09 April, 2009

LMRA Taxes, are they any good?

I have ignored this blog for longer than I should, haven't I? I apologize, and that demands a dedicated post on its own.

This blog of mine usually does not delve into politics. If you look at the most used tags, you will surely find politics somewhere at the bottom. My most used tag is of course: Bahrain. Which is why I'm writing today.
His Highness the crown Prince has a vision of where he wants Bahrain to be economically. Thus he established the Economic Development Board (EDB) which in turn established the Labour Market Regulatory Authority (LMRA or sometimes pronounced as: lemra).
LMRA has many goals, but one of the main ones are to make Bahraini's the employee of choice rather than expats, especially if they were unskilled or moderately skilled. The EDB established another entity called "Tamkeen" to help with that but more on it later.

Now, the LMRA is taxing companies, they have to pay BD 10 per month per each expat employee they employ. Once that happens the world goes NUTS! "We are DOOMED" cry businesses. For this tax apparently will break their business. Because I am a blogger and not an LMRA spokesman I can use colourful expressions like "Fuck you, you dumb fuck. You are what is holding us back." But I wont. :)
See, several companies write in the papers saying how doomed they are, some well known papers, oh hell, let me name them: Akhbar Alkhaleej & Alwatan are at the forefront of a media campaign to battle this tax. Alwasat is also defending the majority of shiite readers with stories on how businesses are failing, families are bankrupt, prices are going up for Bahrainis and how maybe, just maybe, the government, maybe (did I say that before?) does not care about us poor citizens. Maybe.

OK people, calm down. Let me explain why and how this works:

1- Too Many Expats, Too many jobless Bahrainis:

We do have way too many expats here, over 50% 0f the population actually. Companies hire in Bahrain for two main reasons: Cost & Stability.
Decreasing costs is at the forefront of any business. So companies here try to pay the lowest salaries possible. But they do that in an unethical way.
Picture your friendly road digging worker. They get at best BD 80 per month. Just a bit over US$ 200. Yes, PER MONTH. Now obviously this is much less than the job deserves. For one, the workers work under the direct rays of our friendly sun. Next they work in roads which anyone in Bahrain can attest how safe that can be. Not to mention the lousy work environments.
This job obviously is worth much more than a mere BD 80 per month. True, it doesn't need a degree, but it is freakishly hard work. What happens is instead of companies paying what the job is WORTH they pay salaries based on MARKET PRICE (See the Supply/Demand image attached). Because there is a supply of cheap unskilled labour, they get away with paying less than what they should. Just because there are many supermarkets doesn't mean we can pay less than 100 fils for a cola can, but companies do. If Bahrainis woun't work for that salary, Indians will. If Indians woun't, Bangladeshis will, if Bangladeshis woun't maybe the Vietnamese will. So companies scoure the Earth looking for the cheapest alternative. This creates an unfair work package. This point leads us onto the next: stability.

Bahrainis will not work for such low salaries. And if they did, it's a matter of months or weeks before they can find better jobs. So Bahraini people will not work for long at unfair jobs. But expats, thanks to a sponsorship system, cannot leave to find another job. They HAVE to stay and work for the greedy employer or be returned home which is often not an option for many of them.
This example was based upon road workers but is true for every job capacity.

2- Making things even:
So since they hire for cost and stability, these reasons must be made equal to Bahrainis and fair for all. The LMRA tax serves to make expats a more costly option. But still, that alone is not enough. So the next logical step is to abandon the sponsorship system and adopt issuing working Visas to expats. Giving expats the liberty to change employers if a better chance come up.
In essence: if Bahrainis will not stay and work for you, eventually expats woun't.
Companies which have crappy packages or working conditions get around the high turnover in Bahraini staff by hiring expatriate ones.
When this system is fully in place, it will mean that companies cannot hire for cost nor stability anymore. They must hire for competency and competency alone. If you can do the job, well, you are hiered.
What this also means is that the salaries will get better organically. If a company suffers from a high turn over of staff because the package or work environments are lousy, then they HAVE to make them better to attract people to stay.
Eventually this will happen:
Companies offer better jobs, better salaries and also have better quality because they hire for competence.
Good no?

So Why are they making a fuss? Because they are greedy.
They want to keep earning money as if its 1985. Same profit model. The thing is, they can't. They just can't. The world is different now.

The companies that are going to be stubborn and stick with unfair low salaries will simply have no one to work for them. They have two choices:
1- Improve working conditions, including salary, benefits and safety
2- Die

If you have no one to run the business, you don't have a business. So businesses better step up.

So companies are complaining about paying BD 10 per month. Big freaking deal! You will not go bankrupt because of that and if you are, then you have another problem.
Lets imagine shall we? You have a business, OK? And you employ 50 expats. Fine? Which means you have to pay 500 per month. OK? See, that should NOT be a problem. Because if you have 50 staff members, and 500 dinars a month puts you in the red, then, you are running a real crappy business my friend! BD 10 per employee should in no way make companies go bankrupt or affect their profit in a significant manner. If it does then here are some solutions:
a- Go to business School you idiot
b- Change the business you are in
b- Sell the business. You are crap and lazy.

Companies that wish to AVOID paying extra fees for expats should simply hire Bahraini's. If you simply click on Tamkeen's website, you can see that they will go out of their way to help you and train all the staff you need for free. There is really no comparison here:
Unskilled uneducated expat + fees? OR Skilled and Educated Local + No fees + lotsa support?

This model will cause the price of goods and services to spike up of course. After all, companies are not used to this. However, salaries should also spike because of this, so theoretically you will not feel it.

I personally feel this is a great step in the right direction. I am passionate about it and can't wait to see the fruits. I know we will soon get into a "Storming" phase, but will eventually move on to the Norming & Performing phases in the future.

If only companies see things the way I do.