Experts warn against security deposit from expats, cite negative economic impact for Bahrain

TDT | Manama              

The Daily Tribune – www.newsofbahrain.com

The proposal to insist on a security deposit from expats for renewing or obtaining a commercial registration to run businesses would have a negative effect on the economy and would not improve the living conditions of citizens, warn global economic experts.

A proposal was recently presented by a group of MPs to the Industry and Commerce Minister for introducing a security deposit, which would depend on the size of the business, for obtaining or renewing commercial registrations. Tackling unfair business practises and unfair competition was stated as the aim of the proposal that was presented in a meeting of the minister with a parliamentary committee that is looking into the alleged low standards of living of citizens.

Stan Veuger, a senior fellow in economic policy studies at the Washington-based think tank American Enterprise Institute, told The Daily Tribune that implementing such a proposal would have a negative effect on the country’s economy. Nor would such a move result in providing a better standard of living for the citizens of the country, the editor of AEI Economic Perspectives said.

Violates WTO rules

Dan Ikenson, an expert in international trade policy based in Washington, also held a similar view regarding the proposal for a security deposit for expat businesses. "Generally, any extra requirements imposed on foreign but not domestic entities in the same industry violate the World Trade Organization (WTO) core principle of ‘national treatment’, which is one of the pillars of ‘non-discrimination’.

Unfortunately, more and more governments are deprioritizing those and other multilateral trading rules," Dan, an economist specialising in international trade and the founder and president of Ikenomics Consulting, said. A similar apprehension regarding the proposal was also raised by Ritesh Kumar Singh, a business economist with 20 years of experience and a columnist at Nikkei Asia.

‘Not sensible:

"When countries are outdoing each other to make it easier for investors, locals or foreigners, imposing security deposits for setting up commercial establishments by expats is not sensible in my view. The government must check for malpractice, but doing it through security deposits doesn’t make sense.

It’s lazy policymaking," the economist who specializes in macroeconomic risks and opportunities stated. Regarding the effect of implementing the proposal on the standard of living of citizens, the economist said, "Revenue from security deposits will not be enough to improve the lot of citizens. Facilitating businesses and, in turn, creating jobs is a far more effective alternative to achieving that." However, MP Maryam Al Dhaen, who was part of the group of legislators who made the proposal, strongly defended the move, hailing it as an effective step for preventing malpractices and ensuring quality service to citizens.

There have been numerous court cases in which expat business operators, especially in the construction business, collected money from citizens but fled without fulfilling their promises, the MP pointed out. She added that there is also the problem of foreign workers being trained at the expense of Tamkeen (labour fund) and then leaving for better jobs abroad. Stating that the proposal is intended to bring more responsibility to expat business operators, the MP said sometimes you have to balance between quality and quantity.

When a service is provided, it should come with the necessary assurance, she said, while noting that the present situation allows for providing low-quality services without a proper system for insisting on adequate follow-up maintenance.