Emiratis are reluctant to enter the private sector where salaries are less than half those of government jobs.
Emiratis are reluctant to enter the private sector where salaries are less than half those of government jobs.

Securing prosperity for the next generation of UAE nationals



Throughout the Middle East and North Africa, officials are working to secure economic prosperity for future generations. In the UAE, the need for economic reform arises from a unique blend of demographics and challenges.

On close inspection, strains on the economy are already visible and threaten to deprive future generations of their share of prosperity. The need for reform is no less urgent because oil revenues have helped to hide structural imbalances and the region's economies, growing by an average of 9 per cent annually in recent years, display no urgent need for change.

But the current economic model of Emiratisation - the active participation of Emirati nationals in the economy - cannot last. Young, working-age adults account for a growing share of the population and are struggling to find jobs.

To secure their prosperity, governments must create a stable middle class, propelled by productive, high-quality jobs in the private sector.

The region should take significant steps away from a system in which citizens rely heavily on governments for their income. Research by McKinsey shows nationals receive on average 93 per cent of their household income either directly or indirectly from government revenues, mostly unearned income.

Almost all working nationals (90 per cent) are in government jobs, and about a third of their household income comes from wages that are very generous compared with similar jobs in other countries and the value they create.

An additional 16 per cent comes from government subsidies for education, health care, electricity, water and gasoline.

Slightly more than 40 per cent comes from other sources of unearned income, such as agencies, sponsorships and rental income from non-freehold properties. The remainder is investment income.

An over-reliance on unearned income and government contributions puts the future prosperity of the UAE at risk.

Subsidies - already Dh70 billion (US$19.05bn) a year - and government employment (four times more prevalent than in comparable economies) leave little room for further increases.

In the UAE, six out of 10 barrels of oil sold go towards financing day-to-day spending, mostly for public-sector salaries and subsidies.

At the same time, market liberalisation, freehold properties, special economic zones and competitive pressures have begun eroding other traditional income sources, such as agencies, rental income and sponsorship opportunities.

From every angle, the revenue model of national households is under threat. And while oil revenues are likely to allow the Government to continue this pattern, today's spending will come at the expense of future generations.

Cracks in the structure are visible. Unemployment has reached an average of 14 per cent and youth unemployment is estimated at 30 per cent.

Government jobs cannot absorb a growing workforce, and nationals are reluctant to enter the private sector, where salaries are, on average, less than half of those offered in the public sector.

At McKinsey, we believe action on five strategic themes will generate the momentum to move forward.

1 Increase wages to reflect real costs. As a rich region near much poorer countries, the UAE is a magnet for low-wage expatriate labour. In addition, the authorities depress labour costs by subsidising business expenses such as infrastructure improvements, utilities and health care. Reforms are needed to increase private-sector wages to reflect real costs, creating pressure for greater labour productivity and gradually shifting the economy toward higher value-added employment.

2 Partner with the private sector. In the UAE and elsewhere, employment programmes focusing on job seekers have failed to place more national workers into the private sector. Instead, governments should work closely with the private sector to anticipate future capability needs and stimulate demand for specific jobs. Such a shift requires private employers to accept their social responsibility and, rather than being compelled to hire nationals, work with governments to stimulate real demand for national workers that offer valued skills. Governments should reward companies that successfully bring UAE nationals into the private sector, creating an elite cadre that other companies will be eager to join.

3 Reduce bureaucracy. Labour markets are burdened with loose immigration rules but complex and restrictive labour market bureaucracy, creating multiple tiers of worker standards and ample opportunities for legal and illegal arbitrage. Regulations such as the sponsorship system block labour mobility, impede productivity improvements and distort the market further. The best solution is the mirror image of this model: tight immigration policies with a bias towards highly skilled expatriates and a more flexible, liquid internal market.

4 Convince the young. While the workforce must accept the transition, only a new generation of workers will completely embrace the new paradigm. Governments must communicate the new rules and model to the next generation of workers and create an incentive system that encourages them to accept the changed environment.

5 Acknowledge the pain. No economic transition benefits everyone. There are those who - because of a lack of skills, motivation or abilities, for example - are left behind. Governments should work to minimise the hardships faced by specific groups and distribute the suffering equitably.

The current model in the UAE may eventually prove unsustainable and threatens future wealth.

For a healthy economy, stable growth in household income must be supported by productivity increases and private-sector gains, rather than government largesse.

Jorg Schubert is a partner at McKinsey & Company's Middle East office and leads the public-sector practice in the region

The Facility’s Versatility

Between the start of the 2020 IPL on September 20, and the end of the Pakistan Super League this coming Thursday, the Zayed Cricket Stadium has had an unprecedented amount of traffic.
Never before has a ground in this country – or perhaps anywhere in the world – had such a volume of major-match cricket.
And yet scoring has remained high, and Abu Dhabi has seen some classic encounters in every format of the game.
 
