As a stable player in the region, Bahrain raises international profile

The name Bahrain means “two seas” in Arabic. It is unclear what the term specifically refers to, and 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.

History 

The island’s first notable inhabitants were of the Dilmun civilisation, approximately 6000 years ago, but its geographically strategic location has attracted the attention of numerous empires over the centuries, including the Persians, Sumerians, Assyrians, Babylonians, Arabs, Portuguese and the British. As 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.

Economic Overview

Bahrain pioneered the Middle East’s oil production in 1932, thus establishing the region’s initial framework for the petroleum industry. The new resource enabled Bahrain to modernise its economy by moving beyond traditional industries such as pearl diving and fishing.

However, the kingdom sought to diversify its economy at an early stage and consequently established itself as a leading regional financial centre. Its highly regarded regulatory system encouraged various regional banks looking to move their capital out of Lebanon during that country’s civil war to set up shop there. Today, the country’s national plan, Bahrain Economic Vision 2030, aims to enhance private sector growth while the government invests in infrastructure, affordable housing and human resources.

The kingdom maintains a developed industrial sector and hosts one of the world’s largest aluminium smelters, Aluminium Bahrain (Alba), with downstream businesses creating products for export. Other industries in Bahrain include downstream oil and gas products as well as a growing food industry, serving both the Saudi market and the global economy. According to the World Bank’s 2016 “Doing Business” report, the country ranks 66th in the world for the ease of doing business and 8th for paying taxes, with its 2014 GDP recorded at $33.87bn. In the World Economic Forum’s 2015-16 “Global Competitiveness Index”, the kingdom ranks 39th globally, mainly thanks to its strong institutions, infrastructure and market efficiencies.

Bahrain’s model of development has been studied and formalised by the UN Industrial Development Organisation (UNIDO), in partnership with the Arab Regional Centre for Entrepreneurship and Investment Training based in Manama. The UNIDO Entrepreneurship Development and Investment Promotion programme, developed in Bahrain, has been applied, with UNIDO support, in 42 developing countries around the world with strong results.

Government 

Bahrain gained independence from the British government in 1971. The kingdom has been ruled as a constitutional monarchy since 2002 under the leadership of King Hamad bin Isa Al Khalifa, who is the country’s current ruler. King Hamad came to power in 1999, following the passing of his father, Sheikh Isa bin Salman Al Khalifa, whose rule began in 1961. Sheikh Khalifa bin Salman Al Khalifa, the prime minister, 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 appointed Council of Ministers. In 2001, the king initiated a number of reforms articulated in the National Action Charter. A bicameral legislature, known as the National Assembly, was re-established after its suspension in 1975. The assembly 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 veto power over the lower house. The latest parliamentary elections took place in November 2014 and thought met with boycotts by the Al Wefaq party, still garnered over 52% voter turnout. Six women were elected to the 40-member lower house of parliament, the most since elections began in the kingdom.

Politics 

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

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 2015, the government remains under pressure from the opposition party and the international community regarding the implementation of the BICI report recommendations.

Financial Services 

Bahrain’s rise to prominence as the region’s key financial centre occurred during the 1970s. The banking sector benefited significantly as a result of the kingdom’s economic diversification programme, and Bahrain is highly regarded for its regulatory framework under the direction of the Central Bank of Bahrain (CBB). According to the CBB, there were 403 financial institutions in the country as of June 2015, 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 as of December 2015, according to the ICD-Thomson Reuters Islamic Finance Development Indicator report. The kingdom 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 kingdom regularly issues sukuk (Islamic bonds) that are met with full subscription rates, as do other Bahraini institutions. The kingdom is also home to seven takaful (Islamic insurance) companies.

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 58,000 barrels per day (bpd) in 2015, up from 48,000 bpd in 2013, 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 in from the Abu Safa field, which the country shares with Saudi Arabia. Gas production is also expected to increase from 1.5bn to 2.7bn cu feet per day in the same time-frame. A new pipeline with a capacity to transfer 350,000 bpd from Saudi Arabia to a Bahraini refinery is expected to be operational by 2018, replacing an ageing 230,000 bpd pipeline.

Transport 

The island’s geographic location is a key strategic asset, enabling it to serve as a transportation hub for the region. The Khalifa Bin Salman Port has enhanced the country’s role as a primary supplier of goods to Saudi Arabia, the region’s largest market. Bahrain is linked to Saudi Arabia via the 25-km King Fahd Causeway, which may soon be expanded to handle increased traffic by trucks, commuters and tourists. Additionally, the Bahrain International Airport is in the midst of an extensive expansion and modernisation programme, which is expected to further improve the country’s status as a centre for global trans-shipment and logistics.

