Webcast series COVID-19...May 12, 2020 · salaries up to GBP 2.5K per employee per month if...

COVID-19xHealth

PwC Middle East 12 May 2020

Middle East Updates Webcast series

Our focus for today

Welcome

Stephen AndersonStrategy & Markets Leader,PwC Middle East

Economic update

3rd edition - Middle East CFO Pulse findings

The GCC job market post dual shock: what’s next for Governments?

Hilal HalaouiPartner, Head of Government & Public SectorStrategy& Middle East

Richard BoxshallChief Economist, PwC Middle East

Q&A

Stephen AndersonStrategy & Markets Leader, PwC Middle East

PwC Middle East - COVID-19 Webcast - 12 May 2020 3

COVID-19 checklist and digital resources available

http://pwc.com/us/covid-19-navigator

Considerations checklist, prior webcasts and resourceswww.pwc.com/me/covid-19

https://digitaltrust-me.pwc.com/assess/COVID

Digital Trust Manager Our COVID-19 response module identifies any gaps in your organisation's pandemic response approach. Available in both English and Arabic, the assessment focuses on business resilience, and provides detailed recommendations on the steps to take to improve your ability to respond and recover.

COVID-19 - NavigatorNavigator is an online, interactive tool to help organisations better understand where they are on their path toward COVID-19 preparedness and response across six focus areas.

**New** Digital Fitness for the WorldPwC’s upskilling contribution to the world in response to COVID-19. Access our free Digital Fitness App available from the Apple App store and Google Play store.

If registering with your personal email, use invite code (LRNALL) to access today

http://pwc.com/us/covid-19-navigator

http://pwc.com/me/covid-19

https://digitaltrust-me.pwc.com/assess/COVID

Quick poll


What is your main area of concern in relation to COVID-19?


If COVID-19 were to end today, how long would you estimate it would take for your organisation to get back to “business as usual”?

1The GCC job market post dual shock: what’s next for Governments?Hilal Halaoui

PwC Middle East - COVID-19 Webcasts - 12 May 2020

May 2020

The GCC job market post dual shock: what’s next for Governments?

8


Jan Feb MayAprMar

Labor markets globally have been hard-hit beyond initial expectationsCOVID-19 global labor markets impact

Note: Unemployment rates have not been published for the month of May, yet showcase rise outlooks1) 6-8Mn employees are currently covered under the Furlough Scheme in UK2) PMI: Purchasing Managers Index for US, EU, China, India and ME marketsSource: ILO, Bureau of Labor and Statistics, European Central Bank, WHO, Bloomberg, Strategy& analysis

32 Mn

5 – 25Mn

14.7%

16 Mn

4.4%

6 Mn

3.5%

2 Mn

3.6%

March 17

Job Loss Claims

Unemployment Rate

Job Loss Claims

Unemployment Rate

Job Loss Claims

Unemployment Rate

Job Loss Claims

Unemployment Rate

6-8 Mn Employees Furloughed

(20% of workforce)

April 07 April 29

190 - 200Mn

300MnGlobal Incremental

Job Loss Estimates

~10 Mn Employees on

state-subsidized wage scheme

9


Employers to receive 60-67% of salaries for all registered employees for 12 months

Employers to receive 80% of salaries up to GBP 2.5K per employee per month if employee is furloughed for >3 weeks

Around the world, Governments rushed with short-term measures to alleviate the impact

10

Short time work

scheme

Funds are disbursed to employers in the form of wages to reduce termination of employment

Funds are directly disbursed to the persons affected by the crisis (e.g., Unemployed persons, gig workers, part-time employees)

Government to pay 60% of salaries of citizens employed in the private sector for 3 months from unemployment fund

Government to pay salaries to all citizens employed in private sector for 3 months

Initiative Description Examples

Measures to support and stimulate employment

Persons affected by the crisis to receive $600 for 4 months

Emergency disaster relief payment of $816 to be paid to every household

Temporary mobility of

expats

Business continuity

Redundant expats are permitted to transfer their work visas to other types of employment

Regulation permitting to reduce hours and/or wages in private sector

Businesses to register redundant staff on a virtual platform to be recruited by other employers

Upon the consent of both parties, employers are permitted to reduce employee working hours and/or mandate employees to take unpaid leave

Social assistance program

GCC Countries Non-GCC Countries

NON-EXHAUSTIVE


High youth unemployment

that is increasing further given the demographic

bulge

Low female participation

reducing talent availability and

economic participation

High share of low skilled expats in private sector driving

duality in labor market (e.g., reservation wages)

