Listening to the din at the Caribou Coffee shop in Dubai one hears a smorgasbord of languages. From Arabic to English and Hindi, even the occasional smattering of Japanese can be heard here.
"Dubai doesn't have one face, it has a hundred different faces," said Ahmad Waarie, general manager of Watson Wyatt Middle East in Dubai.
The scene is repeated around the Gulf, the result of booming economies and small populations.
"The wealth potential inside the UAE [United Arab Emirates] is vast [but] the population is very small," said Simon Williams, HSBC's chief Gulf economist. "There are simply not enough Emiratis to build a workforce that can fulfil the country's economic potential. There will always be a need to import a very large proportion of the labour force whether it's unskilled, semi-skilled or skilled."
This situation has led the Gulf Cooperation Council (GCC) countries to put their comparative financial advantage to work to import the labour necessary for their economies to thrive, with Dubai as its poster child.
"Look at the average organisation here, there is probably an expat population of at least 80%," said Markus Wiesner, market leader at the human resources consultancy Mercer in Dubai.
Now, with the economic crisis reducing growth estimates for Dubai and the UAE to 6% in 2009 from a peak of 9.4% in 2006, according to Morgan Stanley Research, companies are cutting back.
"Companies were hiring because of the huge boom, but then things slowed down a little bit so they stopped hiring and laid-off some of the extras," said Waarie. "They always overstaff a little bit in anticipation of future growth."
A crisis of labour
In February, the UAE labour minister Saqr Gobash announced a measure making it all but impossible to lay off an Emirati employee. But the government did not offer any protection to foreign workers.
According to Waarie, layoffs in Dubai have hit two labour groups the hardest: unskilled workers in real estate and its ancillary industries; and high salary earners. Both are composed largely of foreigners who, if laid off, must leave the UAE within 30 days.
While exact data on layoffs are unavailable, anecdotal evidence -- including hundreds of cars left abandoned at the Dubai airport and thousands of bulk flight bookings one-way out of the emirate -- reaffirm experts' assessments that foreign workers are leaving the UAE in their droves.
Ironically, the crisis has yet to have a notable effect on UAE nationals -- the group the government has stepped up to protect. In fact, the protection itself may do more harm than good, according to the International Labour Organisation (ILO), which reported in April that the measure could harm private businesses' ability to recover from the global economic crisis.
Emiratisation
Employment protection for nationals is nothing new to the UAE. Since the early 1990s, the government has had in place an 'Emiratisation' programme to ensure jobs for citizens in all sectors. "It is unacceptable that [more] nationals are either unemployed or underemployed," said Lubna Al Qasimi, UAE minister for economy and planning, in a 2007 McKinsey Quarterly interview. "The private sector therefore cannot be left unregulated. Hence the Emiratisation programme."
Wiesner describes the programme as one of simple quotas: "The percentage [of Emirati employees] varies hugely by industry sectors. Something like 1% to 2% in hospitality to 20% or even more in banking and 50% and above in oil and gas".
But despite almost two decades of Emiratisation, UAE nationals as a group remain significantly more unemployed or underemployed than their foreign cohorts. According to the Ministry of Economy, 12.7% of Emiratis were unemployed in 2008 versus 2.6% of foreigners, which is not surprising given the requirement for unemployed foreign workers to leave the country within 30 days.
The Emiratisation policy is widely seen as a positive, but it is not without its problems. "Some businesses will hire Emiratis just to be a driver or even pay them to stay home simply so they can meet their quota," said one local businessman.
"The basic idea of bringing local people into the workforce is clearly a good one [but] the quota regulation per se is probably not the right way to execute it," said Wiesner.
"In the UAE, as elsewhere in the region, there is an interest to safeguard the needs of local workers," noted Williams. But "while there may be additional measures introduced to enhance the position of the local workforce, this has to be coupled with some [much needed] heavy investments in education and skills upgrades for the local workforce."
Knowledge deficit
Decades of inadequate government investment in education has left a dearth of qualified UAE nationals to fill the country's skilled labour needs. In 2003, a United Nation report found the Middle East experiencing a "knowledge deficit". Since those findings, several countries, including the UAE, have jumped to action. Numerous new facilities, including Dubai's knowledge and academic cities, Abu Dhabi's Masdar Institute of Science and Technology (a partnership with the Massachusetts Institute of Technology) and various primary and secondary schools, are currently under construction or about to open.
"It's fantastic that there is a lot of investment going on. It's one of the key priorities on the agenda of the [UAE's] ruling family," said Wiesner. "But it will take another 10 or 15 years before those people come into the job market on a large scale."
This year, the UAE has budgeted Dh9.7 billion ($2.6 billion), nearly one-quarter of the federal budget, for education.
"Skilled UAE nationals are only available in limited numbers and they're always going to be," said Waarie. "What the government has done and is doing in education is more than enough. What needs to be done is [private] organisations need to play an active role creating professional development opportunities for nationals."
"Most UAE nationals today are [already] in the professional category," he continued. "But when they enter into the workforce, additional professional training is needed."
The challenge facing the UAE is to find the balance between satisfying the needs of the local population - smart government policy anywhere - and continuing to support a business environment that encourages growth.
"As long as the economy is doing very well, there will always be a demand for foreign labour," said Waarie. "The relationship between the economy and the expat population is correlated. In the next 10 or 20 years [the UAE] will still need significant numbers of expat labour."
And so, while there is a mass exodus at the moment, many say they expect a return of expats once the economy turns around.
We will not see a [dramatic] shift away from expats," said Wiesner. "There might be a percentage shift from 80-20 to 75-25 in the near future but if the economy picks up again we may see a shift back to earlier percentages. "There is no way possible that this country could survive without having any expat labour."
