Dubai could create its own demographic dividend

September 26, 2016

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.

The solution to Dubai’s economic challenges might be right under its nose. The tiny emirate, the most diversified sheikhdom in the Gulf, has been affected like most of the region by low prices for the oil exported mainly by its neighbours. One way to offset that impact might be to address an imbalanced workforce that is too reliant on expatriates. They make up 22 out of every 23 active workers, according to calculations based on official data. Dubai could even do worse than turn some of its skilled foreign workers into actual citizens.

About half of Dubai’s $143 billion pile of debt has to be repaid by the end of the decade, according to the International Monetary Fund. That is almost double the United Arab Emirates’ forecast revenue from exporting oil this year. One of seven semi-autonomous sheikhdoms in the U.A.E., Dubai has endured the 53 percent fall in oil prices over the past two years relatively unscathed, but some belt tightening is inevitable. The Financial Times reported on Sept. 12 that Istithmar World – a government investment company – has made most of its staff redundant to save money.

Click the image for an interactive graphic:

dubai1.15

Yet Dubai needs more people working, not fewer. The emirate depends almost entirely on foreign expatriates to make its service-driven economy function. Emiratis account for just one in every 23 active workers over the age of 15 – and 55 percent of those are government bureaucrats, or soldiers, according to official employment survey data for 2015 analysed by Breakingviews.

Getting citizens to work in a process called “emiratisation” has proved difficult. More than half of the estimated total Emirati population of 159,000 who are over 15 years old were considered economically inactive last year, despite only 2,154 being classed as unemployed. Some may not want to work, while others may not have to because of private wealth, or generous government handouts such as free housing and energy subsidies.

Were Dubai to offer citizenship to skilled foreigners, thereby increasing their prospects of upward career mobility, skilled employees would lay down roots. They might consume and invest more. The labour market would become more competitive. Current citizens might not like the idea, but without a more vibrant local economy, the lifestyles they take for granted may be harder to sustain.

 

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