How a skilled workforce and robust private sector keep Bahrain ahead

Bahrain was also early in establishing further education. In 1927, it sent a university education mission abroad as eight students enrolled at the American University of Beirut. The subsequent development of its educational capabilities enabled the economic life of the country to develop.

A small population and a big proportion of expat labour

Bahrain's population is estimated at 1.5 million according to the World Bank, with native citizens making up 48% of the total and expatriates of other countries 52%.

Its citizens are active in a range of professions and trades, which contrasts with other Gulf nations where a welfare state culture makes people reluctant to work in some professions seen as basic or menial.

Employment is also less dependent on the public sector in Bahrain. Official statistics show the number of private sector workers reached 560,000 in 2022, compared with 57,000 in the public sector.

The expansion of private sector will help the government reduce unemployment among citizens, which is expected to decline to 4.4% this year, according to the International Monetary Fund.

Private sector first

Over the past two decades, there have been frequent calls for government job opportunities for young workers entering the labour market, but Bahrain has resisted them.

Limited oil revenues mean it does not have the luxury of providing a high proportion of government-funded, public sector jobs as is the case in Kuwait, Qatar and the United Arab Emirates.

Instead, Bahrain encourages investment and expansion of the private sector as a more effective way to creating jobs for its citizens.

International finance

During the 1980s, the Bahraini government saw the potential of the financial sector.

It encouraged the establishment of domestic banks and the opening of branches of international banks in the country, known as offshore banks, transforming the country into a free economic zone.

The capital Manama became for a time one of the primary financial centres in the region, an international conduit for funding various projects in many sectors in the region's countries. 

But it did not live up to the ambitions held for the projects, which wanted to emulate Beirut in the 1960s and the success of Hong Kong, Singapore, or even London or Jersey.

Limits came from the impact of a period of flux in the global economy, with regional and global financial crises. Geopolitics also took a toll, including the impact of the Iraq-Iran war, Iraq's invasion of Kuwait.

Nonetheless, Bahrain remains a successful financial centre. Data from the country's central bank shows 365 active financial institutions in the country, including 86 banks, both domestic and international.

The financial sector employs about 14,000 Bahraini and expatriate workers, including more than 7,000 in the banking sector. Total assets in the banking system exceeded $225bn.

Banks in Bahrain play a key role in the Gulf banking system. Manama has become an important centre for banking management and has been able to develop banking technologies and provide training opportunities for staff working in other Gulf banks.

Pandemic recovery

The Bahraini economy suffered from the effects of the Covid-19 pandemic in 2020 and 2021, but the country has begun to recover.

The World Bank estimates that the economy grew by 2.2% in 2021 after contracting by 5% in 2020. Bahrain's economy also recorded remarkable growth in 2022 amounting to 4.9%, according to data from the Information and E-Government Authority.

The non-oil economy played an active role with a growth rate of 6.2%.

Additionally, tourism has grown, with tourism revenues up 50% in 2022 to about $4bn, while visitor numbers rose about 20% to 9.9 million in the same year.

The sector has benefited from economic and social openness, attracting a greater number of specialised meetings and conferences and hosting sporting activities such as Formula One and football competitions.

Fourth industrial revolution

At the end of 2021, Bahrain launched the Industrial Sector Strategy 2022-2026, which focuses on increasing the contribution of the industrial sector to economic growth, increasing the exports of the national industrial sector, providing promising jobs for citizens in the industrial sector, and supporting the transformation of the sector toward the fourth industrial revolution.

It is also designed to promote moves to a carbon-neutral economy and improved environmental and social governance. There are policies to encourage investment in technological infrastructure and the digitisation of manufacturing, while boosting the efficiency of supply chains through the integration of Gulf industries.

These ambitions are clear signs that Bahraini government sources are right when they claim the country has rebounded from the Covid-19 crisis and has been able to benefit from political changes as it enhances security and social stability.

Oil has a role – and clear limits

Oil was discovered early in Bahrain, in 1935, and the industry remains as major part of the national economy. But it only accounts for about 0.2% of global production at under 198,000 barrels a day.

That means Manama's oil revenue is limited, making it all the more determined to improve the performance of other economic sectors.

Its long history of expertise in human development gives Bahrain a strategic alternative to oil and a potential advantage over other Gulf states. To keep it, it must now pay more attention to the latest technological developments and upskill its citizens to adapt to the changes and challenges in the labour market.

Social support for economic growth

Bahrain is culturally and socially well-placed to benefit from the changes underway in the global economy. Over the last decades it has demonstrated its respect for the value of work and has a labour pool skilled in modern science and technological techniques.

There is a strong civic tradition, underpinned by respect for life and family and social relations, as well as high standard of professionalism among the workforce. The status of Bahraini women, including their high level of education, means their participation in the labour market has been boosted.

While its high proportion of expatriate workers means the Bahraini economy requires continued support from other Gulf countries – alongside investment in vital sectors such as tourism, manufacturing, and logistics – the educated workers it produces are also active in neighbouring nations.

The Bahraini government, through its Economic Vision 2030, aspires to build a diversified and productive economy led by the private sector and to raise the standard of living.

These objectives are similar to those of other Gulf countries. But what distinguishes Bahrain is the determination that comes from the modest size of its oil industry, which has encouraged it to enhance the quality and professionalism of its labour force.