Bahrain
Area: 259 square miles Capital: Manama Government: Constitutional hereditary monarchy Population: 677,886 Languages: Arabic, English, Farsi, Urdu GDP per capita: USD 17,100 Monetary unit: Bahraini Dinar Imports: Crude oil, machinery, chemicals. Exports: Petroleum and petroleum products, aluminium, textiles.
Gateway to the Middle East
Economy
Shaikh Hamad bin Isa Al Khalifa, His Majesty the King
Bahrain, with its location on major trade routes between East and West, has through the ages been an important international entrepot in the Arabian Gulf. An international leader in the pearl industry and the first Gulf country to strike gold in the 1930s, it has developed over the decades into a sophisticated financial services hub. Over-reliance on its declining natural resources has moved the Kingdom toward a concerted new economic vision under the patronage of His Majesty King Hamad bin Isa Al Khalifa, one that will cement its position as one of the leading Gulf states in the 21st century.
A four-year Economic Action Plan was unveiled in December 2002 to diversify the Bahraini economy from its traditional petrochemical, ship-repairing and industrial base to make the kingdom a world-class trading and commerce hub with a sophisticated financial services sector. To compensate for its small size and to attract international investment, the government is positioning Bahrain as a regional services hub and has outlined five economic clusters for further expansion. These are tourism, information technology, telecommunications, healthcare, and business and financial services.
Based on the tenets of a free economy in which the government takes a supervisory and regulatory role, the Action Plan gives a high priority to privatization. The government’s belief is that its sole role is to facilitate business, provide fertile ground for business to flourish and set the stage for the economy’s diversification away from the petrochemical sector towards a service economy.
To integrate Bahrain more smoothly into the global economy, the government has reduced bureaucracy, removed restrictions on foreign investment and created a single investment portal to facilitate the entrance of international companies into the economy. Furthermore, significant public spending on health, education and industrial and infrastructure projects is giving Bahrain a modern transportation and communications infrastructure necessary to attract and foster international business.
Much progress is still needed, however, in improving bureaucratic efficiency and in formulating transparent procedures and decision-making. The creation of a financial regulatory framework employing the highest international standards will enhance Bahrain’s well-established role as a leading regional and international financial center.
The USD 1.3 billion Bahrain Financial Harbor located on Manama’s beachfront integrates financial services, commercial activities and leisure services, and is an outstanding opportunity for private investors that will further strengthen Bahrain’s position as the region’s top financial services center.
Such initiatives, along with the political stability afforded by the ruling Al-Khalifa constitutional monarchy, have given Bahrain a level of commercial activity that other Gulf states are hard-pressed to compete with.
The Ministry of Finance and National Economy formulates and implements economic policy and manages the country’s finances. The crowning achievement of the government’s drive toward economic modernization is the creation of a free-trade agreement with the United States. Spearheaded by His Highness the Crown Prince Shaikh Salman bin Hamad bin Isa Al-Khalifa and the former Minister of Finance and National Economy Abdulla Hassan Saif, the agreement was negotiated in record time and is expected to be implemented in early 2005.
Former Minister Saif comments, “The record-time negotiation shows the vision of the two leaderships. Bahrain has always played a strategic role in the GCC and Middle East and we see our future as a regional player. The free-trade agreement will give American companies access to the region. Bahrain is their gateway.”
Thanks to the GCC Unified Customs Union, international companies enjoy customs-free access to the markets of GCC member states and to markets throughout the region, an area with a total population of 1.3 billion people and a GDP of more than USD 900 billion.
Bahrain has been rated the most economically free country of the Middle East by the Index of Economic Freedom, and ranks 20th worldwide. As former Minister Saif comments, “Each country has its own features. Bahrain’s strengths are its transparency, a fair legal system, and a track record of supporting an open economy.” A key focus of the government’s efforts will be to further develop its regulatory framework and continue identifying potential for investment in the country.
Bahrain’s intellectual capital will play an important role in the growth of its services sector. As Saif explains, “Bahrain has a young and vibrant community with well-developed human resources. We want to push the role of human resources in the economy, especially in the finance sector.” The local Bahrain labor force has over the years been supplanted by a better trained and more motivated foreign labor force, but the government aims to promote education and training of local workers to bridge the gap.
Saif believes the free-trade agreement will provide many long-term benefits to both countries. He comments, “Bahrain has to tell its story not only to the United States but to many countries. The free-trade agreement is a challenging new step for both the United States and Bahrain.”
