Country name: The Kingdom of Bahrain
Population: 708,573; includes 235,108 non-nationals
Land Area: 711.85km²
Official Language: Arabic (official), English (commercial)
Currency: 1 Bahraini Dinar (BD) = 1000 fils
Main Cities: Manama (capital), Muharraq, Isa Town, Riffa, Hamad Town
Bahrain is an archipelago of 40 islands in the Arabian Gulf midway between the Qatar peninsula and Saudi Arabia. Bahrain is an Arabic word meaning "Two Seas", and refers to the fact that the islands that form the country contain two sources of water, sweet water springs and salty water in the surrounding seas; it also alludes to the south and north waters of the Gulf.
The Kingdom has a small but dynamic and prosperous economy with a significant financial sector. Bahrain, a founding member of the WTO and with over 372 financial institutions and representative offices, has successfully emerged as an international financial centre in the Middle East, a position further strengthened by the launch of the various development projects being undertaken in the Kingdom. In 2006 Bahrain’s GDP reached approximately 11.3%. The growth has been primarily in the non-oil sector and has not only resulted in Bahrain being voted as the freest economy in the Arab world but has also resulted in significant job creation, attracting a significant influx of expatriate workers. Furthermore, the Kingdom has been ranked as the number one country for the last 10 years in the human development index (HDI) by UNDP.
Bahrain’s prosperity is based on its vibrant non-oil sector which includes manufacturing and tourism as well as financial services.
Bahrain’s total land area is 711km² and consists of a series of islands, the largest of which is Bahrain Island, a distinctive pear-shaped land mass 48km long and 16km wide. Bahrain has been connected to Saudi Arabia by a 23km causeway since 1986.
Bahrain boasts one of the fastest growing economies in the Arab world, according to the United Nations Economic and Social Commission for Western Asia writing in January 2006. Underlining this, in October of the same year Moody's Investors' Service upgraded its listing of Bahrain from BAA1 to A3, with a positive outlook. A notable recent development is its free trade agreement with the US which came into effect on 1 August 2006. The 2006 Index of Economic Freedom published by the Heritage Foundation/Wall Street Journal evaluates Bahrain as possessing the freest economy in the Middle East. The same body ranks the Kingdom as the twenty-fifth freest economy in the world.
Bahrain has long been an oil-driven economy and operates one of the world’s first commercially exploited fields in the onshore Awali field where production first started in the 1930s. The kingdom's 130 million barrels of proven oil reserves are all located in this field.
The rise in oil and gas prices over the past few years came when Bahrain was witnessing a decline in crude production. Current production is around 37,000 barrels per day (bpd). A combination of high oil prices coupled with ongoing public and state-backed industrial and infrastructure projects has enabled Bahrain’s economy to grow significantly in the last few years. Growth is evident across the sectors and has spilled over into the real estate market, which has witnessed increased activity with numerous new projects in the residential, commercial, industrial, and tourist sectors.
After years of planning and extensive investment, Bahrain now enjoys the most highly sophisticated financial sector in the region and it continues to grow strongly, particularly in the area of Islamic finance. The Gulf-wide stock market downturn or correction that occurred in March 2006 was felt on the Bahrain Stock Exchange (BSE), but the impact was not as dramatic as experienced elsewhere. Overall, the market capitalisation of GCC bourses dropped some $442 billion in 2006. Bahrain, meanwhile, ended the year with a 0.99% advance.
Bahrain’s financial markets have shown great resilience, demonstrating the effectiveness of recent financial reforms. In July 2006, the Bahrain Monetary Agency (BMA), the central bank and regulatory authority, announced details of a new regulatory reform package, aimed at comprehensively grouping the rules on banking licensing into a single new code.
Bahrain is a key centre for Islamic finance in the Middle East. The first Islamic bank was established in 1979, when Bahrain Islamic Bank was licensed. Since then, the sector has grown considerably, satisfying a growing desire by customers to transact their financial activities in accordance with the Islamic shariah. According to the Central Bank of Bahrain there are currently 28 Islamic financial institutions licensed in Bahrain, including 5 full commercial banks, 16 investment banks and 3 offshore banking units.
