Ten reasons why Bahrain is best - #5 Open Economy
Of all the GCC states, Bahrain is the country in the region whose economy has made most progress in diversifying away from complete dependence on oil. Although a substantial proportion of the Government’s Budget remains reliant on oil; year on year, oil’s overall share in Bahrain’s economy has continued to decrease. Meanwhile, the private sector has gradually expanded.
As Bahrain diversified away from oil during the late 20th century, it established itself as a centre for banking and regional commerce. Bahrain’s system of financial regulation is designed to facilitate investment and trade.
International economists have predicted that growth in Bahrain’s economy during 2015 will be almost entirely dependent on the non-oil sector. The IMF (International Monetary Fund) in late 2014 forecasted a 3.9% economic growth rate for Bahrain, in comparison with a relatively subdued 2.7% for the rest of the Middle East region.
However, where Bahrain’s economy really stands out from other Middle Eastern states is its degree of economic openness. Global ratings of economic performance and investment climate consequently always score Bahrain very highly. The Heritage Foundation’s “economic freedom” rating puts Bahrain as the only Arab state on its global top 20 list.
What does “economic openness” actually mean? In Bahrain’s case, this reflects the sophisticated regulatory environment; facilitating investment, providing legal protection for businesses, securing rights for the workforce and reducing bureaucracy. In 2015 Parliament approved a new series of arbitration laws, strengthening the accesses of domestic and foreign businesses to the justice system.
A review of the “most liberal” Arab and Muslim nationsputs Bahrain at the number one spot, commenting: “Bahrain is the Arabic world’s most liberal country partly because it is the center for commerce in the Gulf. This outward-looking nature was further strengthened by education reforms started at the beginning of the 20th Century which spurred the development of the Kingdom’s middle class and thus gave the country a very different economic structure than many of its neighbors.”
The past decade has presented a series of challenges to Bahrain: First the global financial crisis of 2007-2008; then the political unrest of 2011; and more recently the sudden sharp decline in oil prices.
These events have forced Bahraini businesses to become leaner and more competitive than other GCC states. This is one of the reasons why these businesses have made so much headway in neighbouring countries and across the region. At the Government level, these challenges have forced the authorities to address wasteful spending and corruption, while investing substantially in initiatives to support the diversification of the economy.
Bahrain’s Industry and Commerce Minister Zayed Al Zayani said: "As part of its diversification process, Bahrain has focused on high-value-added industries such as aluminium, petrochemicals, metal products, steel and other knowledge-intensive industries. These factors have helped the kingdom develop into the one of the region's most-diversified economies, with the manufacturing and services sectors accounting for more than three quarters of the economy and expected to lead national economic growth." (June 2015)
This diversification effort has given rise to massive investment in infrastructure, amounting to around $4.4bn for major projects to improve Bahrain’s economic and transport infrastructure.
Bahrain is once again seeking to consolidate its pre-eminence as the banking centre of the Middle East region. Bahrain’s financial sector accounts for around a quarter of GDP.This sector grew by around 20% in 2014, with net profits totalling $953m for the first half of 2014
Many economic experts look to the tourism sector as the area which will drive Bahrain’s future growth, bringing in dependable levels of revenue and indirectly benefiting all other sectors of the economy. Much of the investment in infrastructure and construction has been geared towards tourism and hospitality.
The hotel & restaurant sector experienced year-on-year growth of 7.4% in 2014, with numbers of visitors steadily continuing to grow. The total number of visitors to Bahrain (by air & via causeway) was around a million over the course of just one month in November 2014.
Bahrain has a strong record of responding positively and ambitiously to the challenges it faces. Despite the difficult regional economic environment at the beginning of 2015, Bahrain’s Government has responded by increasing investment in infrastructure, tourism, vocational education and economic projects.
The initiatives to strengthen the regulatory and financial environment and combat corruption and financial mismanagement are also important for improving Bahrain’s long term financial position.
There is much in Bahrain to attract inward investment and foreign businesses. With a thriving private sector and exciting levels of expansion in the banking, tourism and hospitality sectors, Bahrain’s economic prospects continue to go from strength to strength.
Ten reasons why Bahrain is best: Click these links to find out
#1 - Family friendly
#2 - Religious tolerance
#3 - Personal safety
#4 - Cultural hub
#5 - Open economy
#6 - Tourist paradise
#8 - Dependable ally
#9 - Island nation
#10 - Historic power-centre