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Emiratization & Youth Employment: A Legal Perspective 10-01-2016

The youth of today is a nation's strength of tomorrow, global growth relies on their development. Being employed not only enhances their financial situation but it teaches them responsibility, organization, and time management.

Despite these facts, the crisis of youth unemployment has been resonant in our society for a long time. According to the International Labour Organisation (ILO), the unemployment rate is defined as the 'number of unemployed youth (typically 15 to 24 years old) divided by the youth labour force (employed + unemployed). The unemployment rate is one of the best known and most used labour market indicators.

Compared to 2012, the youth unemployment rate has decreased by 1.4 percentage points in Developed Economies and the European Union in 2015, according to ILO, and by half a percentage point or less in Central and South-Eastern Europe (non-EU) and CIS, Latin America and the Caribbean, and Sub-Saharan Africa. The remaining regions— East Asia, South-East Asia and the Pacific, the Middle East, and North Africa — saw an increase in the youth unemployment rate since 2012 and a slight dip in 2014, or no change in the case of South Asia.

Moving to the GCC, the issue of youth unemployment in the region must not be overlooked. Saudi Arabia's largest bank, National Commercial Bank (NCB), reported that unemployment among citizens in the six-nation Gulf Cooperation Council (GCC), the richest in the Arab world, has remained far higher than the rate among expatriates. On the other hand, the economic ramifications of the worldwide recession and Arab Spring are stimulating youth unemployment figures at an alarmingly high rate in the Middle East and North Africa (MENA). ILO predicts that youth unemployment in the Middle East could increase to 29 percent by 2016, a rate they have labelled 'disturbingly high".

In the UAE, the Ministry of Economy's Labour Force Survey 2009 estimated that around 200,000 UAE nationals would reach the working age by 2020 and at least half of them were expected to enter the labour market. This issue should be dealt with through long- and short-term intervention programs.

Short-term schemes can include nationwide programs targeting the employment of a fixed number of individuals annually, and can provide incentives to the employer such as financial benefits (a percentage of the salary) for a limited duration. A fund could also be set up for Emiratization empowerment, thereby increasing the demand for the national labour force and activating related program. Measures could also be introduced to reduce foreign labour  fees for companies committed to Emiratization initiatives. In the long-term, policies can be implemented to encourage the participation of UAE nationals in the private sector by guaranteeing them comprehensive social protection.

When it comes to Emiratization, the UAE aims to increase the number of citizens employed in the private sector by tenfold by 2021. Indeed, the country is striving to create a knowledge-based economy pioneered by Emiratis. In order to move into this direction, there has to be a shift of employment from the public to the private sector, which in turn would enhance productivity in the public sector itself.

Towards this, the Absher initiative was launched. The program is based on four pillars which are: creation of employment opportunities for UAE nationals, vocational guidance and counselling, training and development, and motivating Emiratis to work in the private sector. Complementing Absher are other initiatives and entities such as Tanmia, the National Human Resources Employment Authority, Abu Dhabi Tawteen Counsel, and the Emirates National Development Program.

Under the UAE Labour Law, foreign nationals can be employed only after getting approval from the Ministry of Labour and if no qualified Emiratis were found to fill in the vacancy. Moreover, several Ministerial Orders have been passed to increase the employment of citizens, especially in the private sector. The Ministerial Orders No. 41, No. 42 and No. 43 impose a quota system on private-sector employers, under which a company is obliged to recruit a specific number of citizens to ensure that it meets the required national workforce percentage of the total number of staff.

Currently, the Emiratization quotas are 2% for commercial entities, 5% for insurance companies if they have more than 50 employees, and 4% for banks. The Central Bank and Insurance Authority have the authority to decide on the increase every year for banks and insurance companies respectively.

The Cabinet Resolution No. (635) of 2008 states that a company with more than 100 employees should employ an Emirati public relations officer. Furthermore, the Council of Ministers Order No .26 and Ministerial Order No. 1187 of August and November 2010 respectively offers incentives to companies adhering to the principles of Emiratization. These Laws are not applicable in free zones as such areas have their own set of rules and regulations.

The Ministry of Labour could also block a work permit or residence visa application from a private company if it finds that there are UAE nationals qualified for the post yet unemployed.

Nevertheless, such measures are seldom enforced. Some authorities, however, such as the Insurance Authority, reject the renewal of commercial licenses when they find that a company has not met the Emiratization quota.

In conclusion, the UAE enacts a set of efficient laws that promote the employment of citizens as well as Emirati youth. If UAE nationals utilize them well, the issue of unemployment could be largely reduced.

By Althea Edwina Rozario, Partner and Legal Consultant at The Legal Group

Source: INSIGHT Magazine