From Wikipedia, the free encyclopedia Economy of Bahrain

Economy of Bahrain

Economy of Bahrain [1] Exports $19.17 billion (2008 est.)

Export goods Petroleum and Petroleum Products,

Aluminum, Textiles

Main export Saudi Arabia 3.5%, United States

partners 2.5%, United Arab Emirates 2.5%
(2007)

Imports $15.64 billion (2008 est.)

Import goods Crude Oil, Machinery, Chemicals

Main import Saudi Arabia 37.7%, Japan 7.2%,

partners United States 6.2%, Germany 4.7%,
United Kingdom 4.5%, United Arab
Emirates 4.2%, China 4.1% (2007)

Public finances

Public Debt $10.57 billion (31 December 2008

est.)

Revenues $7.226 billion (2008 est.)

Expenses $5.806 billion (2008 est.)

All values, unless otherwise stated, are in US dollars

Currency Bahraini dinar (BHD) According to the 2007 Index of Economic

Freedom published by the Heritage Founda-
Fiscal year Calendar Year
tion and the Wall Street Journal, Bahrain has
Trade OPEC, GCC the second freest economy in the Middle East
organisations and North Africa region [1] and is thirty-
Statistics ninth overall in the world. An alternative in-
dex, published by the Fraser Institute, puts
GDP $26.75 billion (2008 est.)
Bahrain in 44th place tied with 7 other
GDP growth 7% (2008 est.) countries.
GDP per capita $37,200 (PPP) (2008 est.)

GDP by sector Agriculture (0.3%), Industry

Macro-economic trend
(43.6%), Services (56%) (2007 est.)
This is a chart of trend of gross domestic
Inflation (CPI) 7% (2008 est.) product of Bahrain at market prices estim-
ated by the International Monetary Fund
Labour force 463,000 with figures in millions of Bahraini Dinars.
Labour force Agriculture (1%), Industry (79%), For purchasing power parity comparisons,
by occupation Services (20%) (1997 est.) the US Dollar is exchanged at 0.30 Bahraini
Dinars only. Average wages in 2007 hover
Unemployment 15% (2005 est.)
around $110-133 per day.
Main Petroleum Processing and Refining,
industries Aluminum Smelting, Iron
Balance of Payments
Pelletization, Fertilizers, Islamic and
Offshore Banking, Insurance, Ship
Repairing, Tourism Bahrain’s current account balance is charac-
terized by surpluses in merchandise trade
External and international services, and a large deficit
in unilateral transfers, which is accounted for

1
From Wikipedia, the free encyclopedia Economy of Bahrain

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)

1980 1,158 0.37 Bahraini Dinars 79
1985 1,375 0.37 Bahraini Dinars 97
1990 1,703 0.37 Bahraini Dinars 94
1995 2,199 0.37 Bahraini Dinars 100
2000 2,996 0.37 Bahraini Dinars 100
2005 4,859 0.37 Bahraini Dinars 104

by the country’s large expatriate workforce generally effective, especially in the

