LABOR CONCERNS LOOM LARGE FOR PRIVATE SECTOR

C O N F I D E N T I A L SECTION 01 OF 03 MUSCAT 000669

SIPDIS

STATE FOR NEA/ARPI, DRL (JDEMARIA),NEA/PI (SFRANCESKI)
STATE PASS USTR FOR B. CLATANOFF
USDOL FOR JIM SHEA
ABU DHABI FOR MEPI

E.O. 12958: DECL: 04/19/2015
TAGS: ETRD ELAB EWWT KMPI EINV PREL ECON MU
SUBJECT: LABOR CONCERNS LOOM LARGE FOR PRIVATE SECTOR

REF: A. MUSCAT 132


B. MUSCAT 534

C. 04 MUSCAT 550

Classified By: Ambassador Richard L. Baltimore III.
Reason: 1.4 (d)

--------------
SUMMARY
--------------


1. (SBU) In a regional visit to Salalah April 15-17, PolOff
met with officials at Salalah Port Services (SPS) and Dhofar
Power Company (DPC) to discuss issues related to the labor
chapter of the expected U.S.-Oman Free Trade Agreement, as
well as customs, training, and recruitment and retention
challenges specific to private-sector employment in the
region. Human resource managers at both SPS and DPC lamented
that poor English language skills, sub-par education, and
cultural differences remain significant challenges in
recruiting qualified employees from the local labor pool.
Moreover, both private-sector companies said that
establishing worker representation committees, particularly
without some explicit guidance from the Ministry of Manpower
and substantial technical assistance, will be a monumental
task. End summary.

--------------
PORT SALALAH RECRUITMENT BLUES
--------------


2. (SBU) In a three-day regional visit to Salalah beginning
on April 15, PolOff met with officials at Salalah Port
Services (SPS) to discuss labor, customs, training, and
recruitment and retention challenges specific to
private-sector companies in the region. As one of the largest
companies in Salalah, SPS employs over 1400 people. The
company currently exceeds a 65 percent Omanization target
with over 900 Omani employees, and plans to achieve 78
percent Omanization by the end of 2007. However, many of the
lowest paid positions at the port are still filled by
expatriate labor with monthly salaries of about USD 260 plus
housing, food, homeward passage and medical care. In
contrast, the lowest paid Omani at SPS receives a monthly
salary of approximately USD 655 plus a housing and
transportation allowance.


3. (SBU) The successful Omanization program at SPS is part of
the company's overall strategy to increase training and
recruitment in the region. Inadequate English language
skills and poorly designed curriculum continue to hamper the
company's ability to recruit from the local labor pool and
fully meet its target Omanization rate without significant
training and expense on its part. In an effort to ease its
recruitment challenges, SPS invested heavily in the newly
opened Dhofar University (DU) but has been subsequently
disappointed in the school's curriculum development and
sub-par English program.


4. (SBU) The International Maritime College Oman (IMCO) may
help bridge the education gap with its much anticipated
opening in Sohar this September. IMCO is a joint venture
between the Omani government (70 percent) and the STC Group
of the Netherlands (30 percent). The college will offer the
first training of its kind in Oman in navigation, maritime
engineering, port services, shipping and transport
management, and operational technology. Because Sohar will
operate as an industrial port and currently lacks the
equipment and technical infrastructure for training, a
satellite campus will be opened in Salalah. SPS, with its
new training facility set to be complete in August, will host
IMCO courses on-site. (Note: The training facility is being
paid for by the Omani government as part of the
infrastructure for the expansion of berths five and six. End
note.)

--------------
PORT SALALAH WORKER COMMITTEES
--------------


5. (SBU) In addition to training and recruitment, management
at SPS also highlighted its concerns about the recent
ministerial decrees outlining the establishment of worker
representation committees (refs A and B). Ali Tabouk of SPS
human resources is currently heading the steering committee
that has been assigned the task of organizing committee
elections. Tabouk said that considering the collapse of two
previous employee relations committees, establishing a new
committee, even with the support of the Ministry of Manpower
(MOM),will be a significant challenge. Tabouk also said
that of SPS's almost 1400 employees, not more than four are
even interested in running for committee leadership. Though
he doesn't believe the signs are encouraging, SPS held
elections on April 20.


