Bahrain is a key economic and political player in the GCC

For much of its history, Bahrain was the name for the eastern coast of Arabia. Only recently has it come to identify the islands of the Awal archipelago. The first notable inhabitants were of the Dilmun civilisation 6000 years ago, but it has attracted the attention of numerous empires over the centuries, including the Persians, Sumerians, Assyrians, Babylonians, Arabs, Portuguese and British. A commercial centre during the period of ancient Mesopotamia, its key location for facilitating trans-Gulf trade attracted merchants and imperial administrations for millennia to come.

Economy

Bahrain pioneered the Middle East’s oil production in 1932, thus establishing the region’s initial framework for the petroleum industry. The resource enabled Bahrain to modernise its economy by moving beyond traditional industries such as pearl diving and fishing. The kingdom sought to diversify its economy at an early stage, and consequently established itself as a leading regional financial centre with a highly regarded regulatory system.

Bahrain’s Economic Vision 2030 plan aims to enhance private sector growth while the government invests in infrastructure, affordable housing and human resources. The kingdom maintains a welldeveloped industrial sector and hosts one of the world’s largest aluminium smelters. According to the World Bank’s 2013 “Doing Business” report, the country ranks 53rd in the world for ease of doing business, and seventh for starting a business, with GDP at $32.8bn. The World Economic Forum’s 2014-15 “Global Competitiveness Report” ranks it 44th.

Government

Bahrain gained independence from the UK in 1971. It has been ruled as a constitutional monarchy since 2002 under the leadership of King Hamad bin Isa Al Khalifa, the current ruler. King Hamad ascended the throne in 1999, following the passing of his father, Sheikh Isa bin Hamad Al Khalifa, whose rule began in 1961. The prime minister, Sheikh Khalifa bin Salman bin Hamad Al Khalifa, has served as head of government since 1971. The crown prince, Sheikh Salman bin Hamad Al Khalifa, is the deputy supreme commander of the Bahrain Defence Force, first deputy prime minister and chairman of the Economic Development Board. Executive authority is entrusted with the king and his Council of Ministers.

In 2001 the king initiated a number of reforms articulated in the National Action Charter. A bicameral legislature, the National Assembly, was re-established after its suspension in 1975. It consists of a 40-seat lower house (the Council of Representatives), whose members are elected to four-year terms, and a 40-seat upper house (the Consultative or “Shura” Council), whose members are appointed by the king. The Shura Council has a veto over the lower house. The latest parliamentary elections took place in November 2014. They were met with boycotts by the Al Wefaq party, but still garnered voter turnout of over 52%. Six women were elected to the 40-member lower house, the most since elections began.

Politics

Following a wave of protests throughout the Arab world in 2011, civil unrest reached its height in Bahrain in February and March of the same year. The demonstrations, predominantly by Shiite Muslim citizens, related to grievances surrounding the country’s democratisation process. In March 2011, the kingdom received GCC security assistance in order to uphold political stability.

As a result of a national dialogue with the aggrieved parties, the king authorised the Bahrain Independent Commission of Inquiry (BICI) to investigate the crisis and develop recommendations moving forward. The final report highlighted various instances of police brutality and demonstrator violence during the unrest, and provided recommendations for political reform. As of late 2014, the government remains under pressure from the opposition and the international community regarding the implementation of the BICI report recommendations.

Financial Services

Bahrain rose to prominence as the Middle East’s financial hub in the 1970s. The sector benefitted from the kingdom’s economic diversification programme, and is highly regarded for its regulatory framework. According to the Central Bank of Bahrain, there are 404 financial institutions in the country, and the sector contributes around 25% of overall GDP. Some 66% of employees in the financial sector are Bahraini nationals.

Islamic Finance

The kingdom is home to the highest number of Islamic financial institutions in the Middle East, with 32 as of November 2014. It also plays host to a number of regulatory institutions that provide international standards for the sector, such as the Accounting and Auditing Organisation for Islamic Financial Institutions, the International Islamic Financial Market, the Islamic International Rating Agency, and the General Council for Islamic Banks and Institutions. The latest monthly sukuk (Islamic bond) issue in November 2014 was oversubscribed by 302%.

Energy

The energy sector is a pillar of Bahrain’s economy, accounting for the majority of government revenue but a shrinking proportion of GDP. Upstream recovery technology has enabled Bahrain to increase its oil production rate to over 48,000 barrels per day (bpd) in 2013, up from 45,000 in 2012, and the government’s target is to reach 100,000 bpd by 2017. Presently, the country refines around 260,000 bpd, with the majority of crude coming from the Abu Safa field, which it shares with Saudi Arabia. Gas production is also expected to increase from 1.5bn cu feet per day to 2.7bn cu feet in the same timeframe.

