INCREASING WAGES IN EMBASSY MUSCAT'S SERVICE

UNCLAS SECTION 01 OF 03 MUSCAT 000300

SIPDIS

SIPDIS

DEPARTMENT FOR G, M, RM, NEA/SCA/PMO FOR GDEBELL, NEA/ARP,
G/TIP AND DRL
DEPARTMENT OF LABOR FOR JRUDE

E.O. 12958: N/A
TAGS: AMGT PHUM PREL ELAB SMIG MU
SUBJECT: INCREASING WAGES IN EMBASSY MUSCAT'S SERVICE
CONTRACTS

REF: A. STATE 28455


B. 07 MUSCAT 388


1. (SBU) Summary: With the Department's support, Embassy
Muscat is committed to ensuring that all expatriates under
contract to perform cleaning and landscaping services at the
Embassy receive at least the prevailing minimum wage for
Omani citizens (ref A). The lack of a wage floor in Oman
(there is no official minimum wage for expatriate workers)
leaves foreign workers at the bottom skill levels vulnerable
to becoming victims of trafficking in persons (TIP) for labor
exploitation. Post's new policy would increase the base wage
of these expatriate contract workers by more than 300% at an
additional annual cost to the Embassy of roughly USD 18,000 -
a less than 30% increase in overall service contract price.
The policy likely will have an immediate positive impact on
the laborers' conditions of work, and help reconcile a
possible conflict between our contracting regulations and
anti-TIP policies. End summary.

- - - - - -
Background
- - - - - -


2. (SBU) Over the past several years, post has been pushing
Oman to adopt new laws and regulations to prevent TIP. In
2007 the USG placed Oman on Tier 3 in the Department's annual
TIP Report for failing to make significant efforts to prevent
trafficking. Low-skilled expatriate workers in the
construction, cleaning and agricultural/gardening industries,
many of whom work long hours for very low wages under often
difficult conditions, are particularly vulnerable to becoming
TIP victims. Some of these workers are in debt to
recruitment agencies in their home countries and can be
forced to accept exploitative conditions as they work to pay
off their debt and accumulated interest.


3. (SBU) Post currently contracts with local companies for
gardening and cleaning services. We became aware that
employees of these contracted companies, all of whom are from
South Asia, are paid a base wage as low as 35 Omani Riyal
(OR) (USD 90) per month. Although this is within the
generally accepted industry wage rate for these services in
Oman, Post strongly believes that these low wages are
potentially exploitative and that accepting them in our
contracts - while in line with Federal Acquisition
Regulations (FAR) - is counter to our labor and anti-TIP
agendas (ref B). Subject to available funds, Post wants to
ensure that workers assigned to the Embassy under service
contracts are paid according to the legal minimum base wage
for Omani citizens of 120 OR (USD 311) per month. (Note: The
official minimum wage for Omani nationals is 140 OR (USD
364); a 120 OR base wage and 20 OR housing allowance. End
note.) Post believes that improving the wages of
low-skilled expatriate laborers is one important way to help
break the cycle of debt that can lead to exploitation and TIP
victimization. In addition, implementing fair labor
practices through our contracts publicly reinforces our
anti-TIP position and helps us avoid potential claims of
inconsistency.

- - - - - - - - - - - - - - - - -
Service Contracts at the Embassy
- - - - - - - - - - - - - - - - -


4. (SBU) The Embassy has two contracts that would be affected
by this policy - one with the company Kalhat for general
cleaning and the other with the General Development Services
(GDS) company for gardening and landscaping at the chancery,
CMR, DCMR and MSG residence. Kalhat cleaners assigned to the
Embassy receive a base salary of 35 OR (USD 90) per month for
a nine-hour workday, six days a week. The workers' total
monthly financial compensation can equal approximately 70 OR
(USD 181),depending upon allowances for which they may be
eligible - some monthly allowances can be as high as 20 OR
(USD 52) depending upon a worker's experience - and the
number of overtime hours worked at a prevailing rate of
approximately 200 beza (USD .52) per hour. The company also
provides each worker with food from the corporate mess at an
estimated value of 15 OR/month (USD 39),as well as housing
(though often in cramped conditions and of very poor
quality),medical care and one trip home every two years.
GDS employees are similarly compensated (ref B).

