workers and managers and forge their own paths through a company. Many young Omanis may not have been given a job in the first place. Companies which feel that they are being pressured into Omanisation, may too easily assign a role to a young Omani without preparing for his or her deployment within the firm.

A letter writer to the Oman Observer in April this year noted:

“Omanisation is not just one-sided; the employer or his representative must treat the employees with respect, explain to them the job, give them their job descriptions, set them targets, motivate them even with a “thank you” note for a job well done. Unfortunately, in most cases the new generation is left on its own when they first join their jobs, and seen as nuisances for asking (if they do so) or are given menial jobs (probably they are degree or diploma holders) and are demoralised by being considered “glorified farashes” to make photocopies.”

It is also true that there simply are not enough professional or technically qualified nationals to fill roles required to support the economy. It is this ‘gap’ that the government is striving to close with new training programmes, although professionals urge the need for mentoring from expatriate experts to Omani juniors. Young trainees do not become expert overnight.

Looking at the other side of the picture, an employer complained to the Times of Oman in July this year that the rate of Omanisation is too rapid, and that, for example, no employer would take on a van delivery driver who was not prepared to work 14 hours a day, six and a half days a week, in an un-airconditioned van at 50C. Rather than recommending that the conditions of work could be made more amenable, he suggested that Omanis would have to get used to working to such requirements. The implicit message was that this kind of menial role was better suited to expatriates of a certain skill level, who would accept the working conditions.

This speaker welcomed the support of the Ministry of Manpower for training and for putting employees on probation, saying that small and medium enterprises would find it the most difficult to provide training for Omani employees. He also acknowledged that where Omanis were willing to do menial jobs, they were less expensive than hiring an expatriate.

Above all, he believed that young people should adopt the attitude of ‘I can’, not ‘I will not do this’. “We need to get into the mindset of ‘we can’ and not, ‘we can’t’,” he said.

Such a viewpoint would seem to be equally applicable to company managements. ‘We Can Omanise’ rather than ‘We Can’t.’

There have been mixed results with the Omanisation of fruit and vegetable shops and markets and foodstuffs shops. Fruit and vegetables became unavailable when Omani staff were not prepared to maintain delivery or opening schedules. Allegedly, one in three foodstuff shops taken over in the SANAD programme are closing down, because the new owners have underestimated the length of time and effort needed to build up and develop a business. This is inexperience. It is not necessarily an indication of a permanent state of affairs. While the social impact of these particular changes appears to be severe, it is doubtful that they impact greatly on the macro economy.

Employment strategies

There is no one solution to provide full employment or nationalization of all jobs in an economy. Much depends on global economic trends as well as activity in the internal market.

Invariably, there is always a sector of society, which remains unqualified and unemployed, and consequently poor.

Perhaps the best that can be hoped for is to be able to balance growth in GDP with the uptake of relatively inexperienced nationals in the labour force. Thus it is vital to give priority to a national employment programme coordinated with economic development planning. Good information is key to effective monitoring and planning. Statistics on numbers of employees, division of employees between national and expatriates, wage differentials and productivity ratios in different occupations of national labour compared with expatriate labour are required. Political will and backing is then necessary to enforce required changes.

Both the World Bank and the International Labour Organization agree that bringing salaries and incentives in the public sector into line with those in the private sector would provide the most successful way of implementing nationalization of the workforce. But there’s a long way to go when public sector salaries can be double those in the private sector. The cost of raising all salaries to the same level as the public sector would be prohibitively expensive.

ILO projections for economic growth in the region up to 2010 suggest that it will not match the demands of new entrants into the labour market. The mismatch is particularly acute for oil-dependent economies, such as Oman. Countries with greater economic diversification are likely to have greater growth, such as Jordan, Sudan, Tunisia and the UAE, and will therefore be in a much stronger position to provide employment.

Economic growth can also be enhanced by foreign investment, but the indications in the MENA region as a whole are that it is not relatively attractive to investors. The World Bank warned that foreign investors would be unlikely to invest in Oman if it was perceived that Omanisation would increase costs of production, lower management efficiency and presage increased government intervention. “The hidden economic cost of reduced private investment would again be lower productivity and incomes for all Omanis.”

In fact, the government has been following World Bank recommendations inasmuch as:

• It has reformed the basic educational structure to improve the quality of education

• It is working to foster schemes run by private companies on the apprenticeship model

• His Majesty has told the Omani people unequivocally that government can no longer afford to take on more people in the public sector

• It is has so far tolerated a moderate amount of frictional employment amongst Omanis

• It is working to reduce private sponsorship arrangements between citizens and expatriate employees

• It has agreed with employers on targets for Omanisation within certain sectors

• It has obliged expatriate employees to obtain private medical services rather than using public services.

Additional measures recommended by the Bank were:

• Introduction of income tax for upper-middle to high earning Omanis

• Luxury taxes (which were introduced during a period of low oil prices, then withdrawn)

• Requiring Omani public servants to accept reduced, or no income for training in order that they might gain promotion. Public servants refusing training for skills upgrading could be forcibly retired.

• Replacing public grants for post-secondary education with student loans, or at a minimum, removing support from wealthy families whose children wished to study subjects which had no vocational objective

• Avoiding, as far as possible, increased labour costs in the private sector as a by-product of Omanisation

• Freezing public sector pay

• Fostering the elimination of public/private, Omani/expatriate wage differentials

• Introducing a system of recovering from expatriates and/or their employees the implicit taxes they impose on Omani consumers by driving up the cost of scarce resources.

His Majesty Sultan Qaboos’ address to the Council of Ministers on 28th September 2001 left no-one in any doubt that he had seen the future and that, without urgent action to encourage Omanis to take their own livelihoods into their hands, it was bleak.

“Work is no longer a personal hobby but it is indeed part and parcel of worship, and therefore it should be performed with sincerity, perfection and honour.”

Published with modifications in Oman Economic Review, September 2003