Transport

The island’s location is a key asset, enabling it to serve as a transportation hub. Khalifa Bin Salman Port has enhanced the country’s role as a primary supplier of goods to Saudi Arabia, the region’s largest market. Saudi Arabia is already linked to Bahrain via the King Fahd Causeway, which may soon be expanded. Bahrain International Airport is also undergoing an extensive expansion, which is expected to further improve the country’s status as a centre for global trans-shipment and logistics. Additionally, the UK is planning to open a military base at Mina Salman Port in 2016 to accommodate a variety of naval vessels and their crews, with Bahrain paying most of the $23m needed for construction of facilities and the British paying ongoing costs.

Tourism

Bahrain attracts a large number of tourists, particularly from other GCC states. In 2012 the Arab League named Manama the Capital of Arab Culture, and the kingdom hosted an array of events relating to Arabic art, music, architecture and literature. Manama was also designated Capital of Arab Tourism for 2013, boosting the industry after a decline due to the 2011 political unrest. The Formula 1 Grand Prix, cancelled during the 2011 crisis, was revived in 2012 and is a key driver of tourism revenue. Bahrain is also investing in infrastructure to support the meetings, incentives, conferences and exhibitions segment.

Climate

Bahrain’s climate consists of two seasons, a hot, humid summer and a mild winter. April to October marks the summer months, when the average temperature hovers around 40°C, with highs up to 48°C. During the winter, generally November to March, the temperature ranges between 10°C and 20°C. The country’s annual rainfall averages 77 mm.

Geography

Due to land reclamation projects, the country has increased its landmass to more than 765 sq km, up from its original 665 sq km. The total archipelago consists of 33 islands off the eastern shores of the Arabian Peninsula. The four predominant islands include Bahrain Island, Al Muharraq Island, Sitra Island and Umm An Nasan Island, which are connected by causeways. Plans are in the works for a 40-km causeway to Qatar, the kingdom’s second-closest neighbour, which would be the world’s longest fixed link.

The capital, Manama, sits at the northernmost part of Bahrain Island and is the country’s most populous city. Other major cities include Riffa, Muharraq, Isa Town and Sitra. Bahrain International Airport is located in Muharraq. Jebel Al Dukhan is the kingdom’s highest point, at 122 metres, while the majority of the landmass consists of low-lying desert. Less than 3% of land is arable, and the primary agrarian area is situated on a 5-km strip on the northern coast, and produces dates, almonds, figs and pomegranates.

Natural Resources

The country’s primary natural resources include oil, gas, fish and pearls. The traditional industries of fishing and pearl diving have diminished since Bahrain began oil production, but they remain culturally significant. Although the kingdom was the first GCC state to discover oil, it has smaller reserves than its neighbours. Water is another finite local resource, and the island’s primary aquifer is becoming salinated due to overuse. Bahrain depends on desalinisation for 90% of its potable water.

Population

The kingdom hosts a diverse, multicultural population that, according to an estimate by the Central Informatics Organisation in 2011, totals around 1.2m people, 585,000 of whom are Bahraini nationals and 610,000 expatriates. The percentage of foreign nationals has increased from 38% of the total population in 2001 to around 55% in 2014, with the majority hailing from Asia. Due to the large size of the expatriate workforce, males account for around 62% of the population. Almost 90% of people live in urban areas, with most in the Capital Governorate.

Language

The official language of Bahrain is Arabic. The colloquial tongue is a similar dialect to Khaleeji (Gulf) Arabic. English is widely spoken due to the extensive expatriate community and business environment. Most street signs and documentation include English, and it is the compulsory second language in the school system. Other common languages include Farsi, Urdu, Hindi, Malayalam and Tagalog.

Religion

Islam is Bahrain’s official religion. Around 98% of Bahraini nationals are Muslim, and adherents of either the Shia or Sunni sects. The kingdom is considered tolerant regarding the practice of different religious beliefs. The 2010 census states that 70% of the country’s population was listed as Muslim and 30% as members of other religions. The expatriate population includes substantial Christian, Hindu, Buddhist and Sikh communities. The country is also home to a small indigenous Jewish community that originally emigrated from Iraq in the late 19th century.

Education

Bahrain was the first Gulf state to initiate public school education for boys in 1919 and schools for girls in 1928. Ever since, it has invested heavily in education, and the government currently spends 11-12% of its budget on education. Bahrain’s literacy rate is the second-highest in the Arab world at 94.6%. In line with Vision 2030, the government launched the Quality Assurance Authority for Education and Training to develop improved standards.

Health Care

Bahrain has historically led the GCC in health care. The American Mission Hospital (AMH), established in 1902, is the region’s oldest. Bahrain created its Ministry of Health in 1973, modelling its policies on the operations of AMH, and the government subsidises health costs for all citizens. The Ministry of Health is currently streamlining an e-health initiative to link all hospitals to a central databank.