The government is struggling to head off unemployment

More jobs for locals will soon be required

Long before the current financial crisis gripped the world, some hard number-crunching in Bahrain led to forecasts of dire jobless rates and prompted a series of measures.

Necessity has led to Bahrain’s decision to introduce labour reforms that outstrip other Gulf states’ efforts to develop a work ethic among their fast-growing, youthful populations.

The workforce will double over the next 10 years, with approximately 4,000 college-educated Bahrainis entering the job market a year.

However, the private sector is creating an average of only 1,100 jobs a year with a monthly salary higher than BD500 ($1,326), but about 2,700 jobs a year for non-Bahrainis.

Bahrain also has an indigenous trade union movement and working class, made up of mostly Shia. Regular protests by jobless and frustrated Shia youth who feel marginalised have sent a clear message to the ruling Sunni elite – increase opportunities for all Bahrainis or political tensions could plague the country.

“We have to increase the middle class and growth in gross domestic product.” says Ali Ahmed Radhi, chief executive officer of the Labour Market Regulatory Authority (LMRA).

“Reforms started in 2004 after a number of studies laid out the challenges for us.”

The studies showed that without reform, unemployment was set to hit 35 per cent and underemployment to reach 60 per cent as soon as 2013.

However, there has been resistance to change from some ministers, particularly those with control over state-owned assets, and the business community that has benefited from cheap foreign labour.

And while most agree the reforms are well-intentioned, some question the pace of implementation.

The LMRA was created in 2006 to create a one-stop shop for workers and employers, regulating work visas, manpower licences, ID cards and the “deportation and detention of illegals”, says Mr Radhi.

Bahrain, like other Gulf countries, has had to grapple with the thorny issue of having a large expatriate workforce overshadowing nationals, who often preferred safe, public sector jobs.

The country has about 750,000 people, some 300,000 of whom are expatriates.

Officials say that diversification is the key to providing more jobs and Bahrainisation – getting more nationals into the workforce – is moving beyond the blunt quota systems of the past.

From July this year, minimum quotas of the number of nationals that must be employed at companies were relaxed in favour of a system of fees levied on organisations for each foreign worker they employ so as to raise the financial costs of hiring an expatriate.

However, under pressure from business, the fees were reduced to a total of BD440 for each foreign worker for a two-year permit, causing some to say that the reforms were being watered down.

Mr Radhi says the fees still allow companies to be competitive.

“Business was scared by the idea of the fees and we’ve faced a number of issues in the first few months of this system,” he says.

“However, the fees have only raised the average cost of hiring a foreign worker by about 10 per cent. In another three months, people will be used to it.”

Also controversial with the business community was the scrapping of the sponsorship system, which tied foreign workers to one employer.

Expatriates will be freer to switch jobs after they have been approved by the LMRA. “Work permits had become almost like a blank cheque on the black market,” says Mr Radhi.

The LMRA has developed an internet portal and is encouraging employers and workers to submit online applications and check the progress of visa applications.

The LMRA transfers 80 per cent of the fees it receives to the Labour Fund, which invests in Bahraini job creation and training, in partnership with private sector companies.

Abdulellah Ebrahim al-Qassimi, acting chief executive of the Labour Fund, says: “Our goal is unique: to create human capital and support the private sector.

“In other countries, such as England or Singapore, they have at least two separate agencies to do these things.”

The fund has been allocated a budget of about $80m until 2011, he says, and its activities include providing subsidies to employers to pay wage increases if workers undergo further training as part of career progression efforts.

He says that a skills gap study has already helped to identify private sector opportunities, from low-level jobs such as waiters through to accountants and pilots.

“Gulf Air alone will need 100 pilots over the next year,” he says. “Before, pilots had to pay for their own training, but we can now help guarantee bank loans, which pilots can pay back at low interest rates once they are qualified.”

Government officials say they are striving for improved transparency so that Bahrainis can see that efforts to help them are under way.

But much distrust exists.

The unemployment rate is under widespread dispute, for example, with some analysts estimating it at 15 per cent. Under the government’s definition, it was 3.8 per cent in September.

The government excludes those who have turned down two “suitable” job offers, and includes those it says are willing and able to work.

But while Bahrainis watch nervously for any impact from the global economic crisis, labour reforms could become a tougher sell in the coming months and will test the government’s resolve to push ahead with genuine reform in the face of powerful resistance.