Handouts thwart UAE drive for Emirati-run economy
Tuesday, 9 October 2007
Matthew Brown
Sheikh Mohammed bin Rashid al-Maktoum, prime minister of the United Arab Emirates, envisions his country as a world-class financial hub run by Emiratis. Government financial support is undermining that goal.
All 800,000 Emirati citizens get free education and health care, and subsidized utilities. Emirati men can claim free land and no-interest loans to build homes. Other benefits include a $19,000 payment toward wedding costs.
The handouts, based on traditions of royal patronage dating back centuries to Bedouin society, now discourage citizens from working, academics say. Expatriates outnumber Emiratis and dominate fields such as banking, law and technology. The quandary for Sheikh Mohammed is how to reduce the culture of dependence without alienating his people.
``The relationship between work and income is broken,'' says Kenneth Wilson, Dubai-based director of the Economic and Policy Research Unit at Zayed University, a school for Emirati women that opened in 1998. ``That's unlikely to change until the government starts trying to give incentives to work in the private or corporate sector.''
Thanks largely to the country's oil-fueled economic boom, the average male Emirati receives benefits worth about 204,000 dirhams ($55,500) a year, according to the university's research.
Khalid Saeed, 30, is building a villa on a 15,000 square- foot plot of land he received free from the government.
Saeed, who has a bachelor's degree from U.A.E. University and a master's from Heriot-Watt University in Edinburgh, is living with his parents until his villa is built. Their house sits on a 40,000-square-foot plot, and has enough room for Saeed, his wife and three daughters, as well as his brother and his wife. Rooms at the back are rented out to Asian workers.
``The biggest expense in our lives is taken care of,'' says Saeed, who works as a planning manager for state-owned Dubai Properties, where he helps coordinate residential and commercial real-estate projects.
Eighty percent of employed Emiratis work directly for the government, and most of the rest work for state-owned companies, according to government statistics. Fewer than 10 percent have jobs in private industry, and many of those who do were hired under a government quota system.
Most U.A.E. citizens lack the skills to compete with expatriates for jobs, according to the International Monetary Fund's latest report on the country, published in 2005. Two- thirds of nationals who graduated from university between 2000 and 2003 earned degrees in the arts, education and religion, the report showed.
Because the law requires U.A.E. companies to be majority- owned by locals, most businesses have Emirati chairmen and chief executive officers. Yet only one of the 28 members of the Dubai Financial Market General Index has an Emirati chief financial officer.
``The CFO needs more hard knowledge in terms of accounting and compliance, which many of today's Emiratis don't have,'' says Eckart Woertz, an economist at the Gulf Research Center in Dubai, which focuses on social, economic and political change in the Middle East.
Citizens make up less than a fifth of the U.A.E.'s 4.3 million residents. They account for 3 percent in Dubai, the second-largest of the state's seven sheikhdoms, Wilson says.
The proportion of citizens dropped as the labor force more than doubled in the decade through 2004, reflecting the economy's shift away from oil into finance, real estate and tourism.
While people have piled into the U.A.E. to work as laborers, housemaids, bankers and executives, the National Human Resources and Development Authority estimates unemployment among Emiratis is 17 percent.
In an April speech in the capital, Abu Dhabi, Sheikh Mohammed pledged to improve the education system and reduce quotas for hiring nationals to encourage locals to increase their qualifications.
``The government strategy seeks to move from the concept of social welfare to social development,'' he said in the speech.
Sheikh Mohammed has already implemented some changes. Beginning last July, civil servants started working an hour longer each day, from 7:30 a.m. to 3:30 p.m.
Government benefits are a holdover from a time when the sheikh's ancestors gave gifts to Bedouin tribesmen to ensure their allegiance, says Wilson of Zayed University. For Emiratis, such reciprocity is ``well-ingrained in their psyche,'' he says.
More significant steps to reduce privileges for Emiratis may be met with resistance, says Anthony Harris, a former U.K. ambassador to the U.A.E. who lives in Dubai.
