The Gulf Economies… Oil… The economy grew in unparalleled speed Infrastructure development… Need for labor Population not ready… Borders opened… The rest is history….
Bahrain today…. …But 50 years on, the story is different 65% of the population is under 25 years old Current unemployment at 20% 95% increase in Bahraini labor force in 2013 16% reduction in wages levels over 20 years and… 60% of total labor force are expatriates
Bahrain today…. Borders open to the outside Highly regulated markets on the inside Limited expatriate movement within the market Strict Bahranization policies Strong government grip on the market
Bahrain today…. There are two labor markets There are two working environments Public sector is the employer of choice Economy dependent on labor intensive industries Population growing faster than the rate of desirable jobs created Reform is over due…
The reform… Aims to: Deregulate the market Equalize the cost differential Give equal rights and choices Upgrade the working environment standards
Destination vision Aspirations Economic reform Education and training reform Labour market reform Improve Bahraini skills through education and training to better meet job market demand Stimulate private sector job creation, especially in the medium and high wage job segments Eliminate labour market distortions first to make education and economic reforms effective Reform Process
2004 2005 Q1Q2Q3Q4Q1Q2Q3Q4Q1 2006 Vision and policiesProcess redesign Vision and policies Implementation Launch Labour market reform Implement (cont.) Economic reform Education reform Vision and policies Implement (cont.) The Plan
Reform Process Initiative by H.H. The Crown Prince of the Kingdom of Bahrain 1 st Step:Diagnostic 2 nd Step: Consultation with social partners 3 rd Step: Announce Proposal begin social dialogue 4 th Step: Prepare for implementation 5 th Step: begin a 3 year gradual engagement
The Reform Allow expatriates to switch employers at will Unify social benefits EFFECT Abolish employer control over expatriate employee, thus: Increase expatriate wages Allow competition, create secondary market Allow freedom of choice for employer & employee
The Reform Equalize cost via increased fees on expatriate work permits payable by employer EFFECT Eliminate unfair competition, thus: Promote technology penetration Steer jobs created towards value added Make employment choice based on productivity not cost
The Reform Eliminate Bahranization policy Deregulate hire-fire procedures EFFECT Make employment of Bahrainis a business decision, not by law, thus: Promote open market policies Induce a new work culture Make employment choice based on productivity
The Reform Dramatically reduce government's role Invest in economy upgrade EFFECT Allow for open market practices to control the labor market mechanism: Government a regulator not a market force Money generated to go to human development Increase private sectors role in the economy
The reform Too elaborate and detailed to discuss within the time allocated, but: Allows for continuous adjustments Aims to be fare to all parties Full Economic Impact Assessment Builds on other countries experiences Fully compatible with ILO & WTO Has been checked by….
16 Peter Capelli Professor of Management; also Senior Advisor, Kingdom of Bahrain Jere Behrman Director of Economics Mustafa Nabli Regional Chief Economist for Middle East/North Africa Vincent Palmade Lead Economist of Private Sector Development Manollo Abella Chief International Migration Branch Augusto Lopez-Claros Chief Economist and Director, Global Competi- tiveness Programme Pang Eng Fong Practice Professor of Management, School of Business Hui Weng Tat Department of Economics Tarek Yousef Professor of Economics International experts