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INTERVIEW - Bahrain reforms raising cost of foreign labour

MANAMA (Reuters) - Bahrain’s labour market reforms have started to increase the cost of foreign workers to the benefit of locals, a government official said, with the government now working on introducing caps on foreign labour.

File photo of workers at a construction site in the Bahraini capital of Manama, June 28, 2005. REUTERS/Hamad I Mohammed/Files

Bahrain is reforming its labour market to drive up the cost of foreign labour, mostly unskilled workers from Asia, and improve the competitiveness of its own population.

“We have seen a growth in the cost, not that significant, but it shows that the trends start moving up,” Ali Radhi, chief executive of the Labour Market Regulatory Authority (LMRA), told Reuters in an interview.

Bahrain’s progress in reforming its labour market is closely watched by policymakers in the Gulf Arab region who have to balance business demand for cheap Asian labour against providing jobs to young local people. Many policymakers are business owners themselves.

The island kingdom, whose population is about 1.3 million, has introduced a monthly fee of 10 Bahraini dinars ($26.5) paid by employers for each foreign worker to finance training for locals.

Last August it allowed employees to change employers without the consent of their employers, hoping that by increasing foreign workers’ rights it will improve their ability to bargain for higher wages and thus make local workers more attractive.

The number of workers seeking to change their employer rose to about 1,500 in December, from around 350 in August, according to LMRA data. The data also shows that the gap between the salaries of locals and foreigners has decreased by 15 percent in selected sectors such as construction.

Radhi said the effect will be stronger when existing work contracts expire and employers choose between foreigners and locals under the new regulations for the first time.

The next step in the reform process will be ceilings that cap the number of foreign workers per sector.

“If you try to control the inflow, then people will think more about the productivity and quality of the people they bring, and this is part of the reform’s objectives,” he said.

Radhi said the ceiling would be a moving target adapted to the growth of the economy and individual industries.

He declined to say when the ceilings might be introduced but said LMRA had finished its studies on the matter and submitted them to LMRA’s board for a final decision.

Other Gulf Arab countries such as Saudi Arabia and the United Arab Emirates have taken a top-down approach to the labour market by forcing companies to employ nationals and to fire foreigners first during the current economic slowdown.

Bahrain is also tackling its employment black market.

Companies with a license to employ foreign workers often invite them to Bahrain but then leave them to work somewhere else in return for a share of their income, often throwing them into financial and legal uncertainty.

Radhi said the LMRA surveyed all companies registered in Bahrain to monitor how active they were and has carried out studies on the causes and scope of the phenomenon.

“We didn’t know any of this when we started (the reforms) in 2007,” he said.

Reporting by Frederik Richter; Editing by Ruth Pitchford