Bahrain's Economy: What Does This Country Produce?

Bahrain is a small country in the Persian Gulf with a mixed economy. Its main exports are mineral fuels, including oil, and aluminium. In fact, Bahrain was the first of the Persian Gulf states to discover oil, and it has since become an international banking centre. The country's other industries include ship repairing, tourism, and the processing of aluminium.

Oil and gas

Bahrain has turned to petroleum processing and refining to make the most of its limited oil reserves. The Bahrain Petroleum Company refinery, which was the first in the Persian Gulf, was built in 1935 and has a capacity of about 250,000 barrels per day. After selling 60% of the refinery to the Bahrain National Oil Company in 1980, the US company Caltex now owns 40%. Most of the crude oil used in the refinery comes via pipeline from Saudi Arabia, and Bahrain also receives a large portion of the net output and revenues from Saudi Arabia's Abu Saafa offshore oilfield. Petroleum production and refining account for more than 60% of Bahrain's export receipts, 70% of government revenues, and 11% of GDP.

Bahrain's other significant natural resource is natural gas. The Bahrain National Gas Company operates a gas liquefaction plant that uses gas piped directly from the country's oil fields. At current rates of consumption, gas reserves are expected to last about 50 years.

The Gulf Petrochemical Industries Company (GPIC) is a joint venture between the petrochemical industries of Kuwait, the Saudi Basic Industries Corporation, and the Government of Bahrain. The plant, completed in 1985, produces ammonia, methanol and urea for export.

Aluminium

The development of the aluminium industry in Bahrain has contributed to the country's economic growth and infrastructure development. The government has invested in advanced infrastructure in transportation, telecommunications, and other sectors. Additionally, Bahrain has a mixed economy, with government control over many basic industries, including aluminium. The country's aluminium industry is expected to continue playing a vital role in its economic landscape.

Banking

Bahrain's economy is heavily dependent on oil and gas, but it has also invested in the banking and tourism sectors. The country's capital, Manama, is home to many large financial institutions. Bahrain's finance industry is very successful, and the country was named the world's fastest-growing financial centre by the City of London's Global Financial Centres Index in 2008. Bahrain's banking and financial services sector, particularly Islamic banking, have benefited from the regional boom driven by demand for oil.

Bahrain's banking system consists of both conventional and Islamic banks and is the largest component of the financial system, accounting for over 85% of total financial assets. There are 31 retail banks, 62 wholesale banks, 17 branches of foreign banks, and 8 representative offices of banks in the country as of the end of September 2020. The banking sector has played a pivotal role in the emergence of Bahrain as a leading financial centre in the region. As of July 2020, banking sector assets stood at over $212 billion, more than five times the country's annual GDP.

Industry growth has been supported by an open-market economy, stable and prudent macroeconomic and fiscal policies, a credible regulatory framework in line with international standards, and a well-qualified local and expat workforce. All these factors have combined to cement Bahrain's position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish their presence in the country.

Bahrain has long been recognized as a global leader in Islamic finance, playing host to the largest concentration of Islamic financial institutions in the Middle East. Islamic financial institutions offer a host of Shari'ah-compliant products and services, including retail banks, wholesale banks, Islamic windows of conventional banks, Takaful companies, and Re-Takaful companies. In addition, Bahrain is at the forefront of issuing Islamic securities (Sukuk), including short-term government Sukuk and long-term instruments. The Central Bank has played a leading role in the introduction of these innovative products.

The growth of Islamic banking in Bahrain has been remarkable, with total assets increasing from $1.9 billion in 2000 to $32.7 billion as of July 2020, an increase of over 17 times. The market share of Islamic banks correspondingly increased from 1.8% of total banking assets in 2000 to 15.3% in July 2020. This growth was made possible by a variety of factors, most importantly the clear vision and approach of the Central Bank of Bahrain. The CBB introduced a separate regulatory framework along with a comprehensive prudential and reporting mechanism for the Islamic segment, tailor-made for the specific concepts and needs of Islamic banking and insurance.

Tourism

Bahrain's tourism sector has been a key part of its post-oil economy, with the country investing heavily in the industry since the late 20th century. In 2019, Bahrain received over 11 million visitors, with the majority coming from surrounding Arab states. However, an increasing number of tourists are coming from outside the region, attracted by the kingdom's heritage and its higher profile as a result of the Bahrain Grand Prix.

Bahrain has a lot to offer tourists, from its archaeological legacy to its modern culture and attractions. The country is home to several forts, including Qalat Al Bahrain, a UNESCO World Heritage Site. The Bahrain National Museum is the country's most popular attraction, showcasing artefacts from Bahrain's history dating back 5,000 years. The Beit Al Quran is another popular museum, housing Islamic artefacts and a rare collection of Qurans. Other historical sites include the Al Khamis Mosque, one of the oldest mosques in the region, the Arad Fort, the Barbar Temple from the Dilmunite period, and the A'ali Burial Mounds.

In addition to its historical attractions, Bahrain also offers a growing art and food scene, heavily influenced by the large expat population in Manama, the capital. The country also has a Formula 1 Grand Prix, which has raised its international profile.

Bahrain also offers a range of activities for tourists, such as birdwatching, scuba diving, and horse riding. Shopping is another popular activity, with many tourists visiting the malls and souqs in Manama. The country also has an underwater theme park, featuring a sunken Boeing 747, artificial coral reefs, and sculptures.

Bahrain's tourism sector is an important source of income for the country, and the government has implemented several initiatives to promote it, including the annual Spring of Culture festival and the development of new infrastructure projects.

Agriculture and fishing

Bahrain's agricultural sector is limited by its arid climate and lack of freshwater resources. The country receives little precipitation, with the average annual rainfall being 72 millimetres, usually confined to the winter months. There are no permanent rivers or streams on any of the islands. The winter rains tend to fall in brief, torrential bursts, flooding the shallow wadis that remain dry for the rest of the year and impeding transportation.

Despite the challenges posed by the country's arid climate, there is a fertile strip five kilometres wide along the northern coast where date, almond, fig, and pomegranate trees grow. Additionally, there are numerous natural springs in the northern part of Bahrain and on adjacent islands, which provide an important source of drinking water for the country.

In addition to agriculture, fishing has historically been a significant source of income for Bahrain. The country's strategic location in the Persian Gulf has made trade, fishing, shipbuilding, and pearling important economic activities. However, in recent years, the contribution of fishing to the country's economy has declined, with other industries such as petroleum and aluminium production taking precedence.

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