Tourism

Due to its vibrant history, rich culture and diverse population, 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 a wide array of events relating to Arabic art, music, architecture and literature. Manama was also designated as the Capital of Arab Tourism for 2013, boosting the industry after a decline in tourism numbers following political unrest in 2011. The Formula 1 Grand Prix remains a significant driver of annual tourism revenue. Bahrain is also investing in infrastructure to support the meetings, incentives, conferences and exhibitions segment. Bahrain’s Ministry of Tourism was absorbed by the Ministry of Industry and Commerce in order to push development in the sector further ahead.

Climate

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

 Geography

Due to land reclamation projects, the country has increased its overall landmass to more than 765 sq km, up from its original size of 665 sq km. The total archipelago consists of 33 islands and rests off the eastern shores of the Arabian Peninsula. The four predominant islands include Bahrain Island (accounting for 76% of the total landmass), Al Muharraq Island, Sitra Island and Umm An Nasan Island, which are all interconnected by causeways. Bahrain Island is also connected to Saudi Arabia via the 25-km King Fahd Causeway. Plans are in the works for a new 40-km causeway to Qatar, the kingdom’s second-closest neighbour, which would be the world’s longest fixed link. Al Manama, the capital city, 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. The 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 Bahrain’s northern coast, which 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 substantially since Bahrain began oil production but remain culturally significant. Although the kingdom was the first GCC state to discover oil, it has smaller petroleum reserves than its neighbours. Water is another finite local resource for the kingdom, and the island’s primary aquifer is becoming salinised due to overuse. Bahrain now depends on desalination for approximately 90% of its potable water, as fresh water sources are scarce.

Population 

The kingdom hosts a diverse, multicultural population that, according to an estimate by the Central Informatics Organisation in 2014, totals around 1.25m people, 614,830 of whom are Bahraini nationals and 638,361 expatriates. The percentage of foreign nationals in Bahrain has increased from 38% of its total population in 2001 to about 55% in 2014, with the majority hailing from Asia. Due to the large size of the expatriate workforce, males account for approximately 62% of the population. Almost 90% of people live in urban areas, with most in the Capital Governorate covering the capital, Manama.

Language 

The official language of the kingdom is Arabic. There are several colloquial tongues, one a similar dialect to Khaleeji (Gulf) Arabic and the other closer to Iraqi Arabic (Baharna). English, however, is widely spoken due to the extensive expatriate community and business environment. The majority of street signs and documentation include English, which is also a compulsory second language in the school system. Laws require most signage to include equal amounts of Arabic at a minimum. Other common languages heard in Bahrain include Farsi, Urdu, Hindi, Malayalam and Tagalog.

Religion

Islam is Bahrain’s official religion. Approximately 98% of Bahraini nationals are Muslim and are adherents to either the Shia or Sunni sects, but the kingdom is considered to be 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. Bahrain’s freedom of faith is considered a defining characteristic of the Gulf state, and the travelling delegation “This is Bahrain”, which has been promoting awareness of Bahrain’s culture internationally since May 2014, has stressed the kingdom’s ethnic and religious diversity.

Education 

Bahrain was the first Gulf state to initiate public school education – for boys in 1919 and for girls in 1928. Since then, Bahrain has invested heavily in education, and the government currently spends approximately 11-12% of its budget on education development. Bahrain’s literacy rate is second-highest in Arab world at 94.6%.

In line with Bahrain’s Economic Vision 2030, the government launched the Quality Assurance Authority for Education and Training to develop and implement standards for institutions. Mandatory contributions to Tamkeen (the state agency charged with development) paid by companies for each expatriate worker they are invested in Bahrain’s education and training system to cultivate a competitive local workforce. On the government side, the Bahrain Institute of Public Administration is a body that focuses on improving the ability of public administrators both in technical and in soft skills, focusing on sharing knowledge by both bringing in outside experts and offering its services to foreign governments across the GCC.

Health Care 

As has been the case in some other sectors, Bahrain has historically led the GCC in healthcare. 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 care costs for all citizens. The Supreme Council of Health is currently streamlining an e-Health initiative with the overall objective of linking hospitals across the country to a central data-bank of medical records, which will reduce costs.