The new mandate for recruiting only local nationals is part of the United Arab Emirates’ three-year program for reshaping its workforce. The government estimates that more than 21,000 jobs will open up for UAE citizens under the new measures--671 HR jobs and 20,865 secretarial positions. But with qualified local nationals in short supply, recruiters face a huge challenge.
Staffing foreign locations means stepping into the mercurial world of government regulations, where quotas for expatriates may change with little or no notice. In some countries, such as Kazakhstan, where global companies are investing billions, the government is easing restrictions on the number of work permits available for expatriates. In 2005, Kazakhstan increased the number of permits to 0.32 percent of the economically active population, up from 0.21 percent in 2004 and only 0.14 percent in 2003.
Taiwan is under pressure to ease restrictions on hiring foreign workers, and calls for deregulation are growing in South Africa, where affirmative action and employment equity plans may be at odds with the need for rapid economic growth. In July 2006, Malaysia announced that it is lifting its ban on recruiting workers from Bangladesh to address new local labor shortages.
But in other locations, governments are taxing companies that hire foreign workers, cutting quotas and eliminating work permits for specific jobs. In July 2006, Singapore significantly raised the monthly tax paid by companies that recruit foreign workers. India’s initiative for caste-based hiring quotas is a growing concern for companies operating there. In the United States, the ongoing debate about immigration raises the fear factor for both domestic and foreign companies that are unable to meet their recruiting needs with local nationals.
Particularly in the Middle East, recruiters face a rapidly changing regulatory landscape, with a general trend toward tighter restrictions on who can be hired for specific positions. Evaluating sites, conducting accurate labor market analyses and recruiting the best candidates are becoming particularly difficult in high-growth areas such as Dubai.
The UAE Labor Ministry plans to systematically expand the number of industries and positions covered by its Emiratisation regulations, which establish minimum requirements for the number of UAE citizens employed in certain jobs. The regulations now cover most positions in the banking, insurance and trade sectors. As the regulatory reach broadens, recruiters must sign on sufficient numbers of local nationals to meet the quotas or face dangerously high levels of open positions.
Like many multinationals, Sirva Inc., one of the world’s largest relocation providers, sees the Middle East as a strong emerging market. GDP growth in the UAE is projected to hit 6.8 percent this year, with the Dubai area growing at more than twice that rate. More than $10 billion in foreign direct investment flowed into the UAE in 2005.
Sirva opened a new service center in Dubai this year to bring its relocation services close to the growing number of client companies that are expanding into the UAE and other Persian Gulf-region nations. The Westmont, Illinois-based company, with $3 billion a year in revenue, has targeted the Middle East, along with China and India, for its global expansion program.
Sirva initially staffed its new Dubai office with expatriates. But like other foreign companies operating in the UAE, it is now subject to the new Emiratisation standards.
"Recruiting in Dubai is tough," says Mark Blumenthal, Sirva’s COO for global assignment services. "We hired a senior-level executive as the general manager for the region, and she will hire her own teams. The Dubai office will be staffed with expats and local nationals, but the number of local nationals may be quite limited because of the labor shortage in Dubai."
UAE nationals are currently employed almost entirely in the public sector. Only 2 percent of UAE nationals work for private companies, which account for more than half of all jobs in the UAE. But all this is about to change as the government increasingly forces foreign companies to rely entirely on local nationals for most or all jobs.
The UAE Labor Ministry’s database includes information on 30,000 unemployed citizens, and the Emirates produce 30,000 new college graduates a year, but local nationals commonly demand higher salaries than expats and may need substantially more training. Recruiters face a long-term shortage of suitable local candidates.
Web-based job boards and search firms are springing up in Dubai to help foreign companies with the transition to a local workforce, but recruiters are still coming up short. The government provides free university education, and 95 percent of female and 80 percent of male secondary school graduates go on to college--some of the highest rates in the world. But new graduates prefer positions in the public sector, where pay and benefits are more lucrative.
