Tapping into potential: A number of tactics are being used to boost local employment

In the context of the GCC Bahrain stands out for its high level of national participation in the workforce. Since it first took root in the 1970s the financial services sector has now achieved 70% Bahrainisation, with up to 14,062 people employed in investment banks, private equity houses and insurance firms. The financial services sector, contributing a quarter of GDP, is held up as a success story for those directing employment strategy in the Kingdom. The challenge for policymakers is to replicate this, reduce the unemployment rate and develop the skills of the national workforce to fully exploit other areas of the economy which so far have remained relatively untapped by the local workforce.

“Our focus over the last two years was on solving unemployment among graduates and females and keeping the unemployment rate under 4%,” Tawfeeq Al Rayyash, the training affairs adviser at the Ministry of Labour, told OBG. “We saw that a gap had emerged between the requirements in the private sector job market and the output of universities. In the past there were two public universities and one private. Now there are 12 or 13, so it is a question of managing all those new graduates every year.”

PROTESTS: The recent protests have had an impact on employment. By the end of December 2011 the unemployment rate had reached 4%, or 5768, but not all of these were a direct result of the political unrest. “We do not have the exact figures, but many people did lose their jobs and we have been involved at the ministry in asking some firms to re-hire the employees once the worst of the unrest subsided,” said Al Rayyash. “There were some unfair dismissals, but many companies with manufacturing production lines, for example, had to find other workers to keep their business going, as some protesters were absent for up to two weeks. We are tackling this from a human angle as these employees have families.”

REDUCING UNEMPLOYMENT: The ministry is currently trying to reduce the unemployment rate by providing a training programme under the BD24m ($63.36m) Graduate Employment Project (GEP). All students are assessed against basic skills such as English for business, numeracy, IT knowledge and work ethic. At present not all graduates meet these requirements. 4500 graduates were assessed as part of the project, with up to 70% receiving jobs post-training.

The GEP is an example of a more focused approach to the challenge of increasing the numbers of employed Bahrainis. The idea of increasing the participation of nationals in the local workforce has a long history in the Gulf states. National programmes targeting Bahrainisation, Omanisation, Saudisation and Emiratisation have been a feature of the political landscape across the GCC over the past several decades. Currently there are 453,661 expatriates in the Kingdom according to Labour Market Regulatory Authority (LMRA) data, and the government would like to reduce these numbers.

Although the ministry is still pushing to bring the numbers down, a different approach is emerging. “We are moving towards greater sophistication in employment policy with the arrival of occupational standards, assessment centres and an IT training hub, and our success is starting to be copied across other neighbouring states,” Al Rayyash told OBG.

A scheme to develop occupational standards in the Kingdom is under evaluation, with an award due by the end of the third quarter of 2012. Six countries are bidding for the project, including the UK-based Young People’s Learning Agency, and South African, Canadian, Estonian, German and Singaporean councils. The two-year scheme will look at developing 125 occupational standards and local capacity building with a view to the creation of a National Qualification Standard for the Kingdom – one which will guide public and private universities on what to teach and where to focus training across higher education.

Overall, employment policy aimed at boosting the number of nationals in the job market is becoming increasingly sophisticated in the country. But a carrot-and-stick approach to encourage and enforce private firms to increase the percentage of nationals included in their workforce is still an option for the authorities. Under government guidelines the LMRA will automatically block the renewal of visas for expatriate employees after two years if no attempt to hire Bahrainis has been made. The Ministry of Labour would then negotiate with the firm to offer an apprenticeship scheme, where either the cost of the programme would be shared or the state would pay the full cost. “The stick is the last thing we want to use,” said Al Rayyash. “The carrot is always more effective as shown by the GEP.”

LOCAL ADVANTAGES: The ministry and the LMRA are also at pains to point out the hidden costs to employers of employing expat workers. “Under the GEP, for example, all graduates receive BD400 ($1056) per month. In addition in the first year of their job, the government subsidises up to half of their salary, with the private sector contributing the other half. By the second year the government covers 25% of their salary,” said Al Rayyash.

