Island of empires: The kingdom has been a global trade centre for centuries

The name Bahrain means “two seas” in Arabic, referring to the seas that surround the Gulf island nation. It is unclear which seas the term specifically refers to, and for much of its history, Bahrain was the name for the province. 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 geostrategic 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 location was key for facilitating trans-Gulf trade. For millenia, various merchants and imperial administrations used the kingdom as a link between markets and posts across the region.

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. Aware of the commodity’s finite nature, 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.

At present, Bahrain’s Economic Vision 2030 aims to enhance private sector growth while the government invests in infrastructure projects, affordable housing and human resources. Furthermore, the kingdom maintains a highly developed industrial sector and hosts one of the world’s largest aluminium smelters, Aluminium Bahrain (Alba).

According to the World Bank’s 2013 “Doing Business” report, the country ranks 42nd in the world for the ease of conducting business, and the World Economic Forum’s 2012-13 “Global Competitiveness Report” ranks it 35th. Bahrain’s Economic Development Board (EDB) recorded 2012 GDP at $30.28bn.

GOVERNMENT: Bahrain gained its independence from the British government in 1971. It has been ruled as a constitutional monarchy since 2002 under the leadership of Sheikh Hamad bin Isa Al Khalifa, who is the country’s current ruler. King Hamad rose to power in 1999, following the passing of his father, Sheikh Isa bin Hamad Al Khalifa, whose rule began in 1961 and lasted until his death.

The prime minister, Sheikh Khalifa bin Salman bin Hamad Al Khalifa, has served as the head of the government since 1971. The Crown Prince, Sheikh Salman bin Hamad Al Khalifa, acts as the commander of the Bahrain Defence Forces and is chairman of the EDB. Executive authority is entrusted with the King and his Council of Ministers, whom he appoints.

By 2002, the King facilitated a number of reforms to modernise the government that were 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 on October 2010, and the Al Wefaq opposition party won a plurality of the votes. Some 18 seats were vacated due to political controversies, and special elections took place in 2011. Four women were elected to the 40-member lower house, and Al Wefaq did not participate in the new elections.

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 basis of the demonstrations, led 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 although some protests continued through 2012, the country’s businesses have carried on and growth levels remain positive. As a result of the initial unrest and a national dialogue with the aggrieved parties, the King authorised the Bahrain Independent Commission of Inquiry (BICI) on June 29, 2011 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 it also provided recommendations for political reform looking forward. As of early 2013, the government continues to receive pressure from the opposition and the international community regarding the implementation of the BICI report recommendations.

FINANCIAL SERVICES: Following civil war in Lebanon during the 1970s, Bahrain rose to prominence as the region’s key financial hub. The sector benefited significantly as a result of the kingdom’s economic diversification programme, and it is highly regarded for its regulatory framework. According to the Central Bank of Bahrain, there were 407 financial institutions in the country as of October 2012, and the sector contributed around 25% of overall GDP.

ISLAMIC FINANCE: The kingdom is home to the highest number of Islamic financial institutions in the Middle East. As of August 2012, the sector contributed $25.4bn, and market share of total banking assets increased from 1.8% in 2000 to 13.3% in 2012. As of October 2012, there were 26 Islamic bank licenses, seven takaful (Islamic insurance) companies, and two re-takaful companies operating in Bahrain.

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.

ENERGY: The energy sector is central to Bahrain’s economy, accounting for over 70% of total government revenue and about 13% of GDP. Upstream recovery technology has enabled Bahrain to increase its oil production rate to over 45,000 barrels per day (bpd), up from 32,000 in 2010, and the government’s target is to reach 100,000 bpd by 2017. Presently, the country refines a total of 265,000 bpd, with the majority of crude coming in 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 2.5bn cu feet in the same timeframe, as the kingdom recently awarded a tender for deep gas exploration alongside enhanced onshore drilling efforts.

