GCC Insights: Bahrain takes steps to liberalise economy

Expatriates working in Bah-rain are now able to switch jobs and change sponsors.

The law of facilitating the local transfer of sponsorship of foreign workforce went into effect in July. Authorities believe the law is a progressive one while representatives of the business community have raised serious reservations.

The authorities contend that the law is beneficial to Bah-rain's economy. The outspoken Minister of Labour Affairs and Social Affairs, Abdulnabi Al Shoala, argues that the law would improve working conditions for expatriates and concurrently accelerate the pace of Bahrainisation.

The minister believes that it will help bring the best workers to Bahrain, and qualified expatriates will stay only in companies where there are the right working conditions.

In the past, local workers had been accused of having high turnover, unlike expatriates who stayed on the jobs for which they have been recruited. But under the new law, local and expatriate workers compete on more equal footing, thus making performance the key factor in employment.

In turn, this could help speed up the process of replacing expatriates with locals. Within the international framework, the new law will help Bahrain to stand with a cleaner record in terms of human rights, and its reputation with the Inter-national Labour Organisation and the WTO.

However, the business community has not extended a wholehearted support to the law, claiming it would cause chaos by introducing an element of uncertainty and particularly hurt small and medium enterprises.

Bahrain Businessmen's Asso-ciation and Bahrain Business-women's Association have voiced fears that the new arrangement carries the potential of having experienced employees leaving in mid-contract, some of who are hard to replace.

Addressing fears raised by business owners, the government has attached several conditions to the law: expatriates are required to provide their employers a three-month written notice, and must be free of financial obligations with the sponsor.

Yet, they will be able to swap jobs without a release letter from their original employers, and without leaving the country. More importantly, the new employer must pay expenses such as work permit fee, immigration expenses and air tickets incurred by the worker's previous employer.

The government has committed itself to instantly issuing replacement permits for departing employees. Yet, a consultant was due to be appointed to study the impact of the new law on business, and if the new law proves to be detrimental, it will be reviewed, he said.

Nevertheless, some merchants charge that the compensation merely covers the cost of the various visa fees, and does not reflect the real damages incurred by the employer. As such, it fails to take into account the time and energy spent in selecting skilled workers.

Also, they argue the law renders an employment contract meaningless, and could encourage some employers to head-hunt skilled workers. And they argue that the law could cripple small and medium businesses, notably those that employee a very small number of employees.

According to the census carried out by the Central Statistics Organisation, foreign workers numbered 181,220, comprising some 59 per cent of the total labour force at the end of 2001. Expatriates remitted more than $1 billion, a sizable amount for Bahrain with a GDP of around $8 billion that year.

By easing regulations governing foreign nationals, the authorities hope that some of this fund will be invested in Bahrain. Currently, foreign nationals can buy property in designated areas of the country and may own up 49 per cent shares of any listed company on the Bahrain Stock Exch-ange.

In short, the new law is part of a wider drive by the authorities to liberalise the economy to foreign involvement.