Today Bahrain is a major trading hub and financial centre in the region, with a strong reputation as one of the most open economies in the Gulf and with the best regulatory environment and most liberal tax regime. The quality of its highly skilled workforce and its close proximity to Eastern Province, Saudi Arabia are seen as unique strengths in the competitive Gulf Cooperation Council (GCC).
The “Economic Vision 2030” plan
Bahrain’s economy is based primarily on dwindling reserves of hydrocarbon resources. Oil and gas revenue accounted for close to 81% of government revenue in 2012. But now, Bahrain is diversifying its economy away from oil and gas production. The Kingdom’s long-term “Economic Vision 2030” development plant highlights the need for diversification by increasing the number of Bahraini’s in the workforce, an initiative known as “Bahrainization”. The plan also seeks to raise the standards of industrialization, privatization, training and education of the Bahraini work force, establishing Bahrain as a regional center for human capital.
The personality behind this plan is the Crown Prince Salman bin Hamad bin Isa Al Khalifa – an innovative, think-outside-the-box type of leader. He is the driving force behind Vision 2030 and has established the Economic Development Board, which is chaired by all ministers who then report back to him. The EDB is a very respected and powerful institution, implementing change for Bahrain across all sectors with the aim of improving living standards for Bahrainis.
Bahrain has carved out a reputation as one of the Gulf’s most open business destinations, ranking 1st out of 15 countries in the Middle East region. Over the past decade, the Kingdom has made marked progress towards establishing a free-market and implementing comprehensive economic reforms. Today it is the largest centre in the Middle East for financial services, and has become a hub for private banking, asset & fund management, and hosts a number of key global players in this field, including Citibank and HSBC.
While much of Bahrain’s economy rests on diminishing oil-wealth, the government is making a considerable effort to diversify the Kingdom’s economy beyond oil & gas. New opportunities are emerging daily in energy development, financial services, manufacturing, and tourism leading to an upsurge in foreign investment. Gross domestic product (GDP) grew 2.1% during 2012 and it is forecast to expand at an average of approximately 4.2% a year from 2013-16. Bahrain is building upon its reputation as a financial center.
Bahrain’s economic freedom score is 75.5%, making its economy the 12th freest in the 2013 Index. Its overall score has increased by 0.3 point due to improvements in freedom from corruption and monetary freedom. Bahrain is ranked 1st out of 15 countries in the Middle East/North Africa region, and its economic freedom score is well above the world average. The Heritage Foundation notes that as a regional leader in economic freedom, Bahrain sets a critical example for other countries in the Middle East and North Africa. Its transition to greater openness, diversification, and modernization is based on strong foundations of economic freedom. Firmly institutionalizing the rule of law by enhancing judicial independence and transparency is critical to stamping out lingering corruption and ensuring success in this ongoing evolution.
From a regional perspective, Bahrain has established ties with all of its neighbors, including Iran, Saudi Arabia, Kuwait, and the UAE. In economic terms, Saudi Arabia remains Bahrain’s largest trading partner, followed by Kuwait and the UAE. Thus, Bahraini officials are highly cautious in promoting balancing their relationship with Iran and western countries like the US and UK. Non-Gulf trading partners include Australia, France, India, and the UK. The country has amicable political and economic ties with China, Jordan, Malaysia, Singapore and South Korea, which has raised the tiny Kingdom’s international profile.
As part of Bahrain’s economic diversification strategy, improving and promoting the country’s tourism industry stands high on the Kingdom’s agenda. The country has a considerable amount to offer to travelers, such as its 7,000 year old civilization, with ancient ruins and historic architecture, as well as first-class resorts and stunning beaches. Given its historic trade in spices and jewelry, tourists can visit the various street markets experiencing the likes of how Bedouin Arabs lived during the time when Bahrain served as a trading post between the East and the West. To promote tourism, the country developed the region’s only Formula One race track, which hosts one stage of the F1 World Championship each year and is considered the most well organized F1 event. In addition, the various beach resorts such as those in the Durrat al Bahrain or Amwaj Islands provide a unique getaway experience for the tourist looking to immerse themselves in a desert oasis.
With respect to infrastructure, the country has embarked on its largest construction project: the development of the Bahrain-Qatar causeway. The project commenced back in January 2009, and was due to be completed by the end of 2015, but it’s currently on hold. The causeway will make commuting to and from Bahrain to Qatar much easier, including providing a new channel to Saudi Arabia. This will decrease the bottlenecks already being experienced on the Saudi Arabian King Fahd Causeway. In addition, the causeway will attempt to attract many more Qatari tourists as well as tourists from the region. The estimated cost is targeted at $3 billion. When completed, this multi-modal connection of approximately 40km between Bahrain and Qatar will feature a two-lane dual carriageway, including 17km of embankments and a further 23km of viaducts and bridges, with two bow-string arch bridges soaring up to 40 meters above shipping channels. This scheme includes the infrastructure to support freight and high-speed rail passenger traffic. It is envisioned that the railway will connect Kuwait to Oman, to become the main rail link for the Arabian Gulf countries.Worldfolio Journalism Team