With a multi-billion dollar economic overhaul underway, tiny Bahrain is trying to keep pace with its Gulf neighbors after more than a decade of political turmoil.
It’s a difficult path for the island nation that neighbors gas-rich Qatar and is connected by a causeway to Saudi Arabia, a key ally and the world’s biggest oil exporter.
It is only a short drive to the United Arab Emirates, another regional powerhouse with well-developed trade, tourism and financial industries alongside its major oil sector.
Bahrain has seen turmoil since the suppression of an uprising in 2011 but has since embarked on a modernization drive, leading to economic and fiscal reforms.
Extensive land reclamation is changing the shape of the country, with many gleaming new buildings on the skyline and cranes working above emerging housing developments.
The small, non-OPEC oil producer is trying to reduce its dependence on its oil sector, which accounts for 80 percent of revenue, much of it from refining.
“The principles are clear: We want to grow. We want to grow faster than the world,” Khalid Ibrahim Humaidan, head of the government’s Economic Development Board, told reporters this month in Manama, the capital.
The announcement could provide an unexpected boost to diplomatic ties between Saudi Arabia and Iran’s Shiite majority, which Bahrain accused of fomenting unrest during the 2011 protests.
“In an optimistic scenario, a Saudi-Iranian rapprochement would build and create a more favorable environment for political compromises within Bahrain that could jeopardize the economy,” said Gulf economist Justin Alexander, director of the Khalij consultancy group. Economics, by AFP.
– Construction dowry –
Bahrain, a monarchy whose cabinet is appointed by the king, has a rich commercial tradition dating back to its days as a thriving pearling center.
Consisting of one large island and about 30 smaller ones, it was a British protectorate until 1971, being a financial hub that led its neighbors at first in terms of economic diversification.
Increased regional competition, mainly from Dubai and Doha, but also political instability and economic challenges, especially after the drop in global oil prices in 2014, all hurt Bahrain.
The 2011 uprising, fueled by revolutions sweeping the region, ended with a crackdown on demonstrators who demanded an elected government.
Sunni-controlled Bahrain, assailing the movement as a plot by the Shiite theocracy of Iran, banned opposition parties and imprisoned political opponents, drawing intense international criticism.
In 2018, wealthy Gulf countries agreed to support Bahrain’s economic goals with $10 billion in loans, sparking the current building spree.
As well as land reclamation for new housing projects and skyscrapers around Manama, Bahrain is building diving centers including an underwater park.
A new $1 billion passenger terminal opened at the international airport last year, bringing annual capacity to 14 million passengers.
Bahrain has also built one of the largest conference centers in the region, aiming to attract international events and visitors.
– Concern for investors –
The country’s financial planners aim to balance the national budget by next year, with its Economic Vision 2030 aimed at reducing dependence on oil and gas and developing finance, logistics and tourism.
Many visitors to Bahrain stream across the 25-kilometer (15.5 mile) King Fahd Causeway from Saudi Arabia where, unlike its more laid-back neighbor, alcohol is prohibited.
Manama wants tourism to contribute 11.4 percent of GDP by 2026, up from around seven percent currently.
Last year, real GDP increased by 4.9 percent, the highest growth in the kingdom since 2013, the finance ministry said on Monday.
“We are confident that we will continue to go down that path and get the results we want,” said Humaidan, who spoke as Bahrain hosted its annual Formula One Grand Prix, an event it has held since 2004 in respect.
With a footprint the size of New York City, Bahrain is a Western ally and hosts the US Navy’s Fifth Fleet and a smaller base in Britain.
The kingdom of 1.4 million, half of whom are foreigners, has a strategic location on the shipping lanes — making it an important logistics hub, but also putting it at the heart of regional conflicts.
“Bahrain has tried to develop new sectors, such as fintech… Since the protests and crackdowns of 2011, however, the tension in Bahraini society has become a concern for investors,” said Alexander.
But after the deal brokered by China to end the seven-year rift between Iran and Saudi Arabia, Tehran said it would also welcome restoration of ties with Manama.
Meanwhile, Bahrain’s Crown Prince Salman bin Hamad Al-Khalifa, 53, who was appointed prime minister in 2020, is among a new generation of Western-educated Gulf leaders who are positioning themselves as force of change.