Recovery Report, Part 3: Time to up-skill?
CW looks at how skills shortages may be impacting on the sector
Hit hard by the global economic crisis, the once-prosperous Middle East construction sector lost more than a positive reputation.
In an attempt to cut costs quickly, towards the end of 2008, companies across the region began slashing their workforces uncompromisingly, purging them of mainly the highest paid, experienced, expatriate senior executives.
Facing the prospect of an upturn, not to mention a wave of new business opportunities across the GCC in markets such as Saudi and Abu Dhabi, firms are now under pressure to ensure they have a full, proficient pool of talent if they want to respond to a sudden shift in the market and compete with international construction giants. More than half way through 2010, and the question is: are they ready yet?
“Currently, there is a skills shortage in the Middle East construction sector, partly because construction is always one of the industries to get hit hard during a recession and partly because this region is unique –if you lose your job officially, you cannot stay here as an expatriate,” says Marie Pickless, manager of Dubai-based recruitment agency Manpower Middle East.
“At the end of 2008 and beginning of 2009, many candidates in the construction sector left the region, and some are reluctant to return due to the uncertainty they feel about the economy here. There is a particular shortage of professionals such as surveyors, many of whom have secured positions back in their home countries and are staying there until the market becomes more stable.”
In strong support of this argument was research commissioned by recruitment agency Gulf Talent. The report, entitled ‘Employment and Salary Trends in the Gulf 2009-2010’, (which covered the entire jobs market), revealed that as many as one in 10 construction professionals were made redundant over the 12-month period to August 2009, with hiring freezes rife as companies reverted from their expansion plans and cut back on recruitment spend.
“The loss of employment meant an immediate relocation of expatriates and their families back to their own countries,” says the report. “Not only were they lacking social security or employment benefits, but most were also required by local immigration laws to leave the country within 30 days of termination.”
Additionally, the report draws attention to a fall in salary increases during the period, which may have further encouraged workers to leave. Whilst the average salary across the Gulf dropped from 11.4% in 2008 to 6.2% in 2009, 60% of employees in the region received no pay rise at all compared with as little as 33% a year earlier.
Intensifying the problem today is global competition for skilled workers. According to Pickless, recently, many candidates have been lured to the Far Eastern job market, where places like Hong Kong offer attractive opportunities for those with experience working in the GCC. Maria Brown, associate director of Reed Specialist Recruitment for the Middle East and North Africa region, agrees.
“It is true that skilled professionals in the property and construction sector are being picked to move to Asia to support the growing demands in the region,” she says. “Asia has taken full advantage of the decline in development in the GCC in the last 18 months and migrated the best skilled talent to join them. Hence, at the moment, the GCC has shortages of mainly highly skilled professionals in niche roles.”
Asked how they felt about recruiting skilled professionals, UAE-based contractors seemed to be in agreement with recruitment specialists.
“The biggest limitation facing the UAE market is finding skilled and semi-skilled artisans,” says ALEC’s financial director Greg Walsh.
“Many have returned to their home countries, whether forced to or by choice, where they have found lucrative positions as they held previously due to the booming economy in India especially. With the limited projects in the market at the moment,” he adds, “it is very difficult to retain these skills.
In the future it may therefore be a challenge to obtain sufficient skills within a workforce and to take advantage of any upturn.”
Arabtec’s chief financial officer Ziad Makhzoumi is of a similar view as he explains how his company experienced difficulties recruiting equipment operators when the recession was at its worst.
“Towards the end of the construction boom, we were finding it increasingly difficult to secure skilled labour,” he explains.
“Recruiting certified, heavy-equipment operators for example was a particular challenge, as they were required to be certified locally by the municipality before being allowed to operate any of the machinery. Regionally, contractors will continue to face a number of operational issues which we need to continue to find innovative solutions for.”
Interestingly, the above report’s analysis of the nature of redundancies sheds even further light on the current situation.
Drawing attention to the fact that it was Western and/or senior executives as opposed to national and/or junior level workers who bore the brunt of redundancies in the Gulf, it suggests not only that these individuals offered “quick-win opportunities for cost saving”, but notably, that they were chosen for redundancy because of the expertise they possessed.
Hired to deal with the growth challenges during the boom period, the report says these senior level Westerners were supposedly deemed unfit to navigate a company’s way through recession.
In turn, the report therefore implies that it will be these kind of workers required in the event of an upturn.
Where there is a lack of these professionals, it could well affect a company’s ability to meet project deadlines to budget, not to mention their ability to participate in the bidding process.
“A lack of expertise within a company will affect its ability to deliver a project efficiently and on time,” says Pickless. “Though project costs may stay the same, the quality will almost certainly suffer and there are likely to be delays in completion.”
But according to Brown, the real challenge today is about knowing and executing the best recruitment practices. With this, she maintains that skilled workers do remain available, albeit less immediately than before, and that there are a number of solutions being utilised by several companies in the context of occasional shortages.
“Some of our clients for example have found a number of alternative solutions to support them, such as gaining sign-off for additional headcount, internal secondments, 12-month ventures and joint ventures with other firms, all of which seem to be working well,” she says.
“I don’t think a lack of talent will affect any company in an upturn if they are effectively managing headcount and talent for each project in the pipeline. If additional headcount is not an option, then internal secondments or 12-month contracts are always available and recruitment agencies can provide support.”
Concurrently, while some industry analysts would suggest that firms are failing to recognise the importance of a strong workforce, the responses from contractors, which all stress the importance of quality staff, would appear to suggest otherwise.
“We believe that people are the driving force for any organization, and it is for this reason that they are the main priority for our firm,” explains ASCG’s business development manager Ihab Elia. Similarly, both Arabtec and ALEC claim to prioritise the recruitment of skilled workers over sustainability and advertising.
But whether this means the market is fully prepared for an upturn, given the current circumstances, remains unclear. The only one thing recruitment agencies and other industry analysts seem to be sure of is that larger international companies will be in a better position than smaller companies.
“Larger, international companies will be less affected as they can absorb financial loss more than smaller firms, they will have more staff and be in a better position to deal with increasing workloads,” explains Pickless. “They can also utilise their global workforce.”
Researchers from Gulf Talent agreed, reporting that smaller companies had a higher proportion of redundancies during the recession than larger companies, though they also drew attention to a faster-decision making process in smaller firms. Whether this will help them in preparation for an upturn is yet to be seen.
Global competition for skilled workers
One of the problems for the Middle East construction industry is the increasing global competition for skilled workers.
According to the experts, many workers have been attracted to the Far Eastern job market and places such as Hong Kong, where there are more attractive opportunities for those who have previous experience in the GCC.
They say Asia has taken full advantage of the decline in development in the GCC and migrated the best skilled talent to join them, leaving the GCC with shortages of mainly highly skilled professionals in niche roles.