While the post-2014 oil price decline has had an adverse impact on all of the GCC member states’ economies, the Kingdom of Bahrain has had to contend with more than its fair share of economic challenges.
With its gross domestic product (GDP) reaching $31.9bn (BHD12bn) in 2016, and a population of just over 1.4 million people, Bahrain is the smallest country in the Gulf by a some distance.
The island nation’s modest size and the historic make-up of its national industries have left it more susceptible than most to negative externalities.
But Bahrain is far from despondent in the face of such obstacles. On the contrary, it is pushing ahead with a raft of development activities designed to ensure long-term prosperity for its denizens, while simultaneously taking advantage of the country’s natural attributes.
Dr Jarmo Kotilaine, chief economic advisor at the Bahrain Economic Development Board (Bahrain EDB), is fully aware of the nation’s limitations, but he is also confident that it has the necessary fundamentals for growth. Indeed, Dr Kotilaine tells Construction Week that Bahrain’s value proposition is unlike any other GCC country, citing three primary factors: regulation, human capital, and connectivity.
“Regulation is important because Bahrain is the smallest economy in the region,” he explains. “It does not have the luxury of capitalising on a big domestic market as a growth driver. And I think, partly as a result of this, it has always appreciated the value of economic openness – at all levels – as a way of circumventing this limitation. As a result, our regulatory framework is both mature and comprehensive; it’s tried and tested. Bahrain has been repeatedly recognised as the most liberal economy in the region and, perhaps more importantly, its government understands the importance of regulation as a growth driver.”
Commenting on human capital, Dr Kotilaine notes that Bahrain’s workforce is “well educated and primarily engaged in the private sector” making it “very different from the GCC norm”. Turning his attention to connectivity, he adds: “The entire region is within easy reach, thanks to Bahrain’s state-of-the-art infrastructure and services. And of course, it is located right next to the industrial heartland of Saudi Arabia.”
Efforts to diversify the country’s non-oil activities have also been paying dividends. Sector-specific figures released by the Information & eGovernment Authority, which are based on value added to the kingdom’s economy, show that in 2016, oil and gas extraction accounted for just 19.3% of Bahrain’s real GDP, down from 43.6% in 2000. During the same period, manufacturing and construction activities have increased in importance, accounting for 14.4% and 7.2% of Bahrain’s real GDP in 2016, respectively.
These shifts are no accident. Bahrain is making progress on a series of strategic mega-developments – including Aluminium Bahrain’s (Alba) $3bn (BHD1.1bn) Line 6 expansion, the King Hamad Causeway, and a range of large-scale residential and infrastructure projects – that look set to pave the way for its post-oil economy.
The country is also working to build a tourism segment capable of attracting visitors not only from the wider region, but also from international markets. Noting that significant progress has already been made in this respect, Bahrain EDB’s executive director for tourism and leisure, Jerad Bachar, says Bahrain’s ongoing hospitality development portfolio – which includes Fairmont Bahrain Resort; Hilton Bahrain Bay Hotel & Residences; One&Only Seef, Bahrain; The Address Marassi Al Bahrain; and Vida Marassi Al Bahrain – will serve to further boost its appeal on the world stage.
“We expect these resorts to be demand generators in themselves,” he tells Construction Week. “We are looking for more of these products to come into the market and help bring more consumers to Bahrain.
“Tourism and leisure developments are very important to Bahrain’s economic diversification efforts,” continues Bachar. “Right now, this segment accounts for less than 4% of GDP, but we expect that to grow. Our ambition is to increase this figure to approximately 10% of GDP within the next 10 years, which is certainly an achievable goal – especially when you consider the increased supply and demand that we’re witnessing.”
Bachar goes on to note that Bahrain’s natural geography makes it an ideal country in which to develop novel leisure offerings, especially when it comes to maritime activities. He explains: “Marinas are being developed in Diyar Al Muharraq and Durrat Al Bahrain. There are [also] lots of marinas that are being constructed as part of mixed-use developments, so we have an expanding maritime sector.
“We’re working with different government agencies to build a more robust [leisure offering] out on the water, and we expect to make some strong advancements in that area over the next year.”
Commenting on his expectations for Bahrain’s overall growth prospects, Dr Kotilaine concludes: “A significant element of this is not guesswork, because we know that elements of our multi-year pipeline are being financed or getting started as we speak. On that basis, Bahrain’s medium-term outlook, in terms of construction activities, is very favourable. Further out, I think the story will evolve, but it’s interesting to note that new growth drivers are emerging now, partly as a result of this low oil-price environment and the fiscal consolidation that is happening.”