Allan Schweyer, executive director of the Human Capital Institute, based in Washington, D.C., reports that the Emiratisation program was a hot topic at the April 2006 Middle East Talent Management Conference in Dubai. From his office in Montreal, Schweyer recalls that both foreign and local HR executives at the conference questioned whether it would be possible to meet the mandates for recruiting only local nationals.
"Generally, there is a labor shortage in Dubai, which is now the fastest-growing city in the world, with construction crews working around the clock," Schweyer says. "There are serious skilled and managerial talent shortages in other emerging markets, but the political environment in Dubai just makes the shortage there more difficult to deal with."
"The problem is that generally, domestic UAE workers are not prepared," Schweyer says. "They simply don’t have the skills, and placing locals in lower-level positions is not really acceptable. And because qualified locals are in such short supply, there is high attrition among them."
Schweyer believes that the new regulations concerning HR managers may be impossible to meet.
"A lot of training will be necessary," he says. "Companies may have to meet the regulations by putting locals into figurehead positions, but this is an expensive proposition. The requirements are going to cause extra costs and cultural adjustments."
The Labor Ministry says that the shift to local nationals for HR manager positions is particularly important because it believes that UAE citizens in those positions will be more likely to recruit other local nationals. Although the government has stepped up its own training programs to prepare local nationals for private-sector jobs, it has acknowledged that the results have been mixed.
No rest for recruiters
Like other global companies, Sirva is moving into high-growth emerging markets where the regulatory environment can be particularly complex.
"When we looked at growth areas for relocation services based on demographics and wealth, we put China, India and the Middle East on our shortlist for expanding our service capabilities," Blumenthal says.
In addition to Dubai, Sirva has operations in nine Asia-Pacific markets–-Auckland, New Zealand; Beijing; Hong Kong; Kuala Lumpur, Malaysia; Melbourne and Sydney, Australia; Shanghai, China; Singapore; and Tokyo. The company conducts more than 300,000 relocations per year through 27 service centers in more than 40 countries with more than 5,000 employees and an extensive network of agents and other service providers.
Sirva rarely uses a search firm.
"The relocation industry is fairly incestuous," Blumenthal notes. "Companies know their competitors and who is working where. We are beginning to broaden our profile for new hires to include people with a strong service background from outside the industry."
Senior leaders are recruited and hired by Blumenthal, and then build their own teams locally. Position descriptions and core requirements are global, but recruiting below the senior leadership level is handled though each service center.
The incestuous approach to recruiting in the relocation industry may work well for established locations, but staffing new sites is a different story. "Local expertise is crucial to find the right people," Blumenthal says. "We want to build the local national staff in all our locations. Expats can only do so much."
The company’s recruiters look for applicants with global mobility and multilingual skills. "We prefer local nationals for service positions because they can provide clients with a specific knowledge," Blumenthal notes. "Expats work within limitations."
But like most multinationals, Sirva’s recruiters find it increasingly difficult to fill management jobs.
"The shortage of managerial talent is real," Blumenthal says. "Companies that moved into the high-growth overseas locations early on are now under seige. They recruited and trained talent, and then newer companies moved in and poached from them, so retention has become a key issue."
Because of the shortage of experienced managerial talent, Sirva’s recruiters are bringing in more workers at the entry level and then training them to move up in the organization.
"Truly, the conundrum is that there is a massive supply of labor, but not with the right skills," Blumenthal explains. In the second-tier cities in China, companies commonly use a mix of expats and local employees, but he notes that the local nationals in these locations are still adjusting to working with expats. In first-tier cities like Shanghai, companies such as Sirva are able to staff their offices entirely with local nationals.
Schweyer notes that India is also starved for middle managers, and government requirements for reserving education and employment opportunities for lower-caste citizens complicate the labor shortage. "The government is undertaking a big initiative to move more workers from the lower castes into the educational institutes that feed skilled positions," he notes. "This is a big concern for employers and candidates who may encounter restrictions in accessing these institutes."
Regulating recruitment and hiring in the emerging nations may be necessary to correct severe and damaging imbalances in local labor markets, Schweyer says. But making these corrections will be a long process, and recruiters will have to pay close attention to ever-changing hiring regulations along the way.