x Abu Dhabi, UAEMonday 24 July 2017

Private sector reforms can help reduce unemployment

A robust, efficient and profitable private sector will not only make it more attractive for Emirati talent, but strengthen the country's economy as well.

Most of the ideas presented at the two-day Government Summit in Dubai were ambitious, long-term plans for a more prosperous nation. One, however, has caught our attention as being potentially revolutionary in the short- to medium-term.

Sheikh Mansour bin Zayed, Minister of Presidential Affairs and Deputy Prime Minister, announced a plan to overhaul one reality for private sector employees: under the law, only the public sector is entitled to a two-day weekend. Private sector employees work a six-day week. This, coupled with lower pay, is a key reason why Emiratis shun the private-sector in favour of public-sector positions.

The Government's goal is to lower the current 20 per cent unemployment rate among Emiratis by encouraging more to seek jobs with private firms. To do this, however, the Government recognises it must encourage the private sector to become more productive, cost effective and profitable.

If pushing firms to do more with less forces them to find ways to become more efficient, a stronger, more productive non-governmental sector could be the result. There are of course important details like implementation, and potential costs to companies. And if employers simply increase the length of the workday to get more out of employees, the policy shift could have unintended knock-on effects, too.

Still, there is a clear need to promote productivity in a sector that too often underperforms. Unlike in many other nations, where private-sector workers are paid more, the dominance of low wages in the UAE, coupled with the tax-free environment, means some companies have less incentive to be efficient. This weakens not only the private sector's performance but the country's ability to boost living standards and economic growth. It also discourages Emirati talent from pursuing jobs within this sector.

Over time, a more efficient, leaner private sector - in manufacturing, construction or other industries - would ultimately lead to more profits, and in turn, higher wages. Making better companies that are more productive is the long-term goal of this forward-thinking approach.

Emiratis account for only 20,000 of the four million workers in the private sector. Clearly, there is much room for improvement. A robust, efficient and profitable private sector will not only make it more attractive for Emirati talent, but strengthen the country's economy as well.