The International Islamic Financial Market (IIFM) began operations in April 2002 and arose out of a cooperative agreement between the Islamic Development Bank, Bahrain Monetary Agency, the Central Bank of Indonesia, the Labuan Offshore Financial Services Authority (Malaysia), the Central Bank of Sudan and the Ministry of Finance of Brunei Darussalam. The main purpose of the IIFM is to provide a cooperative framework to ensure the continued growth of an Islamic financial market, based on shariah rules and principles, as a viable alternative to the conventional banking system.
At a conference in January 2007 the Governor of the Central Bank of Bahrain, Rasheed Al Maraj, called for the introduction of standardized regulatory and accounting frameworks to help take the growing Islamic finance industry to its next phase. He argued that the lack of standardization in accounting standards creates distortions and compromises transparency and market discipline.
Recent rises in oil and gas prices came when production of crude in Bahrain was declining. Current production stands at around 37,000 barrels per day (bpd) from an historic peak of 75,000 bpd some years ago. The kingdom's 130 million barrels of proven oil reserves all located in the onshore Awali field, one of the world's first commercially exploited fields which began production in the 1930s.
Bahrain is working to offset its historic fall in production by expanding upstream and downstream operations.
On the upstream side, the National Oil and Gas Authority of Bahrain has announced plans to invite international majors to explore six offshore blocks. Much of the recent exploration work has been off the southeastern coast around the Hawar Islands, an area only recently opened up following the resolution of Bahrain’s territorial rights claim in 2001.
Two blocks have since been awarded to Malaysia's Petronas and one more to ChevronTexaco. EnCana Corporation has also since entered the area, along with Thailand's PTT Exploration and Production Company.
In terms of downstream operations, Bahrain has long enjoyed an advantage over its neighbours in its possession of a key refinery which has enabled it to add value to its own oil production and to that of other countries which ship their output to Bahrain's Sitra refinery. Petroleum products accounted for around 75% of the country's total exports in 2005, compared to 61% in 2001.
Expanding this has therefore been a great priority, with a development program now coming to its conclusion. Abdul Mirza, the minister of state and chairman of the national oil and gas authority, in early October 2006 stated that development was on track and that he expected refining capacity to be boosted significantly this year. Currently, Sitra refines around 250,000 bpd.
Crude reaches the refinery by a 54km underwater pipeline from Saudi Arabia, as well as via routes from Bahrain's own wells. Saudi Arabia is a key partner for Bahrain in oil production, with the two sharing the Abu Safah offshore field. Output from this is sold on the international market by Saudi Aramco, with the revenue divided equally between them.
The refinery, run by the Bahrain Petroleum Company (BAPCO), has proved a great revenue earner. Retail sales stand at 7.4 million barrels with 4.3 million barrels of jet fuel sales. The company's principal export markets are: GCC 30%; Africa 30%; Japan and Asia 18%; other Arab nations 7% and Europe 6%.
Bahrain aims at boosting the value added element still further with the establishment of more associated petrochemicals facilities. Sitra also has a petrochemical complex run by Gulf Petrochemical Industries Company (GPIC), which uses Bahrain natural gas as feedstock to produce 400,000 tonnes per year (tpy) of ammonia, 600,000 tpy of urea and 400,000 tpy of methanol. Plans to boost naphtha production for use as feedstock are also under consideration.
There has been a general upward trend in industrial activity in the Kingdom in recent years with the basic chemical, plastic and metal industry absorbing about 90% of total industrial investments in the Kingdom.
Industry and Commerce Minister Hassan Fakhro has stated that a record 236 initial industrial licenses were issued in 2006, generating a potential windfall of investment and jobs. When put into effect, these projects are likely secure Bahrain investments of about $1.6 billion and create 8,323 local jobs. Bahrain has demonstrated some recent successes in industrial expansion, which has been praised by the UN Industrial Development Organisation (UNIDO).
In 2008, Bahrain is set to host the Gulf Industry Fair, the first exhibition aimed at providing members of the Gulf Cooperation Council (GCC) with a forum dedicated to the industrial sector.
The bedrock of Bahrain's industrial activities to date has been its downstream aluminium industry which makes up approximately 7-8% of GDP. Established in 1971, Aluminium Bahrain (Alba) has proved a success that has encouraged other industrial sectors to grow such as petrochemicals, gas processing, metal, food processing, paper production, manufacturing of wood products, and garment making. Overall, the industrial sector now makes up roughly 10.6% of GDP.
