Perhaps more than any other sector or resource, Kurdistan’s quickly expanding workforce contains arguably the most potential to reshape the Kurdistan Region’s business, economic, and social landscape for the better, over the long term. This untapped potential is a result of several factors coming together, including latency in the professional capacities of the Region’s workforce, a major demographic skew towards younger generations, and the influx of investment that has swept into the Region over the past decade. The current situation, then, is one in which the workforce is large, young, and yearning for professional development—and the private sector has the incentive and capital to provide it.

The vast majority of Region’s workforce is employed in the public sector—a legacy of both decades of sanctions, which stunted private sector development and employment, and a broader Iraqi history of centralization of the economy beginning in the mid-20th century. Indeed, as of 2012, only 20% of all wage-paying jobs in the Kurdistan Region were in the private sector. This statistic, however, is untenable—something which the KRG’s leadership understands—and is changing. Employment must shift to the private sector for both reasons of efficiency and demography: The median age of the Kurdistan Region is only 20-21 years, meaning that the working age population is set to expand massively in the coming decade, which the already bloated public sector certainly cannot absorb. KRG initiatives are pushing employment increasingly into the private sector, as well as training employees in methods that improve skills and efficiency in the public sector. The KRG’s Human Capacity Development Program (HCDP) sends recent graduates to international universities for post-graduate studies, many agencies train their own employees (or those of other agencies), and the Prime Minister’s office unveiled in 2013 a website to pair job-seekers with employers in the private sector.

However, some of the biggest momentum for capacity development and training, and private sector employment, comes directly from the private sector. Training takes the form of in-house operations at major companies; training centers at universities, such as the Professional Development Institute (PDI) at the American University of Iraq, Sulaimani (AUIS), and the English Language Center at the University of Kurdistan, Hewler (UKH); MSelect, a recruitment agency, has a training and development center, as do specific sector oriented companies, such as Stirling Group’s Health, Safety, Security & Environment (HSSE) training programs. Companies use each of these operations, depending on their specific needs, to invest in their employees’ skills, professional development, and expertise—from English (or Kurdish, or Arabic) language, to computer programming, to firefighting.

Perhaps the most promising training and development programs, however, are the products of public-private cooperation. The Ministry of Natural Resources (MNR) conducts the largest of these programs. International oil companies (IOCs), as part of their Production Sharing Contracts (PSCs) with the MNR to explore and produce oil, must contribute a certain percentage of their income towards the MNR’s capacity development programs. Some IOCs take this even further—Gulf Keystone, for example, has improved morale, staff retention, and overall productivity through the creation of a comprehensive capacity development program for their employees in Kurdistan.

Public to Private: The Great Migration

Creating increased employment opportunities in the private sector is among the most important factors in insuring social and economic health in the Region. Given the Region’s aforementioned young demographic makeup, it is estimated that the Region will add between 850,000 and 1.1 million new employees to its workforce in the coming 20 years—equivalent to over 20% of the Region’s entire current population, and 100% growth on current employment figures.

The KRG’s public sector already employs a far outsized percentage of its population in its bureaucracy and direct government employment, state owned enterprises, and public-private initiatives. Further net expansion of the public sector’s size, particularly in relation to the Region’s population, would broadly be understood as an inefficient use of public resources—let alone a doubling in size, as the workforce is estimated to do over the coming 20 years. This leaves the private sector to pick up the slack in the coming workforce expansion.

This will require increased local entrepreneurialism, increased foreign direct investment, or privatization of some government functions. The KRG has been actively working towards the initial two options, most obviously through its 2006 Investment Law, which has had great success in both bringing foreign investors to the Region, but also in spurring local investment and entrepreneurialism. Since the law’s inception in 2006, the Region has seen 693 new licensed projects, totaling over $39 billion of foreign and domestic investment, and countless new private sector jobs.

