RECONCILING ANTI-TIP POLICY & RESOURCE MANAGEMENT

UNCLAS SECTION 01 OF 03 MUSCAT 000388

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR G, M, RM, NEA/ARP, NEA/EX, G/TIP AND DRL
DEPARTMENT OF LABOR FOR JRUDE

E.O. 12958: N/A
TAGS: PHUM PREL ELAB SMIG AMGT MU
SUBJECT: RECONCILING ANTI-TIP POLICY & RESOURCE MANAGEMENT
PRIORITIES: A REQUEST FOR GUIDANCE

REF: A. MUSCAT 219


B. 06 MUSCAT 1635

MUSCAT 00000388 001.2 OF 003



1. (U) This is an action request. See paragraphs 9 through 12.


2. (SBU) Summary: Some expatriate workers who fill Oman's
low-paid, low-skill service sector jobs face exploitative
conditions and may be victims of trafficking. Workers in the
commercial cleaning industry, including those under contract
to clean the Chancery, are paid poorly due, in part, to the
absence of a minimum wage for expatriate workers in Oman.
Post is concerned that USG policy under the Federal
Aquisition Regulations (FAR) of awarding contracts to the
lowest technically-acceptable bidder may end up supporting
the poor treatment (i.e. low wages) of workers, in
contradiction to our labor and anti-trafficking in persons
(TIP) agendas. Post seeks Department's guidance in resolving
this dilemma. End summary.

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Background
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3. (SBU) South Asian expatriate workers perform most of the
low-skilled work in Oman's growing services sector (ref A).
Some of these workers face conditions of labor exploitation,
including long working hours for low pay, and live in often
overcrowded and unhealthy, company-owned compounds locally
known as "labor camps" (ref B). They may arrive in Oman with
debt to recruitment agencies in their home countries that
exceeds 400 OR (USD 1040). Workers often report that their
Omani employers withhold their passports despite domestic law
prohibiting the practice (ref B). Post is concerned that
these conditions fall under the categories of abuse
associated with trafficking in persons (TIP).

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The Cleaning Industry
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4. (SBU) Cleaning service companies, which are heavily
dependent upon foreign labor from India, Sri Lanka, Pakistan
and Bangladesh, are widely known to pay their employees very
low salaries, placing them at particular risk of
exploitation. Embassy contacts report that cleaners
throughout the industry regularly work 10 to 12 hour days for
a base wage as low as 30 Omani Riyal (OR) (USD 78) per month.
In addition to base pay, cleaners' financial compensation
includes an average of 150-200 beza per hour (less than one
US dollar) for overtime in excess of nine hours per day, and
a 15 OR (USD 39) per month food allowance. Workers generally
do not receive the food allowance as part of their payment,
however, because most companies withhold it in a book
transfer to pay for food service that the company itself
supplies. In addition to financial compensation, cleaning
companies provide workers with one trip home every two years,
and free housing in labor camps, the quality of which varies
according to each company's standards, but is generally poor.
Most companies also provide workers with some level of
medical insurance (ref B).


5. (SBU) Contacts with ties to the industry describe the
market for commercial cleaning services as an oligopoly, with
four or five major companies dominating the market and
controlling prices and, thereby, the value of labor. Wages
for cleaners dropped by almost a third approximately five
years ago, contacts claim, after one of those companies, Stag
International, won a major cleaning contract with Petroleum
Development Oman (PDO) by cutting its labor costs through
wage reductions. The rest of the industry quickly followed
suit, dropping worker salaries, which have remained stagnant
ever since.

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The Embassy,s Contract & TIP Concerns
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6. (SBU) The Embassy is in the third year of a four-year
contract with one of the largest cleaning companies in the
industry, Kalhat. Under the terms of its contract, the
Embassy pays Kalhat 1015 OR (USD 2636) per month for general
cleaning services. Kalhat submitted the lowest priced,
technically-acceptable bid among three bids to win the
contract according to FAR guidelines. The contract commits
Kalhat to uphold local labor laws, and allows the Embassy to
suspend the contract if workers are not paid on time or show
up at work without appropriate protective clothing or

MUSCAT 00000388 002.2 OF 003


equipment. However, since Oman has not established a minimum
wage for expatriate workers, Kalhat employees are not
entitled to a base renumeration. Oman has a minimum wage for
citizens only, which is 140 OR/month (USD 363).


