New report lauds Bahrain’s economic diversificaionAugust 20th, 2008 - 5:30 pm ICT by IANS
Dubai, Aug 20 (IANS) Gulf nation Bahrain’s economic diversification programme has come in for praise in a new, independent report.’The Growing Beyond Oil Report’, issued by American not-for-profit research organisation Conference Board, described Bahrain’s economy as exceptional within the Gulf region and destined for success.
The report highlighted the rapid rise of Bahrain’s economy and demonstrated how the country has avoided many of the Gulf’s general economic pitfalls to position itself at the vanguard of economic progress in the region, according to a statement issued by Bahrain’s Economic Development Board (EDB).
“These findings show the strides Bahrain has made in economic diversification, education and labour market reforms,” EDB chairman Shaikh Mohammed Bin Isa Al-Khalifa said in a statement.
“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,” he added, reacting to the report.
Describing Bahrain’s economy as by far the most diverse and sustainable in the Gulf Cooperation Council (GCC), the Conference Board said finance and manufacturing were among the largest sectors, with oil and gas production contributing less than 20 percent of GDP growth.
“This contrasts with other GCC countries which are heavily dependent on fossil fuel production,” the report said.
The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).
These countries are all focussing on diversifying their respective economies and move away from their sole dependence on oil and gas.
Bahrain’s diversification into the high-productivity sectors of finance and manufacturing was lauded by the Conference Board, in contrast to other Gulf countries’ diversification into low productivity areas such as construction.
According to the report, the basis of Bahrain’s economic growth is the dramatic increase in labour productivity.
While other GCC members have achieved steady rates of growth, the report said this had occurred largely through rapid increase in the labour force, which it described as “an unsustainable source of progress”.
“Capital has played a relatively minor role in Bahrain’s success,” the report said, adding that country has “an unrealised potential for productivity growth without running into diminishing returns on capital investment”.
The report attributed Bahrain’s high rate of labour productivity to several 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,” it said.
“The second is Bahrain’s highly educated labour force and its high rate of both male and female participation.”
According to the Conference Board, these are the key areas, which are preconditions for future economic success for the GCC economies.
According to the 2008 Index of Economic Freedom, Bahrain’s economy is the most free and most diverse in the Middle East.
It has also been rated the most socially liberal country in the Gulf by the Oxford Business Group and a young Middle Eastern democracy.
Bahrain also has a location advantage in the sense that it offers rapid access Qatar and Saudi Arabia.
Strong trade links with booming South Asian economies also make it a vital centre of world trade, the report said.
Founded in 1916, the US-based Conference Board is a non-profit global business organisation supported by business executives that holds conferences, convenes executives and conducts business management research.
It connects more than 1,600 corporations in nearly 60 nations.