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 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
Reform Process Destination vision Aspirations Education and training reform Labour market reform Economic 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
The Plan 2004 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Labour market reform Vision and policies Process redesign Implement(cont.) Launch Economic reform Vision and policies Implementation Launch Education reform Vision and policies Implement(cont.) Launch
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….
Pang Eng FongPractice Professor of Management, School of Business Tarek YousefProfessor of Economics International experts Peter CapelliProfessor of Management; also Senior Advisor, Kingdom of Bahrain Jere BehrmanDirector of Economics Augusto Lopez-ClarosChief Economist and Director, Global Competi-tiveness Programme Mustafa NabliRegional Chief Economist for Middle East/North Africa Vincent PalmadeLead Economist of Private Sector Development Hui Weng TatDepartment of Economics Manollo AbellaChief International Migration Branch