`Bloomberg
Sheikh Mohammed bin Rashid al-Maktoum, prime minister of the United Arab Emirates, envisions his country as a world-class financial hub run by Emiratis. Government financial support is undermining that goal.
All 800,000 Emirati citizens get free education and health care, and subsidized utilities. Emirati men can claim free land and no-interest loans to build homes. Other benefits include a $19,000 payment toward wedding costs.
The handouts, based on traditions of royal patronage dating back centuries to Bedouin society, now discourage citizens from working, academics say. Expatriates outnumber Emiratis and dominate fields such as banking, law and technology. The quandary for Sheikh Mohammed is how to reduce the culture of dependence without alienating his people.
``The relationship between work and income is broken,'' says Kenneth Wilson, Dubai-based director of the Economic and Policy Research Unit at Zayed University, a school for Emirati women that opened in 1998. ``That's unlikely to change until the government starts trying to give incentives to work in the private or corporate sector.''
Thanks largely to the country's oil-fueled economic boom, the average male Emirati receives benefits worth about 204,000 dirhams ($55,500) a year, according to the university's research.
Khalid Saeed, 30, is building a villa on a 15,000 square- foot plot of land he received free from the government.
Saeed, who has a bachelor's degree from U.A.E. University and a master's from Heriot-Watt University in Edinburgh, is living with his parents until his villa is built. Their house sits on a 40,000-square-foot plot, and has enough room for Saeed, his wife and three daughters, as well as his brother and his wife. Rooms at the back are rented out to Asian workers.
``The biggest expense in our lives is taken care of,'' says Saeed, who works as a planning manager for state-owned Dubai Properties, where he helps coordinate residential and commercial real-estate projects.
Eighty percent of employed Emiratis work directly for the government, and most of the rest work for state-owned companies, according to government statistics. Fewer than 10 percent have jobs in private industry, and many of those who do were hired under a government quota system.
Most U.A.E. citizens lack the skills to compete with expatriates for jobs, according to the International Monetary Fund's latest report on the country, published in 2005. Two- thirds of nationals who graduated from university between 2000 and 2003 earned degrees in the arts, education and religion, the report showed.
Because the law requires U.A.E. companies to be majority- owned by locals, most businesses have Emirati chairmen and chief executive officers. Yet only one of the 28 members of the Dubai Financial Market General Index has an Emirati chief financial officer.
``The CFO needs more hard knowledge in terms of accounting and compliance, which many of today's Emiratis don't have,'' says Eckart Woertz, an economist at the Gulf Research Center in Dubai, which focuses on social, economic and political change in the Middle East.
Citizens make up less than a fifth of the U.A.E.'s 4.3 million residents. They account for 3 percent in Dubai, the second-largest of the state's seven sheikhdoms, Wilson says.
The proportion of citizens dropped as the labor force more than doubled in the decade through 2004, reflecting the economy's shift away from oil into finance, real estate and tourism.
While people have piled into the U.A.E. to work as laborers, housemaids, bankers and executives, the National Human Resources and Development Authority estimates unemployment among Emiratis is 17 percent.
In an April speech in the capital, Abu Dhabi, Sheikh Mohammed pledged to improve the education system and reduce quotas for hiring nationals to encourage locals to increase their qualifications.
``The government strategy seeks to move from the concept of social welfare to social development,'' he said in the speech.
Sheikh Mohammed has already implemented some changes. Beginning last July, civil servants started working an hour longer each day, from 7:30 a.m. to 3:30 p.m.
Government benefits are a holdover from a time when the sheikh's ancestors gave gifts to Bedouin tribesmen to ensure their allegiance, says Wilson of Zayed University. For Emiratis, such reciprocity is ``well-ingrained in their psyche,'' he says.
More significant steps to reduce privileges for Emiratis may be met with resistance, says Anthony Harris, a former U.K. ambassador to the U.A.E. who lives in Dubai.
`Bloomberg