Every part of the Middle East and North Africa could see job losses as the world’s economies continue their slowdown. Yet the closer your business ties to Europe, the more your job is at risk. Economists say that a new influx of job-seekers emerging from the West is giving expatriate white-collar workers in construction and financial services concerns that their pay and conditions will be driven down.
The biggest labor market to see job losses is the Maghreb, particularly Morocco, says economist Simon Kitchen of investment bank EFG Hermes. Tens of thousands of Moroccans work in France, Italy and Spain, and many will face redundancy as the economies of Southern Europe slow. This will be compounded by the impact on the tourism industry. Seventy percent of tourists to Morocco come from these countries. A major job-provider and export-earner, tourism is one of the first sectors to suffer from the economic downturn.
“The European economies are slowing down and there is no alternative source of demand for Morocco,” says Kitchen. “The economy is stuck between scissor blades. On the one hand, there’ll be layoffs at home. On the other hand, there’ll be workers returning from Europe, having made redundant, who will also be looking for work.”
This June, hundreds of Moroccan youths rioted over unemployment in the port town of Sidi Ifni. Its economy has been growing steadily since the turn of the century. While this has boosted the profits of home firms and foreign investors, it has not led to enough new jobs.
Egypt, equally, needs job creation for its social and political stability. The government says the economy must expand by 7 percent annually to create enough new jobs for the 700,000-plus young people who join the labour market every year. The unemployment rate stands at 10 percent. Many Egyptians, like Moroccans, travel to Europe and the United States for work. And many may now be sent back, as firms there lay off staff. Like Morocco, Egypt also depends on the expansion of tourism – a particularly labor-intensive sector – to create jobs for those who stay.
“I expect there to be zero employment growth for next year,” says Simon Kitchen. “Tourism has been Egypt’s main job creator in recent years, but half of all tourists to the country [about seven million people] come from Western Europe. Another one million come from Russia and Eastern Europe, which are also now in trouble. I think many new hotel projects will be delayed, and we may see staff laid off after that. This would especially affect people from Southern Egypt, who rely on jobs in the tourism sector.”
The secretary-general of the Egyptian Hotel Association in Southern Sinai, Adel Shoukry, points to currency markets as the largest scourge. “Our biggest problem now is the fluctuation in exchange rates,” he says. “The euro has fallen against the Egyptian pound, and that has impacted revenues. None of our bookings for October and November have been cancelled, but we are not sure of December onwards. We do not expect any job losses over the next five to six months, but who knows? The situation could change dramatically.”
Europe’s economic downturn could, paradoxically, provide a spur for jobs in hotel construction, he says. “The longer the economic crisis persists, the more the prices of building materials will fall. So it’s a good time to finish off projects, which have already been started. The money has been lent. Developers have got the cash. So why not?”
Weak Spots. However, in the Gulf, property development is the sector most exposed to the credit crunch, and the one that is most expected to shed jobs. It’s thought that 40 percent loans made by local banks were for residential and commercial development. But banks are now reining back on credit, to rectify the loose lending habits of the past two years.
“Lending conditions are extremely cautious,” says economist Marios Maratheftis of Standard Chartered Bank. “Before, the banks didn’t price in risk. But now, investment in private-sector construction projects will be more expensive. Developers may delay their building, and we might see a fall in demand for unskilled labor. That will mostly affect people from South-East Asia.”
Still, Maratheftis expects job losses to be very limited, because presently there is a shortage of manual labor in the Gulf’s construction industry. Besides, he says, jobs could be created again quickly. “The developers might delay, but they know they can always restart.” He and other economists also expect the governments of Gulf states to step in and buoy their economies by embarking on large-scale infrastructure projects, paying for them not from loans but from their enormous, oil-funded budget surpluses.
Partly because of the lead that Gulf states are expected to take on their economies moving forward, Standard Chartered Bank predicts economies will continue to grow by 2.7 percent next year, compared to 5.2 percent for 2007 and an estimated 4.8 percent for this year. “We are calling a slow-down, not a recession. This region will still be an out-performer. Businesses will still grow and need staff,” Maratheftis says. He believes spending on advertising and IT will remain high, although corporate hospitality budgets may be cut.
Gulf states have much less of a price to pay than Egypt or Morocco if its firms shed staff. In the Emirates, for example, eight out of 10 residents are hired from abroad. If they’re laid off, they must go back to their home countries. Still, employers here are reluctant to send staff packing, even in sectors, like tourism, which will suffer from the European downturn.
Forty percent of occupants in the United Arab Emirates’ four- and five-star hotels are Western Europeans. Sixty-five percent of them are leisure travelers paying from their own pockets, and the managers are expecting a dip in demand in the New Year. Cost-cutting is the obvious means of propping up profits.
But Patrick Antaki, the general manager of Le Meridien Aqah Beach Resort, says he will not lay off frontline staff. “People here want to be pampered,” he says. “If we get rid of half the staff who serve them, what’s to distinguish us from a three-star hotel?
I don’t think our customers will like it.”
Instead, his answer is to strip out those costs which crept up, almost unnoticed, during the boom years – the costs of senior managers. They won’t have such a ball at the company’s expense any longer. “In the good years,” he says, “the directors might decide to fly to the Far East for a travel conference and everybody would agree it was a good business move. They might also fly business class and stay in a five-star hotel. Now, we’d be flying economy and staying somewhere cheaper. There are costs which you thought were justifiable then, which can be pruned now.”
White-Collar Blues. In the Gulf, those who can expect the biggest jolt from the economic slowdown are expatriate white-collar staff. Their pay rates and fringe benefits are endangered both by companies wanting to shave costs, and from a new wave of economic migrants who are arriving in the Gulf looking for jobs like theirs. One example is construction project managers from countries such as Spain and Britain, who are escaping the property-building slump back home.
“These guys are coming in a lot cheaper,” says one English project manager who works for the Dubai-based developer Nakheel. “They weren’t given the same benefits, like car allowance or school fees paid. If the downturn goes on for another year or 18 months, then a lot of people ending their present contracts in Dubai may have to sign up again under the new terms. There’s plenty of supply, and the companies have got their hands in the sweet tin.”
Another example is investment bankers in the City of London and Wall Street, who face mass redundancies. Thousands of are sending their resumes to private equity firms and banks in the Gulf. “We’ve seen a six- to 10-fold increase in enquiries from job applicants – particularly from London,” says Peter Greaves of Dubai-based headhunters McArthur Murray. “And we haven’t yet seen the mass-culling which happened in the city in previous recessions. But either before or after Christmas, I expect that to happen, and then we’ll see a flood of enquiries.”
“These are highly-skilled people,” says Kitchen of EFG Hermes. “But there’s likely to be a surfeit of them, and that will depress salaries in the industry.”
It’s difficult to equate how any suffering expatriate fund manager in Dubai feels, compared with the plight of a Moroccan worker laid off from a factory in Spain and sent back to a jobless future. But for the Gulf’s white-collar expatriates, who have so far enjoyed tax-free pay with plenty of perquisites, the party is beginning to wind up, and there’s little to draw them back home.

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