Bahrain’s economy ‘growing beyond oil’

MANAMA: Bahrain’s economy is exceptional within the Gulf region and destined for success, an independent report has revealed. The “Growing Beyond Oil” report, produced by the Conference Board, a not-for-profit research organization 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 board confirmed Bahrain’s economy to be by far the most diverse and sustainable in the Gulf Cooperation Council (GCC). Finance and manufacturing are among the largest sectors, with oil and gas production contributing less than 20 per cent of gross-domestic-product growth.

This contrasts with other GCC countries heavily dependent on fossil-fuel production. Bahrain’s diversification into the high-productivity sectors of finance and manufacturing was lauded by the 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 underscored in the report. The basis of Bahrain’s economic growth is the dramatic increases in labor productivity.

While other GCC members have achieved steady rates of growth, the report showed that this had occurred largely through rapid increases in the labor force, an unsustainable source of progress. Data revealed that capital has played a relatively minor role in Bahrain’s success. This led the board to conclude that the kingdom has “an unrealized potential for productivity growth without running into diminishing returns on capital investment.”

These productivity increases reflect Bahrain’s achievement of the highest rate of labor productivity in the GCC. Bahrain’s dominance is largely the result of two factors. The first is the deregulation of the labor market and liberal economic reforms introduced in recent years which have created ideal conditions for foreign investment in the Gulf’s strategic business hub.

The second is Bahrain’s highly educated labor force and its high rate of both male and female participation.