Low productivity impacts GDP growth,

quality of jobs and creation of sustainable jobs suited for nationals

Labor markets in the GCC exhibit a number of unique characteristicsGCC labor market overview

Source: World Bank, Bahrain Labour Market Regulatory Authority, UAE Ministry of Human Resources, Planning and Statistics Authority Qatar, National Centre for Statistics & Information Oman, General Authority for Statistics KSA, Kuwait Statistical Report 2019, Gulf Immigration Org., Global Media Insight, Statista, Strategy& Analysis

11

15%And rising

<30%Across GCC

40-70%Low skilled

1 2 3 4 5

~2%Decline

(in last 10 years)

<10%Vocational enrolments

(v/s higher education)

Weak education-labor alignment (tertiary

and vocational) adversely impacts job-matches


In fact, GCC national workforce is highly dependent on the public sector

1) Abu Dhabi taken as a proxy for UAE due to lack of data (excludes gov. controlled companies)Source: World Bank, Bahrain Labour Market Regulatory Authority, UAE Ministry of Human Resources, Planning and Statistics Authority Qatar, National Centre for Statistics & Information Oman, General Authority for Statistics KSA, Kuwait Statistical Report 2019, Gulf Immigration Org., Global Media Insight, Strategy& Analysis

12

1%

38%99%

62%

ExpatsNationals

Expats

45%55%

2%

Nationals

98%

Qatar

Expats

2%

69%

98%31%

Nationals

Nationals

89%

93%

11%

7%

Expats

YouthUnemployment Rate

30%0%Public sector

Private sector

GCC labor market overview(latest available year)

39% low skilled

~65% low skilled

~70% unskilled & semi-skilled

2 Mn

9.7 Mn

2.4 Mn 0.66 Mn

6.5 Mn

89%

ExpatsNationals

87%13%

11%

7%

5%95%

Expats1Nationals1

93%

1.9 Mn

Size of bubble = Size of total labor market


The assessment of GCC labor markets needs to be conducted on an individual segment basis

13

Impact assessment of GCC labor market segments

Nationals(GIG / Informal economy)

Skilled expats (private sector)

Nationals (public sector)

LEVEL OF INSULATION FROM SHOCK Takes into account provision of job security, unemployment insurance / assistance, social support / social protection availability etc.

IMPA

CT

OF

STR

ATEG

IC O

BJE

CTI

VES

Low High

Low

Hig

h

Take

s in

to a

ccou

nt th

e re

plic

abili

ty o

f wor

kers

, crit

ical

ro

les,

cap

turin

g in

stitu

tiona

l kno

wle

dge

etc.

Expats (public sector)

Expats (low-skill)

G

D

Job seekers (nationals)

C Nationals (private sector)

B

F

E

A

Expats (Informal / unauthorized)H


Accordingly, government response needs to be structured by segment for nationals…

14

• Provide cash transfers and / or increase social assistance coverage (means-tested)

• Design and enhance access to contributory unemployment insurance

• Provide support mechanisms to GIG and informal workers to increase transition from informal 🡪 formal economy

GIG / Informal workers(Nationals)

• Support remote work setup and safe return-to-the-workplace

• Upskill / re-skill to increase digital readiness and increase productivity

• Support entrepreneurship (e.g., innovation grants, long-leaves) to explore innovative business models / recovery ideas

• Cross-skill workforce to build resilience to future shocks

• Transition towards a contractual relationship (vs. job security)

• Provide short-term wage support (work-benefits) to prevent unemployment

• Upskill and certify to enhance employability in the new ‘normal’ (future of work)

• Provide out-placement support

• Cross-skill workforce to build resilience to future shocks

• Strengthen contributory unemployment insurance

• Provide entrepreneurship grants / funding and technical support programs

• Provide virtual internships and / or short-term contracts

• Nudge towards higher-education / certification programs (to delay entry into labor market)

• Publish ‘resilient’ and ‘future’ sectors / occupations – provide support to re-skill and enhance employability

Nationals in private sector

Job seekers(Nationals)

Nationals in public sector

A B C D


Skilled Expats(Public and private sector)

… and for expats

15

• Coordinate with 3rd sector to provide essential supplies and medical support to prevent COVID-19 outbreak

Unauthorized workers

• Support remote work setup and safe return-to-the-workplace

• Provide flexible labor laws / instruments (reduced working hours, leave policy) to minimize job losses

• Prevent skill-drain from market (visa extension for job-search)

• Consider access to contributory unemployment insurance (insulate against short-term skill drain)

• Enhanced labor mobility to support short-term spike in demand in critical sectors

• Access to medical support to encourage self-reporting and quarantine

• Strict OSH rules at work-places and residences to minimize risk of spread (e.g., labor camps)

• Centralized account for end-of-service and gratuity payouts (to prevent adverse impact in case of employer bankruptcy)

• Access to essential food suppliers and / or medical support to encourage self-reporting and quarantine as necessary

• Instill contributory (paid by sponsor) fund for future shocks and ensure decent coverage in case of future shocks

• Increase sponsor responsibility (fines, wage-protection etc.)

