Companies face dilemma over rising Bahrainisation rate

TDT | Manama                          

The Daily Tribune – www.newsofbahrain.com    

Reported by Zahra Ayaz

While the Kingdom’s private sector is on the right track to achieve the highest levels of Bahrainisation, small and medium-sized enterprises (SMEs) emerging from the pandemic crisis are finding it to be a financially challenging option.

The problem derives from the fact that recruiting expats is significantly less expensive than hiring citizens. Additionally, a number of citizens with adequate skills or interest in different jobs are not readily available.

The Kingdom has a total population of 1.5 million people, 52% of them are Bahrainis, while the remaining 48% are expatriates. According to the Labour Market Regulatory Authority (LMRA) report, SMEs rely heavily on cheap expat labour.

In fact, the overall Bahrainisation level for companies with less than 10 employees is less than 2%. The Bahrainisation implications can be viewed as stimuli to a natural market transformational trend. The most successful companies will find opportunities to change their business model by capturing scale economics and providing more value added goods and services.

In every developing economy, there is a natural trend for structural change whereby companies take advantage of economies of scale and consolidate. One example of this phenomenon would be the small grocery shop that eventually gives way to the larger supermarket, which in time also loses market share to even larger players, such as hypermarkets.

Here players take advantage of economies of scale to lower costs and provide a larger product offering. This ultimately leads to increased customer satisfaction with better goods and services at a lower process.

Bahrainisation would simply accelerate this transformational process as companies turn their focus towards improving productivity. While other reports indicated that the primary obstacles to SMEs growth were a lack of funding and intense rivalry.

In addition, the LMRA has organised several workshops with various stakeholders to identify the most urgent areas of concern, assess the best use of fund’s resources, and start defining programs to assist small companies during the transition phase.