Economic Outlook

Published October 18th, 2000 - 02:00 GMT

Although Bahrain is in the midst of developing the Hawar Islands as a major tourist resort, its overall economic wellbeing remains relatively isolated from the outcome of this ongoing suit. Its open economy continues to stimulate private sector activity and attract high volumes of both Arab and foreign investment. The Wall Street Journal’s recently published Index of Economic Freedom ranked Bahrain first among Middle East and North African states and fourth globally in terms of economic freedom. The Index noted Bahrain’s strategic location as a trading hub as a key success factor. It also attributed this tiny Gulf country’s high rating to the strength of its court system and the lack of taxation on personal income or corporate profits. 


Bahrain does not have any plans in place to eliminate the absolute tax holidays granted to individuals and corporations. Finance and National Economy Minister Abdulla Saif was recently quoted as attributing this absence of any form of income tax as a major advantage the country possesses in boosting foreign investment and attracting expertise.  


Economic indicators also remain strong. Bahrain’s trade surplus through the first quarter of 2000 jumped 51 percent to $360 million, compared to a surplus of $238 million in the previous quarter. This comfortable balance was due largely to higher oil earnings resulting from a surge in international prices. In addition, the country’s official jobless rate has been cut to a miniscule 2.3 percent. Still, this figure covers up the structural unemployment that continues to plague Bahrain. The lack of a qualified and trained national labour force is highlighted by the fact that of the 68,000 job openings last year in the private sector, merely 8,000 positions were awarded to locals, while the remaining ones were filled by expatriate workers.  


Bahrain's employment situation is expected to improve slightly from a new $6-million steel project, which is scheduled to become operational by year's end. This Bahraini-Pakistani joint venture, which will be located in the Alba Industrial Estate, will create 110 jobs in the first phase. Initial production capacity will amount to 35,000 tonnes per year, of which 80 percent will be for the domestic market while the remainder will be exported. 


New projects such as this one demonstrate the government's policy of diversifying its economy by developing its industrial sector, which is regarded as the engine of future prosperity. In the meantime, however, Bahrain remains highly dependent on oil, which continues to comprise 62 percent of this Arab State's aggregate export earnings. In 1999, this dependence worked in Bahrain's favour, as rising crude petroleum prices caused oil export revenues to jump by 50 percent to BD 960.1 million (approximately $2.55 billion), versus BD 637 million (about $1.7 billion) in 1998. This surge in exports resulted in a balance of trade surplus of BD 217.7 million (nearly $577 million), compared to a deficit of BD 111.3 million (roughly $295 million) in the previous year. 


Bahrain comprehends the importance of oil to its economy, and continues to upgrade this sector. A new $66-million in-line blending project has recently been inaugurated at the country’s sole oil refinery, which is run by the Bahrain Petroleum Company (BAPCO) and produces 250,000 barrels/day. BAPCO has also launched a complementary $560 million project to reduce sulphur levels, due to be completed by 2004.  

© 2000 Mena Report (

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