The Ambassadors REVIEW
Bahrain’s Economic Triad: Liberalization, Growth and Stability
J. Adam Ereli
United States Ambassador to Bahrain
he Kingdom of Bahrain is unique. A tiny archipelago only 250 square miles
in area, Bahrain has slightly over one million residents, almost half of whom
are foreigners. Located along historical trade routes moving goods from east
to west, Bahrain has been inhabited by traders for thousands of years. This has resulted in
one of the most open societies in the region—both culturally and economically. Openness
is not only a hallmark of Bahrain’s past, but is the key to the country’s strategic plans for
the future as well.
Economically, Bahrain stands in stark contrast to its oil-exporting neighbors in the
Arabian Gulf. Although it sits only 20 miles off the east coast of Saudi Arabia and the
world’s largest oil reserve, Bahrain’s only oil field produces less than 35,000 barrels of oil
per day. Located west of the world’s largest natural gas field, which Qatar and Iran share,
Bahrain also has relatively little natural gas.
As a result of its small size and meager natural resources, one would expect that
Bahrain would not be a major contender in the world economy. However, this is not the
case. For many years the Bahraini leadership has made a concerted effort to modernize,
liberalize, and diversify its economy, while simultaneously investing in its most important
resource—its people. As a result of these efforts, Bahrain has not only created a modern,
service-based economy and established itself as the financial capital of the region, but
positioned itself well to weather the economic storm that is buffeting the world.
Economic Liberalization Leads to Investment
The Government of Bahrain has substantially liberalized Bahrain’s economy over
the past decade, passing laws allowing foreign property ownership, establishment of
foreign companies without a local partner, reducing or eliminating taxes and tariffs, and
divesting government ownership and control in key industries. The government has also
tightened its anti-money laundering laws and enhanced the Central Bank’s oversight and
regulation of financial institutions. Following the creation of a Supreme Privatization
Council in the spring of 2001, King Hamad bin Isa Al-Khalifa also issued a decree in
October 2002 that outlined a strategy for privatizing numerous sectors including tourism,
telecommunications, transportation, electricity and water, ports and airport services, oil and
gas, and postal services.
Consider telecommunications, which was the first key sector to be liberalized.