Gulf Salaries Rise amid Competition for Talent

PRIVATE sector salaries in the booming oil-producing Gulf countries have risen by an average of nine percent in 2007 amid an increasing cost of living and shortage of talent, a study said Sunday.

"Continued economic growth and intense competition for talent... (are the) key drivers of pay rises, along with spiraling living costs in parts of the region," said the study entitled Gulf Compensation Trends in 2007.

Across the Gulf, employees in construction, banking and energy sectors enjoyed the highest pay rises, while healthcare and education registered the lowest, said the study published by GulfTalent - a regional recruitment agency. "The continuing rise in living costs is a major factor pushing up salary levels, with inflation in some countries running in double digits," it said.

It also claimed that economic growth in South Asian countries such as India has contributed to the increase in pay packages to maintain the region's appeal to Asian skilled labor.

"The gap between Indian and Gulf packages is fast closing, making it tremendously difficult for Gulf-based employers to attract professionals from India, historically the main source of affordable talent," it said.

Large pay rises awarded to public sector employees in some countries also contributed to increases in the private sector, it added.

The United Arab Emirates and Qatar, which are experiencing a double-digit inflation, remained near the top of the rankings.

Salaries in the UAE increased 10.7 percent over the one-year period to August 2007, slightly higher than last year's rise of 10.3 percent. In Qatar, wages rose by 10.6 percent compared with 11.1 last year.

Inflation in the UAE stood at 9.3 percent in 2006 and is forecast to reach 12 percent in 2007, while Qatar's inflation rate rose from 11.8 percent in 2006 to 14.78 percent in the first quarter of 2007.

In both countries, high inflation has been led by rocketing rents, which are swallowing up a large chunk of income.

"This is not really a pay rise," said Monica Malik, senior economist at EFG Hermes investment bank.

"In real terms, it is just maintaining income levels," she said, pointing out that workers at the middle-income and lower-income levels are the worst hit by the increased cost of living. She said the trend of pay rises will continue because of the shortage of skilled labor needed for expansion in a region that is enjoying an economic boom.

"Human resources managers often complain that the biggest challenge they face is finding enough people for their expansion plans," she said. Employers in most Gulf countries are expected to provide housing allowances for their workers, but in certain countries, increases in those payments did not keep pace with rising rents.

Salaries in Oman registered the biggest jump among the six members of the Gulf Cooperation Council - from 5.6 percent last year to 11 percent in 2007, triggered in part by a 15 percent pay rise for government employees. The study also said housing rents in Oman increased by 29 percent over the last year, while cyclone Gonu which lashed the country in June put further pressure on the market.

In Kuwait, where inflation is officially forecast at 3.9 percent this year, salaries increased by 7.9 percent, virtually unchanged from last year's 8.0 percent.

Inflation in Saudi Arabia remains low in regional terms - projected at 2.8 percent in 2007 - but residential rents have increased at an average rate of 10 percent over the last 12 months, the study said.