7. (SBU) As part of its broader anti-TIP efforts, Post
investigated the situation of workers under contract to clean
the Chancery and perform basic landscaping services. Kalhat
sends four cleaners and one supervisorto the Embassy five
and a half days a week. On teir full days, two of the
cleaners work for ten ours, including lunch and break time,
and the oters for eight hours, leaving the Embassy at 1630by company transport
for overtime work at separatelocations.
The cleaners tell poloff that Kalhat ays them the industry
average wage of 30 OR per onth, plus a 5 OR/month stipend.
They receive fod in lieu of a 15 OR/month meal allowance,
and an additional 15 OR/month (USD 39) for approximately 110
overtime hours, the majority of which is worked at sites
other than the Embassy. The cleaners added that Kalhat
withholds their passports.


8. (SBU) In February, poloff visited the Kalhat labor camp,
located in the hala industrial area on the outskirts of
Muscat,where the Embassy's cleaners reside. Prior to the
visit, contacts told poloff that Kalhut runs oneof the
better facilities for expatriate workers, aintaining a mess
hall and health clinic on site The camp, however, which is
home to 700 worker, appeared overcrowded. Groups of up to
60 workrs live in poorly ventilated dormitories that measre
approximately 120 meters square. Bathrooms an toilets lack
proper sanitation, with mold and peling paint indicating
infrequent maintenance. fficials at the Ministry of
Manpower, which is responsible for inspecting work and living
sites, told poloff that they are aware that conditions in
labor camps like Kalhat,s may not meet health and safety
codes, and that the Ministry is in the process of upgrading
its capacity to enforce them.

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Comment & Action Request
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9. (SBU) Post believes that the current wage for Kalhat's
cleaners - set under imperfect and uncompetitive market
conditions - is potentially exploitative. This low wage
makes it extremely difficult for workers to pay off their
debts to recruitment agencies or improve their living
conditions. Post is working with partners in government, the
private sector and labor groups to improve the situation of
low-skilled workers under its anti-TIP, human rights and
labor reform agendas. We are concerned, however, that the
USG's current contracting and federal acquisition regulations
convey a contradictory message by forcing the USG to contract
with companies based primarily on price, without
consideration for the larger context of worker rights.


10. (SBU) The Embassy also has a contract for gardening and
landscaping services with the company Global Design Systems
(GDS),whose workers report that they too receive very low
salaries. Their wages and employment conditions also present
a contradiction between the USG's concern for the fair
treatment of workers and its desire to contain costs through
the contracting process. Furthermore, Post understands that
low-paid, expatriate contract workers are widely used to
provide cleaning services elsewhere in the region. We
consequently suspect that the problem of exploited labor
working at U.S. diplomatic facilities is an issue that
extends far beyond Oman.


11. (SBU) Post has identified two possible alternatives to
conform its practices to the USG goal of ending labor
exploitation:

-- Make cleaning and gardening direct hire positions:
According to USG wage and compensation rates for Oman, a
direct hire employee at the FSN 2/1 level, which would
include cleaning and gardening staff, would earn 3,314
OR/year (USD 8,608) or 276 OR (USD 717) per month in wages
and allowances. This amount, which the USG considers a fair
compensation, is more than five times the equivalent wage and
allowance package currently earned by Kalhat and GDS
employees. By making cleaning and gardening direct hire
positions instead of contracted services, Post would be able
to control the conditions of work and ensure that the
employees were paid a non-exploitative wage.

-- Demand that contracted employees receive the Omani minimum

MUSCAT 00000388 003.2 OF 003


wage: In the absence of a universal minimum wage covering
both Omani citizens and expatriate workers, the minimum wage
of 140 OR/month for Omani citizens is the only official,
domestic estimate of what may constitute a fair wage.
Imminent passage of an expatriate minimum wage is unlikely
given the potential negative political and economic effects
of increased labor costs in an economy that is heavily
dependent -- and becoming more so -- upon cheap foreign
labor. Despite this political and economic reality, Post
could demand that workers assigned to the Embassy be paid 140
OR/month when rebidding current contracts. Both companies
likely would demand a higher contract price to recoup the
additional labor costs, but the resultant gap in wages
between those working at the Embassy and workers assigned to
other sites could help call attention to inequities in the
current wage structure.


12. (SBU) Either alternative outlined above would require
significant additional resources for Post. Post requests
Department feedback on our proposals, as well as specific
guidance on how to ensure that contract workers at the
Embassy are treated fairly and in accordance with USG human
rights, labor and anti-trafficking principles.
GRAPPO