Bahrain Government Rejects Mandatory 50% Bahrainisation Clause in Privatisation Bill

Manama — The Bahraini government has rejected a proposed bill that would mandate a minimum 50% Bahrainisation quota in all privatisation contracts, arguing that such a fixed clause would conflict with existing laws, limit economic freedom, and discourage investor participation.

In an official memorandum submitted to Parliament, the government stated that a flat hiring rule would complicate contractual structures, particularly for capital-intensive projects that rely on small, highly specialised teams. It also warned that imposing such a quota could exacerbate labour shortages in sectors where local expertise remains scarce.

The memo emphasised that the proposal contradicts Articles 2 and 6 of the Privatisation Policies and Controls Law, which grant the Cabinet the authority to shape privatisation policy and determine how state assets are restructured in line with global best practices.

If enacted, the amendment to Article 4 of Decree-Law 41 of 2002 would require that at least half of all staff in privatised projects be Bahraini nationals a measure the government contends would interfere with flexibility in contract negotiations.

“Laws should be read as a whole, and a fixed hiring term would blunt the effect of those articles,” the memo noted, referencing previous Constitutional Court rulings on legislative consistency.

Officials further warned that the proposed clause would undermine the freedom of contract, converting state agreements into near adhesion contracts and deterring potential investors. “Mandating a compulsory quota removes the possibility of negotiation,” the memo said, calling such a move inconsistent with free-market principles.

The government also cited Article 10(a) of the Constitution and the National Action Charter, which uphold economic freedom and emphasise the private sector’s central role in national development.

As an alternative, the government highlighted that Bahrainisation objectives are already embedded in the privatisation process through bid evaluation criteria that reward companies for committing to higher local employment, workforce training, knowledge transfer, and community engagement. This approach, it said, allows for tailored outcomes without enforcing a “one-size-fits-all” requirement.

Following parliamentary procedures under Article 92(1) of the Constitution and Article 95 of Parliament’s internal rules, the Legislation and Legal Opinion Commission has drafted the relevant text and attached its legal opinion for further review.