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How Bahrain is investing to boost its economy

In the context of the current plunge in oil revenues, it is a surprise to discover that the Bahraini economy continues to grow, reinforced by a strong and expanding private sector.

Oil represents just 20% of Bahrain’s GDP. The economy averaged around 4.5% growth during 2014. Although this is predicted to slow to below 4% during 2015, the non-oil sector is expected to continue growing at around 4.5%, with strong levels of growth anticipated in the hospitality and construction sectors.

Part of this growth is the result of massive investment programmes focused on specific sectors of the economy with the objective of stimulating future economic growth. In this report we look at some of the key sectors where this investment has been concentrated and evaluate the expected results of these efforts.

Tourism & hospitality

One of the most obvious destinations for investment is the tourism sector, with plans to renovate Bahrain’s coastline and promote its historical and cultural places of interest. Bahrain’s tolerant and diverse society makes the Kingdom more inviting to foreign tourists than many other nearby locations.

The hotel & restaurant sector experienced growth of 7.4% growth during 2014, with around a million visitors to Bahrain each month last year. A number of new hotels and leisure facilities are under-way, with the recent opening of the huge Four Seasons Hotel in Manama being a major highlight.

There are also a number of schemes underway to facilitate entry to Bahrain, through simplifying the visa regime, improving access via the Saudi Causeway and further investment in airport facilities.

Education hub

Plans for establishing a “higher education city” in Bahrain go back to 2007, and such ideas have recently received a boost, with the Bahrain Banking and Finance Institute announcing its strategic plan to make Bahrain a regional educational hub

Meanwhile, the Higher Educational Council’s 2014-24 strategy states: “The vision is to position Bahrain as a regional hub for quality higher education, producing graduates with the skills, knowledge and behaviours required to succeed in the global knowledge economy, while contributing to the sustainable and competitive growth of Bahrain”.

There has been intense interest in ensuring that Bahrain's education sector continues to receive the necessary investment to grow and excel. 

Construction & infrastructure

One important factor for boosting economic growth is huge investment in infrastructure from the Budget and the GCC fund. This amounts to around $4.4bn for major projects to improve Bahrain’s economic and transport infrastructure. This is just one component of a five-year Government spending plan amounting to $22bn.

Substantial improvements to Bahrain’s airport and the planned construction of the GCC railway network, along with a second causeway to Saudi Arabia will tighten Bahrain’s connections to the wider region.

During the third quarter of 2014 the construction sector recorded growth of more than 12%, reflecting an impressive level of renewed dynamism in this sector, after a number of relatively subdued years following the 2008 global economic recession and the 2011 political crisis.

Banking & investment

Industry and Commerce Minister Zayed al-Zayani on 13 May stressed his aspiration for Bahrain to become a “regional and international investment hub”. He explained that his Ministry was pursuing this goal through streamlining investment procedures.

"Bahrain has always been an open economy for foreign investment. Our challenges are centred around the existing set of laws and legislation, both on national and international front," he said.

The financial sector accounts for 16.7% of Bahrain’s GDP, growing by around 20% in 2014. After a series of difficult years, Bahrain’s banking sector is once again establishing itself as a regional centre and the destination of choice for investment and financial security; underpinned by a forward-looking and open regulatory system. A number of new laws for updating Bahrain’s commercial arbitration system have just been passed.

Medical hub

Parliament recently approved proposals for investing in Bahraini medical centres to make the Kingdom a centre for health tourism. Bahraini MP Dr. Jamila al-Sammak, one of the main proponents of the bill, stressed how lucrative this could be for boosting Bahrain’s economy, while also improving health care availability for Bahrainis themselves.

The challenging economic circumstances which Bahrain has been through – the 2008 global economic crash, the 2011 political unrest, and the sharp reduction in oil prices – have forced Bahrain’s leadership to think creatively about long-term strategies to ensure that Bahrain’s economy grows and diversifies. The result of this may be that Bahrain’s economy emerges from these challenges as a more robust and more competitive entity which is not reliant on oil revenues.

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