C O N F I D E N T I A L SECTION 01 OF 03 MANAMA 000219

SIPDIS

SIPDIS

DOL/ILAB FOR JRUDE

E.O. 12958: DECL: 03/03/2017
TAGS: ECON ELAB PGOV PHUM SOCI BA HUMRIT POL
SUBJECT: MINISTER OF LABOR DISCUSSES NATIONAL EMPLOYMENT
PROJECT, LABOR REFORM WITH AMBASSADOR


Classified By: Ambassador William T. Monroe for reasons 1.4 (b) and (d)
.

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Summary
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1. (C) Minister of Labor Dr. Abdulmajeed Al Alawi told the
Ambassador February 28 that since January 2006, unemployment
had dropped in Bahrain from 15% to 3.8% under the National
Employment Project (NEP), leaving only approximately 4,000
unemployed remaining in the program. He said the second
phase of the NEP would provide training to low-salary
Bahraini workers already in jobs, while supplementing their
earnings to a minimum of 200 BD ($530) monthly. Labor reform
legislation, which will replace Bahrain's 1976 labor law, has
gone to the Cabinet for approval before being forwarded to
parliament. Al Alawi said that the Labor Market Regulatory
Authority (LMRA) would begin managing the expatriate labor
force in the fall, generating revenue from increased fees on
individual workers. In a separate meeting with the
Ambassador March 1, Minister of State for Foreign Affairs,
and recently appointed Labor Fund director, Nizar Al Baharna
said that under the new labor reform program, the Labor Fund
will provide training for workers as well as offer
consultancy services to companies to assist in improving
their operational systems. End summary.

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National Employment Project Success, Challenges
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2. (C) Minister of Labor Dr. Abdulmajeed Al Alawi told the
Ambassador in a meeting February 28 that unemployment in
Bahrain had dropped from approximately 15% to 3.8% since
January 2006 as a result of the NEP. Of the nearly 18,600
who have registered with the program over its 14-month
existence, most are either currently employed or have
voluntarily withdrawn from the program. According to Al
Alawi, there are approximately 4,000 unemployed remaining,
96% of whom are women. He said that the NEP has a job b

ank
listing approximately 9,000 positions offered by employers to
be filled with trained graduates of the program. Al Alawi
expressed satisfaction with how the project has proceeded,
saying "the problem is small and can be controlled." Only
ten percent of the budgeted 30 million dinars ($80 million)
has been spent thus far and the program is entering a second
phase. (Comment: The GOB does not publish official
unemployment statistics, and we have no way of confirming Al
Alawi's information.)


3. (C) In an attempt to raise the skills and wages of
Bahraini workers already in jobs, the NEP's second phase is
offering training for Bahraini workers and a temporary salary
supplement in exchange for employer assurances that they will
raise the wages of these workers. Al Alawi said that there
are approximately 30,000 Bahraini workers whose wages are
under BD 200 ($530) monthly. The NEP will train workers with
the intent of boosting productivity and subsidizing their
salaries for six months so that their take-home pay will be
BD 200 monthly. At the end of the six month period, the NEP
asks employers to maintain their workers' salaries at BD 200.
Al Alawi said that 250 companies have so far agreed to the
program. To both recognize their commitment and to encourage
others to participate, the government placed half-page ads in
the Arabic daily newspapers listing the names of the
companies.


4. (C) Al Alawi said that the NEP had experienced challenges
in dealing with entrenched attitudes of both employers and
the unemployed. A program goal is to build trust in Bahraini
workers, who have a negative reputation in the marketplace.
Similarly the program works to convince Bahraini workers to
take private sector jobs and not expect to find a government
job. Some unemployed people registered with the program had
refused private sector offers, saying they would only accept
government jobs, and thus left the program.

