Cement and steel prices have leapt by as much as 35 per cent in some Gulf states in the last three years, and contractors have been feeling the pinch. However, new capacity is gradually filtering through to the market, and profit margins of 7-10 per cent have helped take the sting out of short-term supply constraints. But there are longer-term capacity issues that face contractors and clients alike in the oil industry, the most important of which is a shortage of labour.
As the fourth HSBC-MEED Middle East Confidence Survey revealed in September, nearly 70 per cent of respondents pointed to a major shortage of unskilled labour in the GCC, while contractors expressed serious concerns about wage inflation among skilled workers. Project manager salaries for local hire in the UAE jumped by 9 per cent in June alone to $6,000 a month, while the monthly salaries demanded by site engineers of 10 years' experience has risen to as much as $4,500. Ageing workforce The problem is particularly acute for oil companies. During the low oil price environment of the late 1990s many international firms cut back on staff, while incentives for trainee engineers to enter the industry dried up. As a result, the pool of qualified engineers is ageing, with as many as 40 per cent of petroleum engineers expected to retire within the next decade. The average age of production engineers working in the Middle East is now 48, according to recent research by UAE-based Middle East Strategy Advisers (MESA), and while the number of graduates entering training schemes has increased in recent years, there is fierce competition for qualified engineers. The national oil companies (NOCs) of the Gulf are at a particular disadvantage, according to MESA, as international employers such as BP, the Royal Dutch/Shell Group or Total have better reputations as employers. 'There is already competition in this sector for human resources between GCC countries, a trend which could become a major hurdle for the region's overall economic development,' says MESA. 'In addition, most GCC countries have set aggressive nationalisation targets to replace hiring expatriates with nationals. The national supply base of experienced engineers is limited so this requirement turns a difficult task into a major challenge for human resources departments.'
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