6. (SBU) Senior representatives of SPS groused that although
the company has distributed copies of the ministerial decrees
promoting the committees, as well as solicited involvement
through its company newsletter, any representative committee
established needs explicit guidance and support from the MOM.
Employees, and employers, are unlikely to see any benefit of
the committees until both parties have a clear understanding
of the implications and benefits of the new law. Moreover,
from the perspective of SPS, and most private-sector
employers in Oman, laborers already have an abundance of
protection under the current labor law. Demonstrating his
point, one senior SPS manager argued that although the
grievance procedure at SPS is quite comprehensive, the
company has had to heavily compensate eight employees in the
last six years in order to dismiss them. Management argues
that both the MOM and the courts are heavily biased toward
the employees and that companies are asked to take on an
unfair burden in absorbing the cost of cultural no-no's in
dismissing unproductive employees.

-------------- --------------
DHOFAR POWER COMPANY SEEKS ENGLISH LANGUAGE SKILLS
-------------- --------------


7. (C) In highlighting the importance of labor rights in the
expected U.S.- Oman Free Trade Agreement, PolOff met with
another of Salalah's most prestigious employers, Dhofar Power
Company (DPC),a subsidiary of U.S.-based PSE&G Global.
General Manager Yaser Tobeh (protect throughout) said that
with 93 employees, including 52 expatriates, DPC has achieved
42.3 percent Omanization. The lowest paid expatriate
receives about USD 850 per month plus a housing and
transportation allowance. In contrast to the unskilled Omani
wages for SPS, the lowest-ranking Omani at DPC, an Omanized
position of driver, receives about USD 310 per month plus
housing and transportation. According to one businessman,
before policies of Omanization, no Omani would have
considered this sort of unskilled position.


8. (SBU) DPC representatives, echoing the comments of SPS
officials, also said that one of their most significant
recruitment challenges is finding qualified applicants with
competent English language skills. Moreover, senior
recruitment officers bemoaned that the curriculum at DU is
inconsistent with the needs of the business community and is
mediocre at best. Hoping to engage DU and influence future
curriculum development, DPC currently offers DU engineering
students training opportunities in exchange for employee
English classes at DU. (Note: Employees at DPC who have taken
English classes at DU have complained that the classes, with
an Egyptian teacher, are inadequate. End note.)

-------------- --------------
LABORERS PERCEIVED TO HAVE UPPER HAND IN THE COURTS
-------------- --------------


9. (SBU) Although DPC has not yet established a worker
representation committee, the company has started laying the
framework for employee involvement. Unfortunately, as with
SPS and other private-sector companies, there is a
fundamental lack of understanding of the role of the
committees and the potential impact on businesses. DPC
managers said that officials with the MOM, unfamiliar with
the concept themselves, are unable to provide any guidance or
concrete assistance with the new committees. Managers also
complained that laborers in Oman already have the upper hand,
suggesting that there is an overlap in authority between the
MOM and the courts (who rely on consensus rather than law).
Private-sector management argues that employees, knowing the
labor court will more than likely compensate them with
something, have an enormous incentive to take companies to
court.


10. (C) Tobeh, relatively frustrated with doing business in
Oman, said that he was particularly disappointed over DPC's
lengthy struggle to settle a dispute regarding unrefurbished
turbine generators that DPC was required to purchase from the
Omani government as part of its original concession (ref C).
Although it appeared the case was nearing an amicable
settlement in 2004, it has now been moved into arbitration
with the International Court of Arbitration.


11. (SBU) Despite DPC's legal challenges, in Tobeh's short
time at the helm, he has led DPC through a successful
restructuring and, more importantly, the company's first
profitable quarter in March. Moreover, DPC raised almost USD
225 million in its initial public offering (IPO) in April,
signaling a strong investor interest in independent water and
power projects in Oman.
COMMENT

12. (SBU) Oman's private sector continues to struggle with
understanding and implementing the recent ministerial decrees
establishing worker representation committees. While many
members of the business community have demonstrated their
progressive policies in establishing committees, the majority
of companies feel that until the MOM provides more specific
guidance, preferably through detailed decrees, established
committees may come to a standstill over uncertainties about
their scope and operations. Nevertheless, the number of new
workers committees continues to rise. Eventually, they may
just shape for themselves the roles they will play in Oman's
evolving civil society.
BALTIMORE