Dubai aside, the Gulf’s construction sector has been better sheltered from the global economic downturn than other parts of the world, despite key projects across the region being cancelled or put on hold.
With regional governments committed to large capital expenditure programmes focused on key infrastructure projects, Gulf states will continue to confront the same strategic obstacles as before the downturn: high unemployment rates among the local population and a large and growing skills gap that has frustrated efforts to keep flagship construction projects on track.
According to a report issued by US consultant Booz & Company in April – Keeping up with Economic Cycles: Rethinking Labor Strategy in the GCC – there is a gulf between the needs of the market and the skills and career ambitions of the region’s nationals.
Booz & Company says the current situation is simply not sustainable for long-term growth because while more skilled construction workers will be needed when the global economy recovers, hiring them will become more difficult.
Construction activity in recent years has taken place largely without the use of local labour, aside from in the most senior management positions. Gulf nationals are largely nonexistent in positions below that level, and even in middle management roles, foreign workers continue to dominate.
Gulf governments are slowly responding to this dearth of local skills, developing labour policies aimed at aligning the skills of nationals with available job opportunities. The Saudisation and Emiratisation programmes introduced in Saudi Arabia and the UAE, for example, seek to ensure employers recruit sufficient numbers of nationals in those countries.
Yet these policies have produced little material gain in the fastest-growing economic sectors such as construction. Riyadh launched its Saudisation programme in 2003 in a bid to cut unemployment by reducing the country’s intake of foreign workers. But the construction boom of 2002-08 derailed the programme, and in 2007 Riyadh cut the Saudisation quota for on-site construction workers from 10 per cent to 5 per cent in response to a severe labour shortage.
However, recruiting more local workers is not merely a matter of meeting social targets; it may be essential to economic well-being. The Gulf is no longer such an appealing prospect for migrant workers from India, Nepal and Pakistan, which previously made up the bulk of the construction labour force. Rising living costs in the Gulf, and increasing prosperity in South Asian countries, has reduced the incentive to take up jobs in the region.
Regulation is another factor. In March 2008, India’s government announced new minimum standards for pay and living conditions for its expatriate workers in Gulf states, making it more expensive for employers to recruit them. It announced a minimum wage of $265 a month for all unskilled Indian workers in Bahrain, compared with the existing average of $160-225 a month.
Lack of available talent also raises the overall cost of projects, making it more expensive to buy in construction expertise.
“The challenge is understood,” says Rabih Abouchakra, a partner at Booz & Company and one of the authors of the report. “There are lots of jobs, but these are for low-skilled labourers. On the other side are the high-end, skilled positions for which Gulf nationals mainly do not have the skills.”
In Bahrain, which is at the forefront of Gulf efforts to equip nationals with suitable skills, the Tamkeen (Labour Fund) – a semi-autonomous authority designed to boost Bahraini employment levels – has teamed up with leading project sponsors and construction firms to implement a raft of innovative training programmes. In February, Tamkeen signed a contract with the Bahrain Training Institute to train 220 Bahraini civil engineering graduates as quantity surveyors at Heriott Watt University in the UK. The two-year programme has been initiated by Tamkeen as part of its efforts to act on the findings of the 2009 Skill Gaps survey published by Australia’s Allen Consulting Group, which highlights Bahrain’s need for quantity surveyors.
It has also teamed up with local contractor Nass Group on a training programme to address the skills gap in construction, aiming to establish an internationally recognised certification scheme for the sector in conjunction with Bahrain’s Specific Council for Vocational Training in Construction.
The island’s largest employer, Bahrain Petroleum Corporation (Bapco), launched its Skills for the Workplace initiative in January 2006, in conjunction with the Labour & Social Affairs Ministry and contractors involved in Bapco’s low-sulphur diesel production project. The idea is to provide training to 600 Bahraini jobseekers, to develop essential industry and construction experience, and to provide employment opportunities with contracting companies in the kingdom.