- - - - - - - - - - -
Minimum Wage in Oman
- - - - - - - - - - -

MUSCAT 00000300 002 OF 003




5. (SBU) While Oman has established a minimum base wage of
120 Omani Riyal (OR) (USD 311) per month for its citizens,
there is no official minimum wage for foreign workers. Some
labor exporting countries have attempted to unilaterally
establish minimum base wages (not including overtime or other
financial compensation) for their nationals in Oman under
cooperative agreements with Oman's Ministry of Manpower
(MOM). Under these agreements, the embassies of labor
exporting countries review all new employment contracts for
their citizens seeking to come to Oman to work to ensure that
they meet the required wage minimum. If a contract does not
meet the established wage floor, the embassy can refuse to
approve the contract and then stop their nationals (in
coordination with their immigration officials back home) from
departing for Oman if the petitioning company does not agree
to pay the required amount. Some of the countries that
provide the bulk of Oman's foreign labor force have
established minimum wages for newly entering workers at the
following levels:

Country
India -- 50 Omani Riyal (OR) (USD 130)
Bangladesh -- none reported
Pakistan -- none reported
Sri Lanka -- 75 OR (USD 195)
Indonesia -- 75 OR (USD 195)
Philippines -- 154 OR (USD 400)


6. (SBU) The result is a patchwork of wages for low-skilled
workers that is notoriously difficult to enforce.
Specifically, as the minimum wages set by these countries are
not enforceable under Omani law, foreign embassies have no
mechanism to impose the payment of wages at the contract
level once their nationals are in country, although the
individual worker could initiate legal action against his/her
employer for a contract violation. Moreover, there are many
reported cases in which companies "switch" contracts by
forcing a worker to sign a new agreement with a lower monthly
salary once he or she starts work. (Note: There is no
evidence that either Kalhat or GDS is involved in contract
switching. End note.)


7. (SBU) Kalhat's base wage, for instance, is well below any
of the exporting countries' wage requirements. An Omani
manager in one of Kalhat's competitors, Oman International
Group (OIG),told poloff that companies in the industry
generally circumvent the source country wage requirements by
reporting a worker's total monthly financial compensation in
the contract it submits to the embassy for approval without
specifying base wage. A diplomat at the Indian Embassy in
Muscat separately informed poloff that this practice is
against his government's policy; however, to date it has
rarely asked companies to specify the base wage rate for
Indian nationals.

- - - - - - - - -
Costs to the USG
- - - - - - - - -


8. (SBU) The Embassy is in the position to enforce a minimum
wage for its service contract workers through the contracting
process. As stated above and in ref A, pending the
availability of funds, Post will require that all contracts
include a base salary for workers assigned to the Embassy
that is equal to the prevailing Omani minimum base wage of
120 OR/month. Post will not consider nationality-based
minimum wages, as adherence to the Omani minimum is the most
straightforward and easily enforceable way to ensure a basic
level of equity. At present, the Embassy contracts for eight
workers, five from Kalhat and three from GDS. The current
total cost of our two contracts is USD 63,000 per year. We
assume that Kalhat and GDS will attempt to transfer the full
cost of any wage increase to the Embassy through an increase
in the price of the overall contract. If so, the annual
additional cost to the Embassy would be an estimated USD
18,000.

- - - -
Comment
- - - -


9. (SBU) Post strongly believes that this issue is important
enough to incur the extra cost despite budget pressures. We
further encourage other Missions in the region to consider
taking a similar step. Increasing the wages of contract
workers who presently earn so little shows that we take fair

MUSCAT 00000300 003 OF 003


labor practices and TIP seriously, and lead on these issues
by example. In Oman, where there is no expatriate minimum
wage, our action also will help call attention to gross
inequities between Omani and foreign workers in the labor
market. Once the funds are made available and the contracts
modified according to our minimum wage requirement, Post
intends to reach out to other foreign missions in Oman to
encourage similar action. End comment.
GRAPPO