GroundBreaking Reform Bahrains endeavors to reform the labor

Ground-Breaking Reform Bahrain’s endeavors to reform the labor market Ausamah A. Al Absi Director of Employment Ministry of Labor & Social Affairs

The Gulf… A Story

The Gulf Economies… n Oil… The economy grew in unparalleled speed n Infrastructure development… Need for labor n Population not ready… n Borders opened… The rest is history….

Bahrain today…. …But 50 years on, the story is different n 65% of the population is under 25 years old n Current unemployment at 20% n 95% increase in Bahraini labor force in 2013 n 16% reduction in wages levels over 20 years n and… 60% of total labor force are expatriates

Bahrain today…. n Borders open to the outside n Highly regulated markets on the inside n Limited expatriate movement within the market n Strict ‘Bahranization’ policies n Strong government grip on the market

Bahrain today…. n There are two labor markets n There are two working environments n Public sector is the employer of choice n Economy dependent on labor intensive industries n Population growing faster than the rate of ‘desirable’ jobs created Reform is over due…

The reform… Aims to: n Deregulate the market n Equalize the cost differential n Give equal rights and choices n Upgrade the working environment standards

Reform Process Destination vision Aspirations Labour market reform Eliminate labour market distortions first to make education and economic reforms effective Economic reform Stimulate private sector job creation, especially in the medium and high wage job segments Education and training reform Improve Bahraini skills through education and training to better meet job market demand

The Plan 2004 Q 1 Q 2 Q 3 2005 Q 1 Q 2 Q 4 Q 3 Q 4 2006 Q 1 Labour market reform Launch Vision and policies Process redesign Implement (cont. ) Economic reform Launch Vision and policies Implementation Education reform Launch Vision and policies Implement (cont. )

Reform Process Initiative by H. H. The Crown Prince of the Kingdom of Bahrain n 1 st Step: Diagnostic n 2 nd Step: Consultation with social partners n 3 rd Step: Announce Proposal begin social dialogue n 4 th Step: Prepare for implementation n 5 th Step: begin a 3 year gradual engagement

The Reform n Allow expatriates to switch employers at will n Unify social benefits EFFECT n Abolish employer control over expatriate employee, thus: Increase expatriate wages n Allow competition, create secondary market n Allow freedom of choice for employer & employee n

The Reform n Equalize cost via increased fees on expatriate work permits payable by employer EFFECT n Eliminate unfair competition, thus: n Promote technology penetration n Steer jobs created towards value added n Make employment choice based on productivity not cost

The Reform n Eliminate Bahranization policy n Deregulate ‘hire-fire’ procedures EFFECT n Make employment of Bahrainis a business decision, not by law, thus: Promote open market policies n Induce a new work culture n Make employment choice based on productivity n

The Reform n Dramatically reduce government's role n Invest in economy upgrade EFFECT n Allow for open market practices to control the labor market mechanism: Government a regulator not a market force n Money generated to go to human development n Increase private sector’s role in the economy n

The reform Too elaborate and detailed to discuss within the time allocated, but: n Allows for continuous adjustments n Aims to be fare to all parties n Full Economic Impact Assessment n Builds on other countries experiences n Fully compatible with ILO & WTO n Has been checked by….

International experts Peter Capelli Professor of Management; also Senior Advisor, Kingdom of Bahrain Jere Behrman Director of Economics Mustafa Nabli Regional Chief Economist for Middle East/North Africa Vincent Palmade Lead Economist of Private Sector Development Manollo Abella Chief International Migration Branch Tarek Yousef Professor of Economics Augusto Lopez-Claros Chief Economist and Director, Global Competitiveness Programme Pang Eng Fong Practice Professor of Management, School of Business Hui Weng Tat Department of Economics 16

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