HR Opportunities in 2013 and Beyond Resulting From the Arab Awakening
By Samir Mardini, Head of Talent Consulting, Aon Hewitt MENA
12th August 2012
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The Middle East and North Africa (MENA) cluster provides ample growth potential for local and foreign companies. The region (and more specifically the GCC1
countries) has a compelling opportunity to be perceived favorably and to compete for talent on a global scale. Affirmation of its lower people risk ratings can be seen in Aon Hewitt’s 2012 People Risk Index, which compares 131 cities across the world. Taking into account the ongoing shift in Arab demographics and positive indications of economic growth, businesses today are facing a unique employment environment.
The Arab World has a huge demographic window of opportunity over the next decade. The region’s employable population is expected to almost double by 2050, to reach 278 million from the current 145 million. This shift, especially the unprecedented rapid increase in the proportion of young people, and the broader integration of women into the workforce, will have significant impact. These factors will alter not only the size and quality of the talent pool, but also employment and talent development practices for current employers and those looking to establish operations in the Middle East. In terms of the economy, the MENA countries have experienced strong growth in the past decade. Alongside the oil & gas industry, new industries have received more attention and together, have helped the Arab world to achieve an average 5% annual GDP increase over the past 10 years, significantly higher than the Organization for Economic Co-operation and Development (OECD) average of 1.5% and the World’s 2.5%.
It is prudent to view the opportunities and challenges in the region in the light of the Arab Awakening, which triggered momentous and pervasive changes in the region’s political and economic dynamics and exerted noteworthy implications for government policies, private markets, and foreign investments. The changes that the Arab Awakening has set in motion are still unfolding, though early indications for reform in some countries seem positive. Nonetheless, employers still face the deep-rooted challenges of the past with no surety of transformation. At the same time, they must now grapple with a changeable, fluid employment environment. Organizations need to be aware of the risks associated with these changes, especially in the main business cities in MENA, so they can position themselves for success.
Aon Hewitt’s People Risk Index, covering 30 risk factors in 131 cities across the world, indicates that the MENA cities can be divided into two groups according to talent risk. The first group is comprised of relatively low-risk ratings and includes the Gulf Cooperation Council (GCC) cities: Dubai, Doha, Muscat, Manama, and Riyadh. In this group, the initial economic and political settings are more stable and the manifestation of the Arab Awakening was much less violent, but included significant changes to compensation schemes in the public sector, as well as a renewed focus on hiring and retaining their own national talent.
In terms of global talent risk, this group is similar to other developed cities, such as Washington, D.C, Helsinki, Milan, and Lisbon. Its relative advantages are its young demographics and prospects of an increasing workforce, its talent development opportunities, and its government support. However, it tends to lag behind Europe and the US with regard to its education systems and employment practices. Another plus is that this group is more flexible in terms of workforce redundancy issues and are low cost for such moves as reducing headcount, relocating, or realigning. Thus, employers feel more comfortable establishing and expanding their operations there.
Among this group, Dubai is rated with the lowest talent management risk, ranked #29 globally. Dubai’s risk rating has been assessed as being similar to Washington, D.C, Taipei, Helsinki, Dublin, and Tokyo. Dubai has two main strengths as compared to these locations. First, it has a projected growth rate for the working age population of 0.4% year-on-year for the next 10 years, versus the other cities that expect lower to significantly negative growth (Helsinki, Dublin and Tokyo have projected decreases of more than 5%). Secondly, employers in Dubai have a lower risk of losing knowledge and experience due to its younger population composure, with only 1% estimated to leave the workforce in the next five years, compared to 10% or more for the other cities. Interestingly, Riyadh is ranked #56 globally, assessed as having similar risk to Warsaw, Milan, and Lisbon. Riyadh’s young population and projected growth in workforce over the next 10 years are its strengths versus European cities. In addition, Riyadh has a very low risk for brain drain as professional workforce mobility into the city is positive with qualified workforce arriving from other Saudi Arabian locations, as well as expatriates from other Arab countries, and the rest of the world (i.e., India, Europe, US).
The second group is of high-risk cities, comprising Amman, Baghdad, Tripoli, Cairo, Algiers, Tehran, Sana’a, Rabat, and Damascus. This group is ranked at the very bottom of the PRI, alongside cities like Kiev, Almaty, Accra, Ulaanbaatar, Karachi, Lagos and Addis Ababa. High-risk cities are often troubled by relatively high crime rates that pose even greater risks for employees. These countries are typically impacted by ambiguous, unenforced, or missing government policies related to employment practices. Therefore, it may not be surprising to find that the cities with the highest people risk in MENA, and in fact globally, are in those countries that experienced the most acute turmoil in 2011 - Tunisia, Egypt, Jordan, Iran, Algeria, Morocco, Libya, Yemen, Iraq, and Syria. All of these locations experienced riots and civilian rebellions against their regimes. The main factors limiting the talent risk in this category are a younger workforce, better prospects for increasing the workforce population, and opportunities for longer-term future reform in some countries.
In sum, the Arab Awakening has brought significant changes to talent cost, availability, and risk. When governments increase their pay schemes in tens of percentage points, this creates a new benchmark for employees in the private sector. When employment policies change for expatriates, the percentage of local talent increases and employers face more challenges in bridging the qualification gaps as well as developing attractive employment packages. Women and young workers are the obvious available workforce, yet employers need to be creative and adapt their work environment to accommodate their unique needs. In addition, employers need to manage employee expectations wisely, especially those staff between the ages of 29-34, who typically experience an earlier “mid-career crisis”.
To conclude, while the MENA region economies can provide ample opportunities for local and foreign companies, employers will need to proactively manage their workforce effectively in order to possess sufficient qualified talent. Whether employers identify the talent risks in their location and are able to develop effective plans to mitigate these risks will be crucial to their operation’s success in these locations.
We would like to invite you to sign up and join us for our webinar on this topic on 16th October 2012. The webinar will provide an overview into the people challenges in the region, highlighting key HR trends and opportunities for 2013 and beyond.
For more information and registration, please click here
- The Gulf Cooperation Council (GCC) is a political and economic union of the Arab states bordering the Persian Gulf and located on or near the Arabian Peninsula, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.