Regarding the third option, outsourcing public sector functions to the private sector, there has been movement as well. Public-private partnership arrangements are developing increasing momentum in the KRG. Particularly where industry specific expertise can be helpful, the KRG is eager to work with private, often foreign, companies. In ICT, for example, the KRG’s Department of IT (DIT) coordinates several private companies to achieve the KRG’s IT-related goals and benchmarks. In many sectors, the KRG offers regular tenders and contracts for outsourcing projects, and even works in joint ventures to bring the private sector into public projects. Even within the training and development sector, the KRG contracts with private universities and training institutes to improve the skills of local public workers.

While the migration into private sector employment is a must in coming years, the transition will take time, and will take further decisive action by both the public and private sectors. One 2014 report commissioned by the KRG notes that, in addition to poor English language and computer skills, preference for public sector employment still hinders the private sector labor market, as many competitive employees seek stable jobs in the public sector. Overcoming this challenge will require private companies to compete more strongly with the public sector in the labor market, but will also require a broader understanding among the Kurdish workforce of the benefits of private sector employment.

Private Sector Training

However, to prepare the workforce for the rigor of private sector employment, in some cases additional skills and development training is necessary. This is particularly true for employment in foreign companies operating in Kurdistan. For example, written and spoken English proficiency often presents challenges; professionalism in writing and communication is sometimes found lacking; and basic to intermediate computer skills can need touching up. These skills can be developed at many different professional development and training centers and institutes.

Human Capital Data

Perhaps less often considered is cultural awareness in the workplace, for both expat workers and local staff. According to Allegra Klein, director of MSelect’s Training and Development Center, “On job sites…people work in isolated, close quarters for weeks at a time. This creates potential for clashes from religious or cultural misunderstandings. Companies are therefore making cultural awareness much more of a priority.”

MSelect is also now working in recent collaboration with the World Bank’s International Finance Corporation (IFC), which is opening up its ‘Business Edge’ initiative in the Region. The program is active in 30 developing countries, in 10 languages, covering 59 individual topics, tailoring its programming to the needs of local workers, and seeking broadly to improve the professional competencies of employees. MSelect has been selected by the IFC to lead Business Edge courses in Kurdistan and Iraq in English, Arabic and Kurdish.

As many companies and organizations find wide and disparate needs in terms of human capital, universities and training centers find it important to work closely with companies and clients to tailor courses directly to what is demanded. “It is essential to understand the needs of each client so as to customize trainings and courses relevant to their needs,” notes Robert Ritchie, director of AUIS’s Professional Development Institute. “Iraq has seen years of conflict, which has adversely affected the opportunity for its people to gain knowledge and skills. Now, especially in the Kurdistan Region, the favorable security situation means that the Region has an opportunity to invest in its workforce. There is a great need for training in Kurdistan and we receive many requests for all kinds of trainings, ranging from language courses to field specific courses.”

Companies themselves also provide extensive training to their employees. From retail, where Landmark Group brings in foreign experts to train local employees and management, to ICT, where companies such as CIS and others send their employees to get international certificate for new technologies and equipment. Bigger companies, such as Faruk Group Holding have large staff training divisions to bring staff into line with the companies’ quality standards.

Even in healthcare, companies are bringing professional expertise to the field after graduates have left university. Nordic Medical Services, part of RMSI International, trains local healthcare professionals from many of Erbil’s hospitals in Pre-Hospital Trauma Life Support. Faruk Medical City partners with local medical schools to bring recent graduates into the hospital in residency schemes, bringing them to speed with international norms in healthcare provision.

The MNR estimates that IOCs’ production workforce will increase by 200% for each 100,000 barrels per day produced. Current production of 165,000-200,000 is expected to reach 1 million bpd by the end of 2015. Such production represents the addition of 1,600 new production workers in just 1.5 years.

Energy Sector Paves the Way

The energy sector, still the largest driver of Kurdistan’s economy has, in collaboration with the Ministry of Natural Resources (MNR), played a leading role in expanding the skills of Kurdistan’s workforce. Early in the sector’s development in Kurdistan, when the MNR began offering Production Sharing Contracts (PSCs) to international oil companies (IOCs) for exploration and production, the MNR recognized the importance of local capacity development that IOCs could offer the Region. The MNR thus made compulsory a ‘capacity building bonus’ to be paid by IOCs towards local capacity and infrastructure initiatives in Kurdistan. The bonus is first paid upon signing the PSCs, and then, as profit oil is produced, paid as a percentage—between 2.4%-4.8%—of net profits.

