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…

Oil… The economy grew in unparalleled speed

Infrastructure development… Need for labor

Population not ready…

Borders opened…

The rest is history….

Bahrain today….

…But 50 years on, the story is different 65% of the population is under 25 years old

Current unemployment at 20%

95% increase in Bahraini labor force in 2013

16% reduction in wages levels over 20 years

and… 60% of total labor force are expatriates

Bahrain today….

Borders open to the outside

Highly regulated markets on the inside

Limited expatriate movement within the market

Strict ‘Bahranization’ policies

Strong government grip on the market

Bahrain today….

There are two labor markets

There are two working environments

Public sector is the employer of choice

Economy dependent on labor intensive industries

Population growing faster than the rate of ‘desirable’ jobs created

Reform is over due…

The reform…

Aims to: Deregulate the market

Equalize the cost differential

Give equal rights and choices

Upgrade the working environment standards

Destination vision

Aspirations

Economic reform

Education

and training reform

Labour market reform

Improve Bahraini skills through education and training to better meet job market demand

Stimulate private sector job creation, especially in the medium and high wage job segments

Eliminate labour market distortions first to make education and economic reforms effective

Reform Process

2004 2005Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2006

Vision and policies Process redesign

Vision and

policiesImplementation

Launch

Launch

Launch

Labour market reform

Implement(cont.)

Economic reform

Education reform

Vision and

policiesImplement(cont.)

The Plan

Reform Process

Initiative by H.H. The Crown Prince of the Kingdom of Bahrain

1st Step: Diagnostic 2nd Step: Consultation with social partners 3rd Step: Announce Proposal

begin social dialogue 4th Step: Prepare for implementation 5th Step: begin a 3 year gradual engagement

The Reform

Allow expatriates to switch employers at will Unify social benefits

EFFECT

Abolish employer control over expatriate employee, thus: Increase expatriate wages Allow competition, create secondary market Allow freedom of choice for employer &

employee

The Reform

Equalize cost via increased fees on expatriate work permits payable by employer

EFFECT

Eliminate unfair competition, thus: Promote technology penetration Steer jobs created towards value added Make employment choice based on

productivity not cost

The Reform

Eliminate Bahranization policy Deregulate ‘hire-fire’ procedures

EFFECT

Make employment of Bahrainis a business decision, not by law, thus: Promote open market policies Induce a new work culture Make employment choice based on

productivity

The Reform

Dramatically reduce government's role Invest in economy upgrade

EFFECT

Allow for open market practices to control the labor market mechanism: Government a regulator not a market force Money generated to go to human

development Increase private sector’s role in the economy

The reform

Too elaborate and detailed to discuss within the time allocated, but:

Allows for continuous adjustments Aims to be fare to all parties Full Economic Impact Assessment Builds on other countries experiences Fully compatible with ILO & WTO Has been checked by….

16

Peter CapelliProfessor of Management; also Senior Advisor, Kingdom of Bahrain

Jere BehrmanDirector of Economics

Mustafa NabliRegional Chief Economist for Middle East/North Africa

Vincent Palmade Lead Economist of Private Sector Development

Manollo AbellaChief International Migration Branch

Augusto Lopez-Claros Chief Economist and Director, Global Competi-tiveness Programme

Pang Eng FongPractice Professor of Management, School of Business

Hui Weng TatDepartment of Economics

Tarek YousefProfessor of Economics

International experts

Thank you