Bahrain’s well established aluminium industry is experiencing steady growth at present with increasing demand for the metal from the international markets. Aluminium Bahrain B.S.C (Alba), the Kingdom’s important aluminium company set up in 1971 to stimulate local industrial diversification, became the largest modern aluminium smelter in the world when it commissioned its newest reduction line, Line 5, in May 2005. Alba is now one of the centerpieces of Bahrain’s economy.
Alba was holding negotiations in February 2007 with several countries including Qatar and Saudi Arabia for the supply of either gas or electricity to power the proposed sixth potline expansion at its Hidd smelter complex.
Alba’s current aluminium production capacity is 830,000 tonnes a year (t/y) and its coke calcination capacity is 450,000 t/y.
Line 5, which was built as part of a $1.7 billion expansion project that includes the construction of a new power station, carbon, casthouse and other facilities, is the longest reduction line in the world and increases Alba's annual production capacity to more than 830,000 tonnes per annum. The line was commissioned in a world record breaking 77 days to smash the previous record for the fastest start-up of a reduction line by more than 180 days and earn Bahrain international praise and recognition. Along with the cluster of associated downstream industries, Alba generates some 7-8% of GDP.
Nowadays, as global demand rises at 4% a year and rising gas prices render some smelters in the US and Europe economically unviable, Alba’s prospects appear to be extremely positive. The company is also holding its own in the face of increases in smelting capacity elsewhere in the Gulf region. Alba's principal markets remain the Far East and Asia which constituted some 60% of sales in 2005.
A new independent water and power project (IWPP) is likely to be located in the east of the main island between Ras Abu Jarjur and Addur following a go-ahead given by the Bahrain government on 7 January 2007. To be built in several phases, the plant’s capacity could eventually reach 3,000-4,000 MW and 100 million gallons a day. A joint Ministry of Electricity & Water and the Finance Ministry committee will study details of the scheme. When completed, the IWPP will join existing private power projects, the Al-Ezzal independent power project and the brownfield Hidd IWPP.
Bahrain is investing extensively in real estate development and major construction work on residential, commercial, industrial and tourist resort projects are taking place throughout the Kingdom, many of which remarkably ambitious in scale and design. Only a few of the main projects can be listed here.
Education City
In January 2007, the Economic Development Board reached a memorandum of understanding with Kuwait Finance & Investment Company to create a Higher Education City in the Kingdom, at an estimated cost of $1,000 million. The proposed complex will include branches of international universities and aims to bridge the gap between state education and private sector skills needs. The scheme should be operational in four years.
Bahrain Financial Harbor
A $1.3 billion integrated master-planned development, the Bahrain Financial Harbor will be home to the entire value chain in the financial services sector. This landmark project has been designed to address every single need of the financial service sector.
Bahrain Bay
Bahrain Bay is a $1.5 billion development off the North East coast of Manama. It is to be a balance of commercial, residential and retail spaces, all set around the Manama waterfront where the Kingdom’s first Four Seasons hotel will be located.
Al Green Development
This $1 billion residential complex, seen as one of the most significant infrastructure projects in Bahrain today, has attracted a mix of regional and international investment.
On completion, Al Green will be home to up to 10,000 residents and will comprise luxury, mixed-use health, residential and family tourism facilities, spanning over an area of two million square meters. It will also include a $80 million specialized medical centre, which is said to be the first of its kind in the Middle East, with a five-star rehabilitation centre featuring 20 VIP suites and 100 beds that aim to offer the highest standards of service.
Bahrain World Trade Centre
The Bahrain World Trade Centre is a symbol of achievement and a reflection of momentum behind the region's fast growing economy. Its innovative design combines the essential elements of lifestyle and business to create a powerful emblem of aspiration and accomplishment. The centre is more than its landmark commercial towers, offering amenities such as an exceptional shopping and dining environment, a five-star hotel and sophisticated office accommodation.
Lulu Island
Lulu Island is a man-made island resort being built off the coast of Manama, in the Kingdom of Bahrain. The $1.25 billion freehold development project will cover an area of 564,000 m2 and be located close to the Pearl roundabout, along with being moments away from Abraj Al Lulu and the Bahrain Financial Harbour.
Quelle: Ghorfa, Arab-German Chamber of Commerce and Industry e.V.
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