‘Salary Trends – The Changing Landscape’ released by Advantage Consulting
29 September, 2010, KUWAIT

With the economy starting to turn around, organizations again face the prospect of a tussle for top talent at a time they most need the expertise and the experience. And organizations are recognizing the importance of their pay strategies in attracting and retaining this talent.
Ms. Safa Al Hashem, Chairman & Managing Director of ADVANTAGE Consulting Company, while releasing the latest report titled, ‘Salary Trends – The Changing Landscape’, published by the Markets Insights Division (MID) at ADVANTAGE said, “Organizations are now reengineering their workforce and talent strategies, to take advantage of the recovery to better adapt to the new business normal that the financial crisis has resulted in”. Elaborating further, Ms. Safa said that, going forward, the dynamics of a new business environment would result in an organization’s compensation strategy being a key differentiator in its ‘War for Talent’.

The report analyzes, in detail, the trends witnessed in salary increases across the GCC, with 2010 witnessing a relatively stable and moderate increase at 7.7%, far from the highs experienced in the pre-recession period. It has also been noted that far fewer organizations in the GCC opted for salary freezes in 2010, as against 2009, when salary freezes and cuts were the order.    

Recruitment in the region, as outlined in the report, continues to be guardedly optimistic with hiring in specific functions such as Finance and IT, having gradually picked up over the period. Also, as noted, most experienced professionals who kept on hold their plans to change jobs over the last 2 years due to the market instability, have started to seek newer opportunities, signaling a change in the overall business sentiment. Organizations are looking at ramping up operations in areas that offer long term potential growth, such as Asset Management and Project Finance. As Private Equity firms undergo a focus change in target sectors from real estate and financial institutions, to healthcare, education and utilities, hiring is expected to eventually emerge in this area.

On the increasing adoption of Performance linked Pay across the region, Ms. Safa said that “Performance linked Incentive Schemes provide the perfect tool for organizations to align employees with its long term and short term objectives. By linking incentive payouts to performance, organizations will be able to elevate the sustainability of their overall compensation strategies, and will help tie employee performance to the organization’s bottom line, thereby ensuring a greater focus on return on investment.” The report explains that organizations, to offset the relatively low increases that have been given since the recession began, have restructured their compensation strategies to include a higher proportion of variable pay to fixed pay, over the last period.

In its conclusion, the report say that organizations shall be driven to design talent strategies that will help them gain competitiveness and become more efficient. Organizations will have to ensure that they maximize all resources to optimize effectiveness of their operations.  Considering the need to remain competitive, companies will have to implement innovative compensation strategies to attract, develop, motivate, and retain its Human Capital.

Kuwait National Offset Company deviates from its scope of duties by targeting a stake in the development plan.

Ms. Safa Abdul Rahman Al-Hashem, CMD, Advantage Consulting Company, stated:” The repercussions of the  erroneous intervention in the Kuwaiti 5 year development plan is still accumulating. Subsequently, after the initiative to establish a special financial fund to bypass the control of the Central Bank of Kuwait and the consequential undermining of local banks role in the developmental plan, Kuwait National Offset Company announced through its chairman Anwar Al-Joudar at a press conference that they are considering the development of a committee that would take charge of restructuring the guidelines of the procedures of the Kuwait National Offset Company to take part in the development plan.

The premise of the chairman was that Kuwait National Offset Company will benefit from the concerned development plan by forming long term offset agreements with foreign international entities and convincing them to form SME’s under the umbrella of the privatization law, in order to cater to the needs of the plan. He also mentioned that the offset company will embrace governance frameworks for the social good and in inclining  international companies to expedite execution of their obligations.

The Kuwait National Offset Company is also trying to create a symposium with the Kuwait Investment Authority to aid in marketing the projects of the offset company to foreign investors and convince them that the development plan will create economic equilibrium for both the international obligor and local obligee.

Al-Hashem added: "Offset agreements in essence are usually formed as a counter-trade transaction to reinstate a country whether in a tangible or intangible form for the capital outflow triggered as a result of acquisition of a good or service from an international entity, which subsequently becomes the obligor for a service that is direct or indirect to the initial transaction made between the entity and the beneficiary country.

Offset agreements that are practiced globally are predominantly for the purposes of military procurement, while civil agreements constitute only a negligible portion. This is evident in the case of Kuwait, since most potential and available obligors coordinating with the offset company cater mainly to the Kuwaiti Ministry of Defense, as well as the Ministry of Electricity & Water, and Kuwait University. Thus, the offset company lacks the acumen of the needs of the assorted sectors involved in the development plan to do the proper obligor and obligee matchmaking for the respective sectors.

