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Emiratisation Can Affect the SME Growth

Emiratisation in UAE

All over the globe countries have turned their interest and attention towards SMEs (Small and medium sized enterprises) which is helpin in stabilizing economy for better recovery. In the GCC and MENA Region however, the issue of employee nationalization programmes implementation has become region specific and currently grabbing front page headline.

This region heavily relies on foreign labour. If we look over the past four decades the societal transformation, rapid economic growth and influx of expats is necessary to cope up huge demand in the market and occupying around 80% of jobs in emirates.

To ensure proactive jobs and employment Emiratisation or in other words Employee nationalization programs have been devised in the public and private sector so that the knowledge and the skills could be transferred from expatriates to citizens.

Due to desirable work condition and good compensation packages, national job seekers are preferring public sector positions. The ration in private sector is 5:1 if we compare expatriates to GCC nationals. These stats are provided by the IMF recent research.

However, regional countries have now emphasizing on private sector creation sectors pioneered by nationals to shift adequate skill sets and construct knowledge based economies,

The National Agenda of UAE Vision 2021 stipulates the new goal in which country’s recent number of UAE nationals who are working in the private sector will be increased tenfold by 2021. For this reason the government has starting training young Emiratis by various programs to teach skills required in private jobs.

Subsidies are offered to the companies to encourage them in hiring and keeping Emirati staff. Whichever tactics are being used, the results are variably successful as many giant private companies and large corporations are opting for the employee nationalization. According to a report published by Khalifa Fund for Enterprise Development, 2-3% of non nationals are unemployed but the ratio is higher among the UAE nationals with 14% unemployed.

Now the solution could be offered by SMEs as they are already employing up to 17 million personnel in the region. They can easily generate employments but a major obstacle is that Emiratisation requirements are not applied currently in the free zones including DIFC, where majority of the SMEs are operating in the country. Government has raised the voice to strictly enforce this program on numerous occasions in free zone based businesses.

Few companies, who are conducting their operations in free zone, took this program as a form of tax. The major reason of attraction is the 100% ownership and tax free environment. That is why they are reluctant towards this implementation as previously Emiratisation was based on quotas and numbers.

Another element which causes hindrances is incentives. The hiring cost of Emiratis is high. They do not have enough investment to grow as they cannot get a bank loan unless they complete the operating time of 3 years. If we see the stats, within 3 years 6-7 SMEs shutdown out of 10. This could increase the job insecurity and major reason why Emiratis don’t prefer SMEs.

The UAE Labour Law No. 8 of 1980 stipulates that expats or non national in the region should only be recruited if suitable and qualified UAE national is not available. The Emiratisation program was begun in 1996, when it was enforced to hire at least 4 national in the banking sector which increases up to 48% by four points increment every year. Later in 2005 it was expanded and also covered the private sector including insurance and retail. The bank was obliged to hire 4%, insurance companies 5% and commercial entities 2%. TANMIA, The National Human Resource Development and Employment Authority was established to conduct and assist Emiratisation and also provided resourceful training and guidance to Emiratis.