October 18, IPL, Kolkata Knight Riders tied with Sunrisers Hyderabad
The two playoff-chasing sides put on 163 apiece, before Kolkata went on to win the Super Over
 
January 8, ODI, UAE beat Ireland by six wickets
A century by CP Rizwan underpinned one of UAE’s greatest ever wins, as they chased 270 to win with an over to spare
 
February 6, T10, Northern Warriors beat Delhi Bulls by eight wickets
The final of the T10 was chiefly memorable for a ferocious over of fast bowling from Fidel Edwards to Nicholas Pooran
 
March 14, Test, Afghanistan beat Zimbabwe by six wickets
Eleven wickets for Rashid Khan, 1,305 runs scored in five days, and a last session finish
 
June 17, PSL, Islamabad United beat Peshawar Zalmi by 15 runs
Usman Khawaja scored a hundred as Islamabad posted the highest score ever by a Pakistan team in T20 cricket

What is the Supreme Petroleum Council?

The Abu Dhabi Supreme Petroleum Council was established in 1988 and is the highest governing body in Abu Dhabi’s oil and gas industry. The council formulates, oversees and executes the emirate’s petroleum-related policies. It also approves the allocation of capital spending across state-owned Adnoc’s upstream, downstream and midstream operations and functions as the company’s board of directors. The SPC’s mandate is also required for auctioning oil and gas concessions in Abu Dhabi and for awarding blocks to international oil companies. The council is chaired by Sheikh Khalifa, the President and Ruler of Abu Dhabi while Sheikh Mohamed bin Zayed, Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces, is the vice chairman.

TWISTERS

Director: Lee Isaac Chung

Starring: Glenn Powell, Daisy Edgar-Jones, Anthony Ramos

Rating: 2.5/5

Herc's Adventures

Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5

KEY DATES IN AMAZON'S HISTORY

July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington

July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon

1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024

1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs

2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa

2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone

Honeymoonish

Director: Elie El Samaan

Starring: Nour Al Ghandour, Mahmoud Boushahri

Rating: 3/5

COMPANY PROFILE

Name: Haltia.ai
Started: 2023
Co-founders: Arto Bendiken and Talal Thabet
Based: Dubai, UAE
Industry: AI
Number of employees: 41
Funding: About $1.7 million
Investors: Self, family and friends

Sly Cooper and the Thievius Raccoonus

Developer: Sucker Punch Productions
Publisher: Sony Computer Entertainment
Console: PlayStation 2 to 5
Rating: 5/5

SPECS

Engine: Two-litre four-cylinder turbo
Power: 235hp
Torque: 350Nm
Transmission: Nine-speed automatic
Price: From Dh167,500 ($45,000)
On sale: Now

SPECS: Polestar 3

Engine: Long-range dual motor with 400V battery
Power: 360kW / 483bhp
Torque: 840Nm
Transmission: Single-speed automatic
Max touring range: 628km
0-100km/h: 4.7sec
Top speed: 210kph
Price: From Dh360,000
On sale: September

Confirmed bouts (more to be added)

Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez

Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.

COMPANY PROFILE

Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

Based: Dubai, UAE

Industry: Digital receipts, finance, blockchain

Funding: $4 million

Investors: Privately/self-funded

In numbers

Number of Chinese tourists coming to UAE in 2017 was... 1.3m

Alibaba’s new ‘Tech Town’  in Dubai is worth... $600m

China’s investment in the MIddle East in 2016 was... $29.5bn

The world’s most valuable start-up in 2018, TikTok, is valued at... $75bn

Boost to the UAE economy of 5G connectivity will be... $269bn 

Wenger's Arsenal reign in numbers

1,228 - games at the helm, ahead of Sunday's Premier League fixture against West Ham United.
704 - wins to date as Arsenal manager.
3 - Premier League title wins, the last during an unbeaten Invincibles campaign of 2003/04.
1,549 - goals scored in Premier League matches by Wenger's teams.
10 - major trophies won.
473 - Premier League victories.
7 - FA Cup triumphs, with three of those having come the last four seasons.
151 - Premier League losses.
21 - full seasons in charge.
49 - games unbeaten in the Premier League from May 2003 to October 2004.

COMPANY PROFILE

Name: Xpanceo

Started: 2018

Founders: Roman Axelrod, Valentyn Volkov

Based: Dubai, UAE

Industry: Smart contact lenses, augmented/virtual reality

Funding: $40 million

Investor: Opportunity Venture (Asia)

World Cricket League Division 2

In Windhoek, Namibia - Top two teams qualify for the World Cup Qualifier in Zimbabwe, which starts on March 4.

UAE fixtures

Thursday February 8, v Kenya; Friday February 9, v Canada; Sunday February 11, v Nepal; Monday February 12, v Oman; Wednesday February 14, v Namibia; Thursday February 15, final