Bahrain ends sponsor system
Mazen Mahdi, Foreign Correspondent
May 05. 2009
MANAMA // Bahrain will implement a new labour law that allows foreign workers to switch jobs without the consent of their employer, Majeed al Alawi, the minister of labour, said yesterday.
The new law, known as Decree 79 for the year 2009 – the first of its kind in the Gulf – was adopted following three years of deliberation and with input from the Bahrain Chamber of Commerce and Industry (BCCI). It will be implemented beginning in early August.
“I am an executive power. I do what the legislature asks me to do and if I do it wrong, then take me to court,” Mr al Alawi told a press conference in Manama yesterday as he announced the start of the three-month countdown till the law goes into effect.
He said the law would help to bring an end to the trend in which Bahrainis sponsor several, sometimes hundreds of foreigners, and charge them a “visa fee” to work with another employer. The workers, mostly from the Indian subcontinent, are not allowed to change jobs without the permission of their sponsor.
The law, which passed both the lower and upper houses, would also help slow the number of foreigners entering Bahrain to work. There are more than 500,000 expatriates in the country, about half the population, he said.
“The end of the sponsor system is the most important aspect of this law because in my opinion that phenomena does not differ much from the system of slavery and it is not something suitable for a modernised country like Bahrain,” said Mr al Alawi, who is also chairman of the Labour Market Regulatory Authority.
“That system will be broken and eradicated under the new law, because it will end the absolute power which the employer had over the foreign worker.”
The authority will review the requests of workers wanting to change jobs to ensure they are within the framework of the law, Mr al Alawi said, but any legal differences between the employer and employee would have to be resolved through the courts.
Bahrain is also studying the possibility of the government’s sponsoring of foreign workers, he said.
The new law, which excludes domestic workers, is expected to create a better balance between employee and employer.
As per BCCI demands, the employer will be able to terminate a member of staff’s contract and deport him or her with a month’s notice. An employee also can leave their job after giving three months’ notice to the company.
“The new law will also help revitalise the labour market in the country, raise wages and improve the overall work atmosphere for everyone, including citizens,” Mr al Awari said.
The government is also looking at putting a cap on the number of foreigners who enter the country and would make a decision on that by the end of the year, he said.
“The problem of unemployment is not caused by the lack of job opportunities available here. We don’t have real unemployment so having a ceiling will allow us to address the issue of low wages which is the main problem.”
Mr al Alawi said that as long as the sponsor system persisted, and foreigners were forced to work for low pay, wages would remain low for everyone.
He dismissed concerns from some in the business community that allowing workers to change jobs with ease would disrupt their operations, saying that last year 3,850 foreign workers switched sponsors without any disruption.
“I doubt that we will see huge number of workers attempting to change work, but people are naturally fearful of change but this law will help improve things,” he said.
In 2007, Bahrain was one of several key US allies in the Middle East, along with Kuwait, Qatar and Oman, to be added to the US state department’s human trafficking blacklist for what the annual Trafficking in Persons Report described as failure to stop “modern-day slavery”.
The country was placed on tier three of the report, where it faced possible economic sanctions, after being cited for failing to target human traffickers who were bringing in people for forced labour or sex work, and for failing to adopt laws which protect foreign workers.
Last year, the 2008 report moved Bahrain to tier two, which is set aside for countries that have not fully complied with the minimum standards but are attempting to do so.
The US said Bahrain had made “significant improvements in its anti-trafficking efforts” in 2007 and acknowledged its “continuing commitment to address the problem of human trafficking”.
Labor’s Laws Lost
On August 4, 2009
Bahrain doesn’t often make the headlines. Sandwiched between Saudi Arabia and Iran, the tiny kingdom makes more headlines for the congestion on the King Fahd Causeway than for its economic might.
That all changed at the start of May, thanks to Decree 79 of 2009. The new law, announced by Bahrain’s Minister of Labour Majeed al-Alawai, is aimed at doing away with a sponsorship system for foreign workers that many have claimed is antiquated and open to abuse by the employer.
The sponsorship system common across the Gulf, known by its Arabic name, kafala, is the legal basis for residency and employment. Migrant workers receive an entry visa and a residence permit only if a GCC citizen or a GCC institution employs them. In turn, sponsors exercise full economic and legal responsibility for their employees. The sponsorship system, in use for over three decades, has long been subject to allegations of employee exploitation and abuse.
Bahrain’s new labor law, which will come into effect in August, will allow foreign workers to switch jobs without the consent of their employer. According to al-Alawai, the law will stop the practice of Bahrainis sponsoring several, sometimes hundreds of foreigners, and charging them a ‘visa fee’ to work with another employer. In effect, the sponsorship system would no longer be open to abuse.
“The end of the sponsor system is the most important aspect of this law, because in my opinion that phenomena does not differ much from the system of slavery and it is not something suitable for a modern country like Bahrain,” said al-Alawai. “That system will be broken and eradicated under the new law, because it will end the absolute power which the employer had over the foreign worker.”
