Bahrain's economy praised for diversity and sustainability

The Growing Beyond Oil report, produced by the Conference Board, a not-for-profit research organisation based in the US, highlighted the rapid rise of Bahrain's economy and demonstrated how the Kingdom had avoided many of the Gulf's general economic pitfalls to position itself at the vanguard of economic progress in the region.

The Conference Board confirmed Bahrain's economy to be by far the most diverse and sustainable in the GCC. Finance and manufacturing are among the largest sectors, with oil and gas production contributing less than 20% of GDP growth. This contrasts with other GCC countries which are heavily dependent on fossil fuel production. Bahrain's diversification into the high-productivity sectors of finance and manufacturing was lauded by the Conference Board, in contrast to other Gulf States' diversification into low-productivity areas such as construction.

The uniquely sustainable nature of Bahrain's economic growth surge was also highlighted in the report. The basis of Bahrain's economic growth is the dramatic increases in labour productivity. While other GCC members have achieved steady rates of growth, the report showed that this had occurred largely through rapid increases in the labour force - an unsustainable source of progress. Data revealed that capital has played a relatively minor role in Bahrain's success. This led the Conference Board to conclude that the Kingdom has "an unrealised potential for productivity growth without running into diminishing returns on capital investment."

These productivity increases reflect Bahrain's achievement of the highest rate of labour productivity in the GCC. Bahrain's dominance is largely the result of two factors. The first is the deregulation of the labour market and liberal economic reforms introduced in recent years which has created ideal conditions for foreign investment in the Gulf's strategic business hub. The second is Bahrain's highly educated labour force and its high rate of both male and female participation. These were key areas emphasised in the report as preconditions for future economic success for the GCC economies.

Shaikh Mohammed bin Isa Al-Khalifa, Chairman of the Economic Development Board commented:

"These findings show the strides Bahrain has made in economic diversification, education and labour market reform. Bahrain is proud of its record as a leading destination for business and finance and we will continue to forge a diverse, vibrant economy fully-equipped for the demands of the global economy in the 21st century."

The roots of Bahrain's success lie in its unique social and economic attributes within the region. Bahrain's economy is the most free and most diverse in the Middle East, according to the 2008 Index of Economic Freedom. It has also been rated the most socially liberal country in the Gulf by the Oxford Business Group and is a young Middle Eastern democracy.

Bahrain's strategic location within the Gulf, with rapid access to Qatar and Saudi Arabia, and strong trade links with booming South Asian economies, also make it a vital centre of world trade. It is distinctions such as these that make Bahrain a primary destination for foreign business, foreign investment and expatriates.