sending home a portion of its earnings. In
2003 and 2004, the balance of payments per-
formance improved due to rising oil prices
and increased receipts from the services sec-
tor. As a result, the current account balance
registered a surplus of US$219 million in
2003 and a surplus of US$442 million in
2004, compared with a deficit of US$35 mil-
lion in 2002. Bahrain’s gross international re-
serves increased substantially in 2004 to
US$1.6 billion, compared with US$1.4 billion
in the previous three years (2001-2003).
Diversification
Though Current GDP per capita shrank by
2.4% in the Eighties, it bounced back to a
growth of 36% in the Nineties as a result of
successful diversification initiatives.
Bahrain’s urgency in embracing economic
liberalisation is due to its need to diversify
the economy away from its limited oil sup-
plies. Unlike its Persian Gulf neighbours,
Bahrain has little oil wealth and the economy
has expanded into banking, heavy industries,
retail and tourism. The Kingdom is the main
banking hub for the Persian Gulf and a centre
for Islamic finance, which has been attracted
by the strong regulatory framework for the
industry. According to the International Mon-
etary Fund’s Financial System Stability
Assessment of Bahrain’s financial regulartory
environment, published on 6 March 2006,
found:
• The financial system is enjoying strong
performance under favorable
circumstances, and is likely to remain a
major contributor to overall growth. The
main risk stems from potential
overheating in the economies of the
region, but the system should be resilient
to likely shocks.
• Prudential regulations are modern and
comprehensive, and supervision is
dominant banking sector. Supervisory
capacity needs to be expanded in line with
new regulations and to keep up with the
growth and increasing sophistication of
financial institutions.
• The further expansion of the Islamic
sector, the development of housing
finance, and the deepening of securities
markets are important for the future
growth of the financial system. The
banking and insurance sectors will
eventually undergo consolidation. [2]
In 2005, Bahrain signed the US-Bahrain Free
Trade Agreement, becoming the first Persian
Gulf state to sign such a bilateral trade
agreement with the United States. A massive
privatisation programme is underway to sell
off key government assets: utilities, banks,
financial services, and telecommunications
have started to come under the control of the
private sector.
As a result the economy has been well po-
sitioned to exploit the extra revenues gener-
ated in the region thanks to the sustained
high oil prices since 2002. In January 2006,
the United Nations Economic and Social
Commission for Western Asia cited Bahrain
as the fastest growing economy in the Arab
world.
Between 1981 and 1993, Bahrain Govern-
ment expenditures increased by 64%. During
that same time, government revenues contin-
ued to be largely dependent on the oil in-
dustry and increased by only 4%. Bahrain has
at times received significant budgetary sup-
port and project grants from Saudi Arabia,
Kuwait and the United Arab Emirates.
The government has used its modest oil
revenues to build an advanced infrastructure
in transportation and telecommunications.
Bahrain is a regional financial and business
center. Tourism, especially from the region,
has proved another significant source of
income.

2
From Wikipedia, the free encyclopedia
Bahrain has benefited from the oil boom
since 2001, with economic growth of 5.5%. It
has succeeded in attracting investment from
other Persian Gulf states partly because it
used the revenues of the 1970s-early 80s
boom to invest in infrastructure development
and other projects to improve the standard of
living; health, education, housing, electricity,
water, and roads all received attention.
The success of ventures such as the
Bahrain Grand Prix has raised the Kingdom’s
international profile, and combined with the
boom in Islamic banking, has encouraged
major airlines to resume services to the coun-
try, with Lufthansa announcing on 14 March
2006 that it would schedule three flights a
week to Manama from Frankfurt.
As part of its efforts to build a modern
economy, Bahrain has initiated a series of la-
bour reforms under Minister of Labour Ma-
jeed Al Alawi in order to bring the labour
market in to line with international
standards.
Investment
The stock market capitalisation of listed com-
panies in Bahrain was valued at $17,364 mil-
lion in 2005 by the World Bank.[3] Bahrain is
generally a country which is open to creating
a unique economy which is fast growing and
open for all to create business opporturnities.
Hydrocarbon industry
Petroleum and natural gas, the only signific-
ant natural resources in Bahrain, dominate
the economy and provide about 60% of
budget revenues. Bahrain was the first Per-
sian Gulf state to discover crude oil. Because
of limited reserves, Bahrain has worked to di-
versify its economy over the past decade.
Bahrain has stabilized its oil production at
about 40,000 barrels (6,400 m³) per day, and
reserves are expected to last 10 to 15 years.
The Bahrain Oil Company refinery was built
in 1935, has a capacity of about 250,000 bar-
rels (40,000 m³) per day, and was the first in
the Persian Gulf. After selling 60% of the re-
finery to the state-owned Bahrain National
Oil Company in 1980, Caltex, a U.S. com-
pany, now owns 40%. Saudi Arabia provides
most of the crude for refinery operation via
pipeline. Bahrain also receives a large por-
tion of the net output and revenues from
Saudi Arabia’s Abu Saafa offshore oilfield.
3
Economy of Bahrain
The Bahrain National Gas Company oper-
ates a gas liquefaction plant that utilizes gas
piped directly from Bahrain’s oilfields. Gas
reserves should last about 50 years at
present rates of consumption.
The Persian Gulf Petrochemical Industries
Company is a joint venture of the petrochem-
ical industries of Kuwait, the Saudi Basic In-
dustries Corporation, and the Government of
Bahrain. The plant, completed in 1985, pro-
duces ammonia and methanol for export.
Bahrain’s other industries include Alumin-
um Bahrain, which operates an aluminum
smelter--the largest in the world with an an-
nual production of about 525,000 metric tons
--and related factories, such as the Aluminum
Extrusion Company and the Gulf Aluminum
Rolling Mill Company (GARMCO)[4]. Other
plants include the Arab Iron and Steel Com-
pany’s iron ore pelletizing plant (4 million
tons annually) and a shipbuilding and repair
yard.
Bahrain’s development as a major finan-
cial center has been the most widely heral-
ded aspect of its diversification effort. Inter-
national financial institutions operate in
Bahrain, both offshore and onshore, without
impediments. In 2001, Bahrain’s central bank
issued 15 new licenses. More than 100 off-
shore banking units and representative of-
fices are located in Bahrain, as well as 65
American firms. Bahrain’s international air-
port is one of busiest in the Persian Gulf,
serving 22 carriers. A modern, busy port of-
fers direct and frequent cargo shipping con-
nections to the U.S., Europe, and the Far
East. Internationally recognised Bahraini
companies include Investcorp, the venture
capital firm credited with turning around the
fortunes of Gucci.
Economy - overview
In Bahrain, petroleum production and pro-
cessing account for about 60% of export re-
ceipts, 60% of government revenues, and
30% of GDP. Economic conditions have fluc-
tuated with the changing fortunes of oil since
1985, for example, during and following the
Persian Gulf Crisis of 1990-91. With its highly
developed communication and transport fa-
cilities, Bahrain is home to numerous mul-
tinational firms with business in the Persian
Gulf. A large share of exports consists of pet-
roleum products made from imported crude.
Construction proceeds on several major
From Wikipedia, the free encyclopedia Economy of Bahrain