Al-Hashem showcased some of the key drawbacks of such intervention in the implementation of the development plan:

• There will not be many significant tangible solutions and benefits from the offset. Most benefits are intangible like technological transfer, procurement of jobs for the youth and training national cadres.
• The development plan has numerous and forked goals, which cost hundreds of millions to fulfill!! Will international obligors be prepared to commit the effort and capital?!
• Since 2002 till 2009, education garnered the lion’s share of offsets in Kuwait, with a rate of 40%. So what about sectors other than education in the development plan, including residential care, healthcare, infrastructure and electricity & water?
• Kuwait is behind in offsets relative to its counterparties and benefited the least from offset agreements. In addition to the fact that foreign investors are not lured to invest in Kuwait, because of the bureaucracy in establishing enterprises due to the legal and administrative formalities in Kuwait. Even the article 8 of the Foreign Direct Investment Law that entitles foreign entities to 100% ownership is applicable only to certain sectors.
• The liability of the transacting venturer (obligor & obligee) to the third party (Kuwait government) is unlimited, thus any fine for malpractice will be paid for by the newly formed Kuwaiti enterprise / venturer according to article 57 of the Kuwaiti Companies Law.
• During 2010, half of the offset projects were directly linked to the purpose of the agreement (direct offsets). While the development plan needs indirect multi scope offsets to cater to different sectors of the forked plan.

Delight and optimism towards establishing Kuwait National Offset Company

Many stakeholders were among the most complacent when the Minister of Finance in accordance with the Kuwaiti cabinet decree took the decision to transform the offset from just a department in his ministry to a standalone state owned company in 2005. This is because it was the first time ever in Kuwait to transform the duties of one of the ministerial departments into a company that conforms to the modus operandi (mode of operations)of private companies, commencing its functions directly on the 2nd of September 2006. The most evident reason of complacency is that the capital that was injected to the department of offset under the Ministry of Finance, stood idle since its foundation in 1992 and with this transformation many thought that the capital will be well utilized.

Kuwait National Offset Company is not the only one to blame. It is just like the government which has no longer got a vivid roadmap to execute the development plan. Maintaining the true essence of the Kuwait National Offset Company is the greatest concern. The Company should restore its original purpose of establishment, which is to match-make the obligor with the Kuwait obligee, for the purposes of technology transfer, increasing job opportunities for the Kuwaiti youth and training the National cadres. Therefore, the Chairman shouldn’t amend article 9 of the guidelines established on the 9th of September 2007 just to operate like one of the ministries concerned in the development plan.

Kuwait National Offset Company should not stray away from its guidelines and behave like a pure privately owned company with a profit motive in mind. There are already several issues that it needs to overhaul, especially the mechanism of match making, which many international entities like Boeing criticized.

Al-Hashem concluded her statement saying: "I have lately noticed that in Kuwait there has been a notion being deep rooted in the conviction of MP’S and government officials since the inauguration and approval of the development plan in April. Which is the continuous attempts to change the roles and conventional functions of Kuwaiti establishments to one’s they weren’t originally created for. And to juggle other functionaries, not taking into consideration that they are new and not relevant to their expertise. Nevertheless, with all due respect, this situation is really problematic.
I reiterate that this is a misconception, because entities like the KFAED and the KNOC were established for an entirely different purpose and with previously set visions and objectives, in addition to the fact that these entities do not have the tools or the know-how to participate in the Kuwaiti development plan, in the way they are proposed to. This is because development plans were last seen two decades ago, therefore having such a huge plan introduced and accepted in this era is considered a new conversion to what major entities were used to in Kuwait.

The panacea to any shortfall in the execution of the development plan is not the involvement of several entities and distorting their original missions and visions to participate in the development plan. The real panacea is to establish a governmental body that conducts a comprehensive diagnostic study on all aspects pertinent to the development plan, in order to pin-point  and eradicate any present hurdles. Kuwait today is like an ailing body that is inflicted with immense malaise, and is in need for deep diagnosis prior to any surgery.

Advantage Releases an Integrated Dictionary of Traditional Finance & Business Terminology and Update Thereto Due to Economic and Financial Crisis

Advantage Consulting Company has released a dictionary of current terms in finance and business world. In this regard, Mr. Abdulwahab Abdulghani, Senior Officer, Financial Advisory in the company, stated: "We have previously released a similar dictionary of commonly used financial terms. We felt that it is time for updating and revising such glossary, particularly as the global financial crisis has struck the world markets and associated significant and huge changes in the financial, banking and investment system. We also took into account the critical decisions made by the United States of America regarding the bailout plan and associated changes to certain terminologies, e.g. Obamanomics, a buzzword that describes the economic philosophy of U.S President Barack Obama. Obamanomics calls for lower tax rates for companies that meet certain criteria, such as providing decent healthcare and maintaining a U.S. workforce and headquarters. Obama's economic platform also calls for higher taxes for high-income families and investment in education, healthcare and the sciences.

Abdulghani also added: "We wanted this dictionary to be an integrated reference to be updated at regular intervals to realize intended benefits. The dictionary is available to be downloaded.