Low-skilled Expats(private sector)

Informal workers(e.g., Domestic visa, free-visa)

E F G H H


All stakeholders have a crucial role to play in shaping the labor market in the coming months

Source: Strategy& Analysis

Government

Employee / Job Seeker Employer

Design guidelines to balance economic recovery and community safety

Provide flexibility in policies / tools to support employers and employees (e.g., at-risk individuals)

Support with active labor market support programs (as needed)

Drive accurate data-driven decision making

Assess and build future resilience of labor market

Adopt an employee centric approach (safety first, mental well-being etc.)

Invest in digitization and remote collaboration tools

Innovate to accelerate recovery

Plan for workforce and entity resilience to future shocks

Invest in up-skilling / re-skilling to enhance employability and productivity

Keep a long-term view while planning career pathways

16

2 Economic update

Richard Boxshall

PwC Middle East - COVID-19 Webcasts - 12 May 2020 18

Business conditions in the region continue to deteriorate

Sources: IHS Markit

● PMI indicates non-oil private sector activity

● Business conditions had been deteriorating in KSA, UAE and Qatar before the COVID-19 crisis

● All three economies signalling significant contraction in March and April

● Lower activity attributed to business closures and shrinking customer demand

● New export orders and employment dropped at the fastest ever pace

Commentary

Expansion

Contraction


COVID-19 and the oil price downturn may have large implications for fiscal policy in the Gulf

19

Fiscal expansion

● Fiscal stimulus packages offset by tactical cuts in recurring OPEX and CAPEX in countries such as KSA and the UAE

Spend rationalization

● Cost rationalization and cost cutting exercises across all countries

● Improvements to public financial management across the region

Rising debts

● Increased borrowing for all countries● Sovereigns like Oman, Bahrain, and Dubai

will tap domestic markets, private lending, and bi-lateral/multilateral lines of credit

● Reliance on reserves to help fund the twin current account and fiscal deficits

● Emergence of new modalities of sovereign wealth fund management (drawdown rules, etc)

Reserve drawdowns

A new focus on revenue diversification

● Quicker introduction of VAT and excise tax● VAT rates increases (i.e. Saudi Arabia)● Potential introduction of new revenue streams

● Already weak inflation numbers (or even deflation in some markets) to decline as government spending places downward pressure on prices

Fighting deflation

1

2

3

4

5

6

33rd edition - Middle EastCFO Pulse findings

Stephen Anderson


In returning to the workplace, how confident are you in your company’s ability to do the following?

21Source: PwC, COVID-19 CFO Pulse, 12 May 2020Middle East 70

● Middle East CFO’s are very confident about meeting customers’ safety expectations and providing a safe working environment for their employees

● However, building future skills and balancing the needs of all stakeholders will need further attention


What is your company planning to implement once you transition back to on-site work?

22

● 85% of UAE CFOs are placing a greater importance on workplace safety measures such as wearing masks and testing

● A third in the Middle East, and a quarter the UAE, are planning to make remote working a permanent option

● 33% of Middle East CFOs are likely to reduce their real estate footprint

All territories

Middle East

UAE

Source: PwC, COVID-19 CFO Pulse, 12 May 2020All territories: 867, Middle East 70, UAE 33


What things will make your company better in the long run?

23

All territories

Middle East

UAE


● Middle East CFOs believe that flexible working (76%) and technology investments (47%) will enhance their company in the long term


What impact do you expect on your company’s revenue or profits this year?

24


● 86% of Middle East CFOs are expecting to see a decrease in both revenue and profits. With 70% expecting a decrease of 10% or more.

● Almost one in five Middle East CFOs are expecting to see a decrease of over 50%.

Increase revenue and/or profitsWe do not expect any impact to revenue and/or profitsIt is difficult to assess at this point

Decrease but range unknown

Decrease < 10%

Decrease 10% to 24.9%

Decrease 25% to 50%

Decrease > 50%

Decrease revenue and/or profits


If COVID-19 ended today, how long would take for your company to get back to “business as usual”?

