Bahrain is one of the less developed economies of the region which has started with the decades old efforts to diversify its economy. Bahrain is different from its neighbors as its oil reserves are somewhat limited; therefore, the country’s economic plan has been to diversify.
Financial and Banking Sector
Bahrain has particularly grown its financial services and places itself as a financial hub within the region. It has also developed banking trappings and rules that have encouraged several Islamic sub- sectors and international banks to establish their operations in the country. Banking is one of Bahrain’s key strengths, and the country plans to build on that strength to sustain its development as a significant financial center in the region.
Tourism
Another one of the primary activities that help Bahrain diversify and reduce relying on oil is tourism. It has advertised itself as a tourist friendly country promoting culture and tourism attractions like historical, beach, luxury hotel, shopping, Formula one stations. Tourism has been on a constant rise in the Bahrain over the recent past due to effort put in developing this sub-sector by undertaking infrastructural development and marketing in order to entice more tourists.
Transport and Logistics
Bahrain is also improving transport and logistics infrastructure in a bid to promote employment as well as a trade corridor to the gulf. It has improved the capacities of port to increase the handling of cargo and airports to accommodate more planes. The government of Bahrain wants to develop an interconnected chain of industries involving manufacturing, finance, transport and logistics with solid economic network through operating on land, air and sea highways.
Small and Medium Enterprises
Assistance to SMEs fosters creation of more entrepreneurship and contributes to productive participation in economic activities other than oil-based ones. Bahrain offers them support, access to markets, training, and favorable policies to aid SMEs that are involved in production, ICT, health, education and others. Promoting the development of SMEs even more provides further insulation of the region from the public sector oil jobs.
Challenges
Nonetheless, Bahrain remains a case that has issues fulfilling the diversification of structure, even though the government has put efforts to bring this change. Exports of oil contributed more than 70 percent of the government’s income in 2022. As we know, international oil price fluctuations affect the country’s budget in the process. As diversification gathers momentum, Bahrain cannot afford to turn its back on sustainability problems associated with new industries such as pressures on raw materials to support growth in construction, tourism and retailing industries.
Being well connected by transport networks, Bahrain is in the process of becoming a logistics centre for regional supply of storage and transport services. The sector contributes more than 12% of the gross domestic product. Future prospects will be derived from investments in the major infrastructure redevelopment of the Khalifa bin Salman Port and new economic cities.
Find out the accomplishments, struggles, and the way forward
Bahrain has for the past two decades embarked on diversification of its economy and as a result the non-oil sectors of the economy have developed tremendously. But a dampened economy resulted from the world economic crisis in 2008, while low oil prices over the last few years hampered growth. It also emphasizes the question of youth unemployment.
Looking to the future, Bahrain will strive for faster diversification by persisting with reforms, absorbing Bahrainis into the private sector employment, establishing cooperation with other Gulf states and attracting foreign direct investment to selected sectors. If these initiatives succeeds the kingdom of Bahrain can start moving towards a new economy that is modern, prosperous and fully sustainable free from the volatility of oil prices in the future.
Interestingly, Bahrain presents an example of a GCC economy that is investing and diversifying deliberately banking, tourism, transport, SMEs and many others in order not to rely mostly on oil revenues. Continuation of other regulatory changes, infrastructure investment, and policies can help the country move to another phase after oil economy. However, strategic management is necessary in deciding how far that diversification should be done actually taking into consideration the natural resource base.