The reforms put Bahrain at the leading edge of reform. They will also help slow the flow of foreign workers into Bahrain and increase the percentage of Bahrainis working in the private sector, according to the country’s government.
Archaic system. Bahrain’s decision to scrap its archaic sponsorship system, likened by the US State Department in its 2007 “Trafficking in Persons Report” to “modern-day slavery,” will also have the benefit of making Bahrain a more attractive place in which to work - an important means by which to attract much-needed foreign direct investment, particularly with the financial crisis.
“The change in regulation is positive for the investment environment and labor mobility,” says Monica Malik, an economist at EFG-Hermes. “It will help to reduce the cost and time linked with labor issues.”
Simon Williams, of HSBC, agrees. “The more easily people can move between posts, the more likely it is you’ll have the right person in the right job.”
According to al-Alawai, the new labor laws will prove to be a spur to the country’s economy. He claims that businesses that oppose the reforms will soon change their minds.
“There is strong opposition from employers, but we think it is good for the market. It will end the black market for illegal visas and will raise salaries, because workers will have an option to go to employers who will treat and pay them better. It will also help us raise the standard of wages amongst Bahrainis,” he says.
“Practically, it will end the sponsorship system and illegal visa system, because those contractors will not be successful. If the sponsor is holding you, holding your passport and not paying your salary, then you can easily just move onto another employer,” he says.
For one recruitment expert based in Bahrain, the reforms may not make much difference in certain sectors or at the top end of the market. “People have always moved freely between banking roles in Bahrain,” says Rory Adamson, director of Bahrain-based executive search firm Azrek.
“For other industries in the private sector, this move should make a difference, but banks have always operated this policy,” he says.
The question many are now posing is what will replace the existing sponsorship system, which will lapse in August. Initially, the Labour Market Regulatory Authority - also headed up by al-Alawai - will review workers’ requests to change jobs. However, longer term, one option the Ministry of Labour is considering is the possibility of the government sponsoring foreign workers.
Nevertheless, employees are a long way from living in a utopian society. Following demands from the Bahrain Chamber of Commerce and Industry, an employer will be able to terminate a member of staff’s contract and deport him or her with a month’s notice.
The Bahraini government is also considering a cap on the number of foreigners who enter the country. A decision on the proposed cap is expected by the end of the year. This is because the top priorities for Bahrain’s authorities are nationals and employment.
The Minister of Labour rebuffed accusations that the reform of Bahrain’s sponsorship system was forced on the country because of pressure from foreign governments. Instead, he argued it’s all about ensuring Bahrainis are in work and earning a decent wage. This will not, however, lead to the introduction of a minimum wage.
“We don’t want a minimum wage because our businesses, industries and services are linked to the GCC economy. Unless a minimum wage is introduced to the whole region it would be a huge disadvantage to our companies.
We are instead encouraging market forces to increase the rates, but there will be no legal minimum wage. There will be no minimum wage in our lifetime. If you apply a minimum wage, then by international law we have to pay expatriates and Bahrainis the same and that will cause a big problem for many companies,” says al-Alawai.
“The problem of unemployment is not caused by the lack of job opportunities available here. We don’t have real unemployment, so having a [minimum wage] will allow us to address the issue of low wages, which is the main problem,” he says.
Regional rethink. Bahrain’s decision may have implications not just for its own citizens and expatriates, but also for the rest of the Gulf. Qatar has set up a committee to look into scrapping the sponsorship system. Saudi Arabia, a country that hosts over eight million foreign workers, is doing the same. So there are major implications for business.
Results of a report,conducted by the Riyadh Economic Forum into the state of the kingdom’s economy, claim that the sponsorship system for expatriate workers curtails competitiveness and hampers human resource development.
The report, which was submitted to King Abdallah, added that Saudi Arabia’s immigration regulations and recruitment policies were not attracting outstanding and competent workers; instead, the sponsorship system promoted the employment of low-productivity job seekers.
In effect, the study concluded that the sponsorship system requires radical reform. Already, Saudi business leaders have begun to discuss the subject in public and many are urging the Saudi government not to follow Bahrain’s lead.
“[Labor reform] is a very serious issue and the media should not stir up the labor market by attacking and criticizing businessmen and entrepreneurs who have the right to protect their business interests,” says Abdul Mohsen Al-Moushegah, chairman of the Al-Moushegah Group of Companies, a Saudi construction and engineering conglomerate.
“Many of us have invested huge amounts of money in hiring and training foreign workers. We pay them well, and treat them as equals. We cannot just allow them to jump from one job to another,” he says.
Nevertheless, Bahrain-based recruiter Rory Adamson believes that reform would bring about a measure of common sense to a system that many believe is out of date: “I recently recruited an expat worker - who was already in Saudi - into another bank in the kingdom. In order to sidestep the visa policy, he’s been forced to live in Bahrain for a year and commute to Saudi Arabia.”