Reforming the system: HE Dr Majeed Al Alawi

by Benjamin Millington

Bahrain’s Minister of Labour HE Dr Majeed Al Alawi sat down with CW to discuss recent protests over labour fees, the chances of introducing a minimum wage and a new law which will “virtually break” the sponsorship system.
How has the Bahrain labour market changed over recent years?

We started working on a number of issues. First of all we wanted to provide protection for our own Bahraini human resources so we started a national employment project, because unemployment was around 16% in 2003. We carried out a massive campaign to recruit Bahrainis.

The problem was structural unemployment, we had jobs and we had the unemployed but they didn’t match each other. Bahrainis were not attractive, or attracted, to the private sector. So we changed a lot of people’s mindsets and instigated training programmes. Unemployment has since been between 3.5% to 3.8%.

We also established our social benefits system through the parliament – there is no other country in the region with such a system. It is financed by employees, employers and the government – each pay 1% of their earnings. Having a social security system has actually proved crucial to solving the unemployment problem. The system is linked to training the unemployed; it’s not just about giving away money.

We also established the Labour Market Regulatory Authority (LMRA) to control the issuing of work permits and issues between employers and employees. The board, of which I am the chairman, is made up of people within the government, industry and trade unions.

What about protecting workers’ rights?

The Labour Ministry has instigated a number of initiatives to provide protection to expatriate workers. We banned working during the summer months from 12 noon to 4pm for construction workers and this has been implemented in the last two years with great success.

This month we are banning transporting workers in the back of open trucks. We also imposed that salaries should be paid through banks. Also by law, if an employer delays payment to a worker by more than six days then interest starts to accrue and this must be paid to the employee.

We have also carried out thousands of inspections of labour camps and construction sites, and we prosecuted many companies for violating health and safety. Our standards for safety are very high because we signed various ILO conventions and international articles. There are still further improvements in this regard on the way.

I think one of the biggest things we’re doing is allowing the freedom of movement for expatriate workers. They will be allowed to apply for another job in the country, so the sponsorship system will virtually be broken. This is a major labour policy shift for the region and will be effective in three months from now.

Will expatriates simply be able to move between employers?

Yes, so long as they adhere to the conditions of their contract. The contract might say, for instance, that the employee cannot work for a competitor for the next six months. The employee might also be liable for visa and travel costs if they break their contract. It all depends on the contract now.

What if their contract ends?

You must notify the LMRA one month before your contract ends and inform it that you are looking for another job. If you haven’t found another job by the end of the contract then we will give you four weeks to continue looking. During this period we will pay you unemployment benefits. If you haven’t found a job after four weeks, then you have to go.

Has there been any opposition to this new law?

There is strong opposition from employers but we think it is good for the market. It will end the black market for illegal visas and will raise salaries, because workers will have an option to go to employers who will treat and pay them better. It will also help us raise the standard of wages amongst Bahrainis.

Practically, it will end the sponsorship system and illegal visa system, because those contractors will not be successful. If the sponsor is holding you, holding your passport and not paying your salary, then you can easily just move onto another employer.

Will the new law have any impact on the monthly US $26.50 (BHD10) fee paid by employers for each expatriate construction worker?

No, those labour market reforms aim to make the cost of expatriate labour expensive. This way we bridge the gap between the cost of expatriates and Bahraini nationals.

The money collected is used to train and develop Bahraini nationals so they can compete in the market. It is also used to help small and medium sized companies improve their productivity and competitiveness. It also helps to automate industries – rather than have one digger and 100 workers it’s better to have 10 diggers and 10 workers. We don’t want labour intensive business in this country.

Do you think recent protests by contractors regarding these fees are valid?

No, these fees have been negotiated with the Bahrain Chambers of Commerce and Industry (BCCI) and 75% of businessmen have been paying them. Of the other 25% – the vast majority of them are not even members of the Chambers of Commerce; they’re small contractors who are involved in trafficking and illegal visa workers. They’re not paying the fees so we took them to court and then they started to demonstrate outside the LMRA.

Will the Ministry consider the contractor’s call to remove the monthly fee?

We have no intention whatsoever to even look into what they want; in fact we need to bring it up. It should be at BHD75.

We started at BHD10, because the BCCI protested against a starting point of BHD20. BCCI wanted BHD5, the government wanted BHD10 so we had a meeting with the Prime Minister and the BCCI and we agreed on a compromise.

So it will go up before it goes down?

Exactly. It has little impact on companies. I’ll give you a quick exercise. If the labour cost is 30% of the overall cost of a project and we add BHD10, which is no more than 10% of the cost of any worker, even if you pay your worker BHD70, they still cost you BHD100 with accommodation, food, visas and tickets. So we’re adding 10% on the 30% cost, which is about 3% overall.

I really can’t believe that sort of thing could break a company.

We asked these people who demonstrated to provide a list of 100 companies that have suffered from these fees. We know that the number of people coming in from abroad has increased, how is that possible if they’re suffering?
Eventually it will have long lasting benefits to the country. They don’t think it is beneficial for them because they are short sighted.

Many of them have since been discovered to be falsifying the number of Bahrainis in their companies and we are going heavy on them. That’s why they fought back by demonstrating and our reply is to allow the free movement of construction workers.

Will Bahrain ever introduce a minimum wage for all workers?

No. We don’t want minimum wage because our businesses, industries and services are linked to the GCC economy. Unless minimum wage is introduced to the whole region it would be a huge disadvantage to our companies. We are instead encouraging the market forces to increase the prices, but there will be no legal minimum wage.

Would you be supportive of a minimum wage being introduced across the Middle East?
Yes, but it won’t happen. There will be no minimum wage in our lifetime. If you apply minimum wage then by international law we have to pay expatriates and Bahrainis the same and that will cause a big problem for many companies.

Labour reforms
HE Dr Majeed Al-Alawi has helped introduce a number of labour market reforms including:

• The legalisation of trade unions in the private sector in 2002.

• Establishing an unemployment benefit scheme in 2007.

• Reducing unemployment levels from 13% to 16% in 2002 to around 3.6% in 2008 through various training and targeted initiatives.

• Introducing a minimum wage for nationals of BHD200 (US $530) a month in 2007.

• Introducing a ban on working outdoors during the midday heat of the summer months in 2007.

• Officially outlawing the “sponsorship” system in 2007 which made it illegal for employers to claim legal rights to a foreign employee or hold their passport.

• Establishing the Labour Market Regulatory Authority (LMRA) in 2008 with the purpose of providing transparent services to workers and employers.

• Introducing monthly fees for employers employing expatriate workers in order to decrease the cost-gap between local and foreign workers in 2008.

• A ban on transporting workers in the back of open trucks in line with international labour laws this year.

• A law to allow free movement of expatriate workers between employers this year.

• Salaries should be paid into banks from this year.

CV
Born in Bahrain’s Al Qadam Village in 1955 Dr Majeed Al Alawi moved to the UK in the late 1970s, where he studied International Relations and achieved his PhD. During his time in the UK, he lectured at Birmingham University on Middle Eastern history and was general manager and director of three British companies.

Al Alawi was also an active member of Bahrain’s exiled opposition movement, the Bahrain Freedom Movement, which in the 1990s assumed the responsibility for articulating the demands of the 1990s uprisings. Al Alawi returned to Bahrain in 2002 to participate in the political process after King Hamad embarked on a process of reconciliation and democratisation.

In the same year Al Alawi assumed his role as Minister of Labour. He is also chairman of the LMRA and the General Organisation for Social Insurance.