The MNR this year is using some of this funding for a major capacity development project targeting thousands of people, including the Ministry’s employees, as well as young future energy sector employees. The training program is comprehensive, comprised of both formal training and an internship component with an IOC. However, many oil companies find that the incentive of creating and retaining skilled, professional workers is enough to invest in capacity building programs independently. Many IOCs actively hire local recent graduates for professional positions; MOL Group and Marathon Oil have scholarship programs in place to send recent local graduates to study petroleum engineering at top international universities, and Genel Energy and ShaMaran Petroleum have donated generously to AUIS. Moreover, some companies are finding that investing heavily into the careers of their own local staff pays hefty returns in staff retention, morale, and productivity. Chris Parker, a consultant to the Region’s energy sector, characterized one of such programs carried out by Gulf Keystone, as a small investment for a large workforce enhancement. Benefits of the program to the company include improved safety and efficiency for the company, and a happier workforce with more defined career paths, more professionalism and competency, and increased pride in their work.

Initiatives such as these, already some of the largest in the Region, are set to expand hugely as IOCs move from exploration to production. IOCs’ net employment in Kurdistan is currently 4,137, and is 64% local. The MNR estimates that IOCs’ production workforce will increase by 200% for each 100,000 barrels per day produced. Current production of 165,000-200,000 is expected to reach 400,000 by the end of this year, and up to 1 million bpd by the end of 2015. Such production represents the addition of 1,600 new production workers in just 1.5 years. Beyond production, the MNR projects that a 5x increase in production increases overall energy sector employment by 3x.

This expansion will also represent growing opportunity for training centers in HSSE. Stirling Group, an HSSE company, is preempting this workforce growth by expanding and broadening its training capacities, including the development of a full-scale oilrig in a training center just outside of Erbil. The company already brings in HSSE training experts from around the world to bring global expertise to the local energy sector.

Moreover, the MNR has set a target of reaching 90% local employment in the energy sector by 2016. The 63% of current local employment by the IOCs in Kurdistan is largely concentrated in the lower rungs of the employment ladder—largely in unskilled and semi-skilled labor, where locals represent 88% and 95% of the workforce, respectively. Moving locals into more executive, senior, and managerial positions is a long-term goal of the MNR, but one which will take time, as education and experience accrue among the local IOC workforce.

Ian McIntosh, an advisor to the MNR focusing on workforce capacity development, is promoting initiatives whereby the energy sector reaches out and collaborates more closely with local universities and local graduates, and uses apprenticeships to build expertise and high-level skills among young, local professionals in the sector.

Public Sector Initiatives

Prime Minister Nechirvan Barzani has addressed the need for growth in private sector employment at length in recent years, and has made private sector development and public sector reform central priorities of the KRG’s recently formed Eighth Cabinet. This follows a 2013 initiative by the Prime Minister to establish ‘Kurdistan Works’, a website devoted to connecting job-seekers to employers in the private sector, as well as services to educate workers about work in the private sector, and help them to create resumes and CVs to apply for such positions.

A doubling of Kurdistan’s workforce presents much more opportunity than liability—the addition of 1 million bright, capable entrants to the workforce carries with it unrivaled untapped potential for the Region’s economy and business environment.

Within the KRG’s bureaucracy, and in addition to the MNR, training and development initiatives are also taking root. Hiwa Afandi, director of the Department of IT, is leading an initiative to have internationally certified training centers, to ensure that computer and IT skills can improve processes and maximize efficiency across the KRG. While daunting at first glance, the major shifts taking place in Kurdistan, both into the private sector and up the skills ladder, are being taken seriously by both public and private sector stakeholders. Upon closer inspection, a doubling of Kurdistan’s workforce presents much more opportunity than liability—the addition of 1 million bright, capable entrants to the workforce carries with it unrivaled untapped potential for the Region’s economy and business environment.