25Source: PwC, COVID-19 CFO Pulse, 12 May 2020All territories: 867, Middle East 70, UAE 33

● 66% of Middle East CFOs are expecting the return to ‘business as usual’ to take three months or more vs. 57% globally


Which of the following does your company expect to occur in the next month?


All territories Middle East UAE

● Middle East CFOs continue to see changes in staffing and layoffs


Which of the following investment types is your company planning to defer or cancel?

27

Global

Middle East

16%

6%

● Only 6% of Middle East CFOs are planning to defer or cancel digital transformation investments but with secure remote working a priority, cybersecurity investments have been protected

Global

Middle East

3%

0%

Cybersecurity

Digital transformation

Source: PwC, COVID-19 CFO Pulse, 12 May, 2020All territories: 523, Middle East 47


Which of the following does your company expect to occur in the next month?


● 38% of CFOs have increased their company’s community-focused efforts and such as contributions to nonprofits, pro-bono goods and services to support vulnerable groups

All territories Middle EastUAE


Stephen Anderson ME Strategy and Markets Leader

PwC Middle [email protected]

Contact us

Richard BoxshallChief Economist

PwC Middle [email protected]

Hilal HalaouiPartner - Head of Government & Public Sector

Strategy& Middle [email protected]

pwc.com/me

Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.Established in the Middle East for 40 years, PwC has 22 offices across 12 countries in the region with around 5,600 people. (www.pwc.com/me).PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2020 PwC. All rights reserved


• Mandate remote work for applicable positions• Reorganize working / meeting spaces to maintain safe

working distances of at least 1.5m• Establish maximums for workplace gatherings • Close common areas where people gather and interact

• Special accommodation for personnel who are members of a vulnerable population or have at-risk family members at home

• Implement tools to monitor staff temperature on-site and mandate self-quarantine in cases of COVID symptoms manifesting; revise sick leave policies accordingly

Symptom Monitoring

Distance Working

Governments and employers should establish and enforce strict protocols for employees who return to workEstablishing new protocols for employees

Source: WHO, US FDA, Dow Jones Factiva, ILO, Strategy& analysis

32

• Implement ‘soft bans’, partial travel restrictions, and policies for employees to inform HR of travel plans; mandate 14-day self-quarantines following travel to high-risk areas

• Distribute health education materials, current policies / procedures, and contact listings for occupational health and safety officers

Awareness

• Boost workplace cleaning programs and signage promoting healthy practices

• Ensure availability of hygienic tools (e.g. face masks, handwashing stations and sanitizing wipes)

Workplace Hygiene

• Install high-efficiency air filters, increase ventilation rates, and use physical barriers such as clear plastic sneeze guards

Engineering Controls

Travel Managing

Systems & Records Updates

• Update notification systems, employee contact information, and develop procedures for technology usage; ensure IT staff availability to assist employees

• Retain names / contact details of meeting participants to trace potential transmission risks

Special Accommod-ation

April 2020


GCC Workforce OverviewExpatriates as a percentage of

populationExpatriates in low-skill industries1 as a

percentage of all expatriates

Countries should focus on improving conditions and containing the virus in labor campsProtocols for sectors where low-skilled workers live in labor camps

1) Low-skill industries: construction, manufacturing, mining/quarrying, and agriculture2) Personal Protective Equipment (e.g. face masks / shields and gloves)Source: WEF, Economist, Huffington Post, CNN, GCC-Stat, ABC News, Strategy& Analysis

Labor Camp Outbreak Example

Singapore Migrant Worker Outbreak

• Initially lauded for its ability to contain the disease (266 total cases mid-March), Singapore has experienced a second wave of a COVID-19 outbreak (~12,000 cases by late April)

• The majority of new cases (93%) were in migrant workers living in condensed dormitories

76%85% 79%

39%44% 43%41%

54%

36%

62%

42% 42%

Mitigation ProtocolsHigh risk demographic due to living conditions

Social Distancing

Hygiene Promotion

Testing, Tracing and Containment

• Enforce spacing requirements at camps and workplaces

• Find additional accommodation to increase worker spacing

• Strengthen hygienic protocols to reduce transmission risk (PPE2, sanitizer, hand washing, etc.)

• Conduct widespread testing and tracing and establish quarantine blocks to contain infected workers

ShiftAlternation

• Increase frequency of alternating shifts in camps, workplace and transportation

Socializing and Awareness

• Spread information extensively and efficiently (e.g. in native language of workers)

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Webcast series COVID-19...May 12, 2020 · salaries up to GBP 2.5K per employee per month if...

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