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Labor Reform
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5. (C) When asked about press reports concerning labor
reform legislation, Al Alawi said that since the current
Labor Law had been passed in 1976 and was based on 1950's
Egyptian labor legislation, there was a need for new
legislation. A major challenge for companies today is

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adjusting to the activities of unions and working with them
to address issues. The legislation had been sent to the
Economic Development Board and the International Labor
Organization for comment, and it is currently with the
Cabinet for approval before it is sent to parliament.


6. (C) Mentioning that the LMRA and the Labor Fund had been
established under earlier legislation, Al Alawi said that the
LMRA had a target of October 1 to take over management of the
expatriate labor force and introduce new fees on expatriate
workers. He recognized the need for the sponsorship system
to be reformed and for expatriate laborers to have more
freedom, but said this would be phased in over time. Al
Alawi noted that the inspection regime has been strengthened,
including legal authority given to inspectors to close
companies and impose fines on violators.


7. (C) Al Alawi explained that current monthly fees for
expatriate workers were BD 6.5 ($17) per worker, but that
rates would go up to approximately BD 20 ($53). The extra
income generated would be split, 80% to the Labor Fund to pay
for continuing training for Bahraini workers and 20% to the
Ministry of Labor. These figures have been approved by the
Labor Fund and a white paper has been sent to the Bahrain
Chamber of Commerce and labor unions for discussion. Early
feedback from employers has been negative. When asked if
household workers were included in this new plan, Al Alawi
said that they were not included, contrary to his will and
counsel. "This creates a labor back door that companies will
exploit to bring in extra workers."

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Looking for Model Programs Abroad
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8. (C) Al Alawi told the Ambassador that he was part of a
government commission responsible for education reform that
had been set up by Deputy Prime Minister Shaikh Mohammed Bin
Mubarak Al Khalifa. The group had formed small delegations
to visit several countries to learn more about what they were
doing in educational reform. He said that he had recently
visited Australia and New Zealand to look into technical
education programs, as the GOB has seen the need to expand
its polytechnical course offerings. Al Alawi mentioned that
in Australia he also looked into the unemployment insurance
program. Bahrain has started registration for its own
unemployment insurance and has linked it to the NEP program.

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Labor Fund Objectives
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9. (C) In a separate meeting March 1, the Ambassador asked
Minister of State for Foreign Affairs Nizar Al Baharna about
his January appointment as director of the Labor Fund. Al
Baharna said the biggest challenge was gaining the confidence
of the private sector that they should support, and would
benefit from, the Fund. The Fund has begun receiving the
current annual fees for expatriate work permits, which are BD
150/worker ($400) and will total about BD 20 million ($53
million) for the year. The fee structure has not yet been
revised under the new labor reform program, but Al Baharna
said the annual fee for expatriate workers would probably
jump to BD 300/worker ($800) and raise BD 40 million ($106
million) annually. (Note: Noting that Al Baharna's estimate
of the fees is different from Al Alawi's, it is clear that
many details about the fee system have yet to be determined.)


10. (C) The Labor Fund, Al Baharna said, needs to show
companies that they will benefit from money they pay into the
system. The Fund will provide training for Bahraini workers.
Additionally, the Fund intends to offer consultancy services
for qualifying companies to assist in improving their
systems, such as warehousing, accounting, and other internal
operations. Ten local companies that participated in a pilot
project for the consultancy services were happy with the
results, Al Baharna said. In this initial test run, the Fund
paid 80% of the costs while the companies paid 20%. In a
second phase, to involve 200 companies, costs will be split
70/30.


11. (C) Al Baharna said that another feature of the Fund,s
activities will be to partner large companies with medium
companies, and medium companies with small companies, to
create links and transfer expertise. Because of the
structure of Bahrain,s private sector, which is dominated by
vertically integrated, insular, family-owned companies, there

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is very little interaction between the various tiers of
companies, Al Baharna said. Likewise, there is little
competition between them, so larger companies should not feel
constrained in assisting smaller ones. Al Baharna thought
this aspect of the Fund,s activities could be a win-win for
all involved.

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