The emphasis on public-private co-operation has yielded its first results. In July last year, the first students graduated from the Works Ministry’s graduate engineering training programme. These trainee engineers spent a year working as members of the technical consultant teams within the $2.5bn Bahrain Bay mixed-use real estate development in Manama.
The Labour & Social Affairs Ministry teamed up with another of the island’s major employers, Aluminium Bahrain (Alba), in 2005 for a new training initiative known as Training for Bahrain. Supported by US construction giant Bechtel, the aim is to increase the number of Bahrainis working in the construction industry using Alba’s Line 5 expansion project as a training opportunity.
The government also worked with 40 major subcontractors to employ locally trained workers, meeting half the cost of its trainees’ salaries. Bechtel designed a custom training programme that includes three to six months of theoretical and on-the-job schooling in carpentry, welding and bricklaying.
Bechtel has taken an active role in promoting training programmes in other Gulf states. In Oman, where the company is project manager on the $2.4bn Sohar aluminium smelter, it has contracted local training provider Rusayl Institute to offer 500 young Omanis training in various disciplines such as carpentry, masonry, welding, rigging and steel fixing. It is a two-tier programme that involves technical training at the Sohar Institute and on-the-job training at the smelter.
Other large contractors have set up their own training centres. Construction giant Saudi Oger has a training institute in Riyadh, where it offers carpentry, steel fixing, painting and masonry programmes designed to give local students the skills to embark on a career at a junior level in the construction industry.
Athens-based Consolidated Contractors Company (CCC) also supports a Riyadh training centre where students learn carpentry, scaffolding, pipe-fitting, steel fixing, plumbing and welding.
Several local contractors support the National Institute of Technology (NIT), a non-profit-making technical training institute aimed at preparing Saudi workers for jobs in the fields of construction and maintenance. NIT owns an educational facility in the town of Bahrah, 30 kilometres east of Jeddah.
In Kuwait, the Public Authority for Applied Education & Training set up the Construction Training Institute in Shukaikh in 2000. Enrolling up to 240 students a year, it provides three years of training for construction designers, concrete workers, tilers and window builders. The training programme comprises a six-month basic vocational course followed by a specialist course lasting two and a half years with an increasingly practical focus, including time spent with local enterprises.
Major project developers have resorted to private training providers to boost their local workforces’ management skills. Dubai’s Nakheel has used the services of US consultant ESI International, which offers project management training and consulting.
“There is definitely local talent coming through the pipeline,” says Craig Jordan, Middle East regional manager at ESI. “But a lot of the local talent is employed in the layer of management above project management level, and this is where there is much room for development.”
ESI says the biggest skills gaps are in risk management and cost control. The company offers three levels of certification: associate, master and advanced master. Most nationals are put through the advanced-level programme, with clients insisting on Western instructors to train locals.
Gulf governments still have a long way to go to improve their construction training programmes and expatriate talent will continue to dominate for the foreseeable future. Even in Bahrain, which has taken the most active role in promoting training, construction employees still form only a small proportion of Tamkeen’s graduates.
In Tamkeen’s first year of running a career progression programme, 3,000 Bahrainis engaged in a wide range of courses, but only 5.8 per cent were in the construction sector, compared with 28.5 per cent in the private sector.
In time, the Gulf states’ efforts may help to increase local workers’ participation in construction projects, but the dramatic downturn in construction activity in key markets such as Dubai is likely to reduce demand for training this year.
“Training is put on the backburner in this economic climate, but other markets are showing interest,” says Alia Fakim, marketing manager at ESI. “In Qatar, there is more momentum and a realisation that they need to train their people in order to reach their objectives.”
What is really needed is a concerted government-backed effort to create a more supportive policy framework. “The easy option is to throw money at the unemployment issue, such as through welfare support,” says Abouchakra. “The bigger challenge is to create active policies that eliminate the skills mismatches.”
Such active labour market policy responses include training programmes to equip workers with the skills they need to compete in the national marketplace and the global economy.
But experience is not something that can easily be bought off the shelf. The commitment to training Gulf workers with the right skills must be long term.