TRANSPORT: The island’s geographic location is a key strategic asset enabling it to serve the Northern Gulf as a transportation hub. The new Khalifa Bin Salman Port has enhanced the country’s role as a primary supplier of goods to Saudi Arabia, the region’s largest market, which is already linked to Bahrain via the King Fahd Causeway. Additionally, the Bahrain International Airport is in the midst of undergoing an extensive expansion, 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 and rich culture, 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 is also designated as the Capital of Arab Tourism for 2013, further boosting the industry after a decline in tourism numbers due to the 2011 political unrest.

The Formula 1 Grand Prix, cancelled during the 2011 crisis, was revived in 2012 and remains a key driver of annual tourism revenue. Bahrain is also investing in infrastructure to support the meetings, incentives, conferences and exhibitions segment, and is currently developing the new Expo City project, which is planned for commissioning in 2013.

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 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.

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 83% 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, its closest geographical neighbour, via the 25-km King Fahd Causeway, a key infrastructural development that supports commercial growth. Qatar, the kingdom’s second closest neighbour, sits 28 km away, and plans are in the works for a new causeway between the two states that will reach 40 km, 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 desert climate restricts extensive agricultural production. The traditional industries of fishing and pearl diving have diminished substantially since Bahrain began oil production, yet they remain culturally significant. Although the kingdom was the first GCC state to discover oil, it has smaller petroleum reserves than its neighbours. However, enhanced oil recovery technology has improved access to reserves.

Water is another finite local resource, and the island’s primary aquifer, Damman, is becoming salinised due to overuse. Bahrain depends on desalinisation for approximately 90% of its potable water.

POPULATION: The island hosts a diverse, multicultural population that, according to the 2010 Central Informatics Organisation census, totals approximately 1.23m people, 568,400 of which are Bahraini nationals and 666,200 expatriates. The percentage of foreign nationals in Bahrain has increased from 38% of its total population in 2001 to 54% in 2010. Roughly 51% are either Bahraini nationals or citizens of the GCC or other Arab states; 45.5% are from Asia or Oceania; 1.6% are from Africa; and 1.3% from Europe and the Americas. 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. The largest single group – numbering about 329,510 individuals – resides in the Capital Governorate, home to the capital city.

LANGUAGE: The official language of the kingdom is Arabic. The colloquial tongue is Bahraini Arabic, which is a very similar dialect to Khaleeji (Gulf) Arabic. English, however, is widely spoken due to the extensive expatriate community and business environment. The majority of street signs and documentation include English and it is the compulsory second language in the school system. Other common languages include Farsi, Urdu, Hindi, Malayam 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. The kingdom is considered tolerant regarding the practice of different religious beliefs, and around Manama there are various churches, temples and a synagogue. 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, Bahrain has invested heavily in education, and the government currently expends approximately 11-12% of its budget on education development. The 2012-13 World Economic Forum “Global Competitiveness Report” ranks Bahrain 31st in primary education enrolment and 21st in secondary education enrolment, noting the overall high quality of the system. Bahrain’s literacy rate is one of the highest in Arab world at 91.4%.

In line with Bahrain’s Economic Vision 2030, the government launched the National Education Reform Initiatives in 2005 to improve all levels of the system from curriculum development to vocational and teacher training. In 2012, the first class graduated from the new Bahrain Polytechnic, and new schemes such as the School Improvement Programme (SIP) are coming online in order to further enhance school adequacy and increase accreditation standards.

HEALTH CARE: As has been the case in some other sectors, Bahrain has historically led the GCC in health care innovation. The American Mission Hospital (AMH), established in 1902, is the region’s oldest. Bahrain created its Ministry of Health in 1973 and modelled its policies on the operations of AMH, and the government subsidises health care costs for all citizens. In early 2013, there were 13 private hospitals and 11 government hospitals, with the King Hamad University Hospital opening in 2012. The Ministry of Health is currently streamlining an e-Health initiative with the overall objective of linking hospitals across the country to a central databank. Upon completion, the programme will enable easy access to immunisation and prescription medicine records, improving efficiency.