“We are trying to show employers that the costs of expatriate workers are higher for them over the long term. Private firms have to pay the costs of transporting people to the country, LMRA labour fees, health fees and housing. All of these are borne by private sector firms, whereas the Bahrain government subsidies Bahraini employees for the first two years of their employment at the firm.”

FINANCIAL SERVICES: The financial services sector has always proved a popular employer for graduates given the status it confers and the generous salaries it can offer. However, it cannot be a solution for all and other sectors – such as manufacturing – still need further development.

According to EDB data for 2010 the public sector is still the largest employer, with 50,000 Bahrainis working across government departments. Manufacturing employed up to 15,000 people in 2010 and retail around 19,000. According to Central Bank of Bahrain data 14,062 people were working in financial services in 2011. Other areas, however, are proving to be somewhat harder to develop.

“Developing other areas of the services sector such as tourism, retail or hospitality can be problematic given cultural and religious sensitivities,” Al Rayyash told OBG. “But government agencies like the ministry and the LMRA are trying to work with private business owners so that such challenges are overcome and employees are used only on the hotel’s reception, for example, or as reservations staff.

Encouraging young Bahrainis to build their own business is another area receiving attention from the government. Tamkeen, which means “empowerment” in Arabic, is a state body tasked with fostering the development and growth of businesses in Bahrain and providing them with technical and financial support. It was set up in 2006 as part of Economic Vision 2030 to develop businesses and their productivity and to create employable skilled Bahrainis. As of December 2011 it has provided up to BD166m ($438.3m) in funding to new small and medium-sized enterprises (SMEs). In September 2009 Tamkeen conducted an eight-month market gaps study with consultants Dun & Bradstreet looking at 12 sectors across Bahrain, seeking to identify the structure and supply chain of each, where there were gaps and where there was growth potential. The study followed an earlier effort by Tamkeen focused on the skills gap. In 2012 the agency will launch 20 skillset training programmes for young Bahrainis.

“Bahrain stands out for international firms because of the high quality of its human capital,” Nasser Ali Qaedi, the senior manager for planning and business development at Tamkeen, told OBG. “We do not have the natural resources of Saudi Arabia or Qatar but we do have a liberal economic structure and a skilled, qualified workforce. We want to move on from being seen simply as business-friendly and focus on what this country can tangibly offer to businesses.”

Tamkeen focuses on structural bottlenecks such as a lack of financing, a traditional problem for start-ups. The state body aims to prioritise sectors where growth appears more likely. “We try to avoid investing in an area with no future,” said Qaedi.

BOOSTING THE NUMBERS: There is much work to be done in boosting Bahraini numbers in the private sector. Although SMEs provided employment for 73% of all private sector employees in 2010, 86% of these were non-nationals while only 14% were Bahrainis, according to the EDB. Tamkeen is working closely with another key partner, Bahrain Development Bank (BDB), so as to extend finance to SMEs. Since starting operations in 1992 BDB has played an integral role in financing the development of the SME sector with international partners, such as the World Bank and the UN Industrial Development Organisation. The state bank is 87% owned by the Ministry of Finance with the Pension Fund and the Social Insurance Organisation retaining a joint 13% stake in the operation. During 2011 BDB financed 2687 enterprises with BD73.4m ($193.8m). Funding was distributed to aluminium manufacturing, textiles, wood production and services such as the restaurant, tourism, advertising and health sectors.

SMEs are known worldwide as a key source for job creation. Over the last decade the government has put a lot of effort and funding into enterprise and entrepreneurial schemes. New agencies like Tamkeen were set up to bring a more modern approach to the challenge of developing Bahraini skillsets and finding young graduates jobs. Sectors that the government wants to expand are light industrial manufacturing, IT and telecoms, and financial services. “Like every Gulf state we want to attract international firms to invest and base themselves here,” said Qaedi. “Where Bahrain differs in this approach is that the government actively supports the private sector in hiring nationals rather than just imposing quotas. This is not the case in some other countries.”