industrial projects. Unemployment, especially first of the GCC countries to implement a UI

among the young, and the depletion of both
oil and underground water resources are
major long-term economic problems.
Taxation
Taxation and import laws apply equally to
Bahraini and foreign-owned companies, and
foreign investors must comply with the same
requirements and legislation as local firms.
Oil and gas companies are taxed 46 per-
cent on income derived from the sale of hy-
drocarbons and derivative products.
There is no personal income tax in
Bahrain.
Employers and workers must pay social in-
surance contributions as follows:
(1) for old-age, disability and survivor protec-
tion: for Bahraini employees, employers pay
10% of salary plus constant allowances,
workers pay 5% plus constant allowances; for
non-Bahraini employees, employers pay 3%
of salary plus constant allowances (then be-
ing entitled only to employment injury bene-
fits).
(2) for unemployment insurance: since June
1, 2007, all wages are subject to a 2% tax,
paid for equally by the employer and the em-
ployee, applicable both to nationals and non-
citizens and supplemented by a government
contribution of 1%. This makes Bahrain the
scheme.
References
Notes
[1] CIA World Fact Book - Bahrain’s
Economy
Bibliography
• This article incorporates public domain
material from the CIA World
Factbook document "2006 edition".
• This article incorporates public domain
material from websites or documents of
the United States Department of
State (Background Notes).
• Kingdom of Bahrain, Ministry of Labour
Unemployment Insurance System.
Accessed November 6, 2007.
External links
• Daily Star (Beirut), 6 January 2006,
Bahrain’s ’honesty’ keeps its economy
freest in region
• Gulf News, 7 January 2006, Bahrain
ranked freest Arab economy
• Bahrain Economic Development at the
Open Directory Project

Retrieved from "http://en.wikipedia.org/wiki/Economy_of_Bahrain"

Categories: Economy of Bahrain, Economy of the Arab League, World Trade Organization
member economies

This page was last modified on 16 May 2009, at 15:53 (UTC). All text is available under the
terms of the GNU Free Documentation License. (See Copyrights for details.) Wikipedia® is a
registered trademark of the Wikimedia Foundation, Inc., a U.S. registered 501(c)(3) tax-
deductible nonprofit charity. Privacy policy About Wikipedia Disclaimers