Bahrain: The U.S.’S part­ner in the GCC

The U.S.’S pri­vate sec­tor is a pri­or­ity for the eco­nom­i­cally in­vig­o­rated king­dom

Newsweek - - Bahrain -

His­tor­i­cally fa­mous as the trad­ing hub of the Mid­dle East, in 1932 the small­est coun­try in the Gulf Co­op­er­a­tion Coun­cil (GCC) re­gion be­came known as the first in the Ara­bian Gulf to dis­cover oil. More re­cently, the mod­ern and cos­mopoli­tan ar­chi­pel­ago has coped with in­creas­ing com­pe­ti­tion from other GCC states by en­hanc­ing its in­dus­trial ca­pa­bil­i­ties, keep­ing pace with global changes and de­vel­op­ments, and vig­or­ously tak­ing ad­van­tage of mar­ket op­por­tu­ni­ties.

This de­ci­sive at­ti­tude is at­trib­uted to Bahrain’s Prime Min­is­ter Prince Khal­ifa bin Sal­man Al Khal­ifa and has led to a sus­tained chain of ef­forts and sac­ri­fices be­ing made to achieve planned tar­gets and ex­plore fu­ture hori­zons. “Our com­pre­hen­sive ap­proach is based on pur­su­ing a de­vel­op­ment strat­egy that is aimed at di­ver­si­fy­ing in­come sources and build­ing an econ­omy ca­pa­ble of com­pet­ing glob­ally,” ex­plains Prince Al Khal­ifa. The suc­cess of this ap­proach has en­abled Bahrain to achieve high eco­nomic growth rates and be at the fore­front in many sec­tors, most ev­i­dently in the fi­nan­cial ser­vices sec­tor, with the king­dom now home to 325 fi­nan­cial and in­surance in­sti­tu­tions.

Bahrain’s real gross do­mes­tic prod­uct (GDP) in­creased by 3.9 per­cent over­all in 2017 and non-oil sec­tors grew by 5.0 per­cent, mak­ing it the fastest grow­ing econ­omy in the GCC re­gion. At the same time, for­eign in­vest­ment reached nearly $10 bil­lion, 95 per­cent of which is con­cen­trated in the fi­nan­cial sec­tor, and ma­jor projects worth $32 bil­lion have been es­tab­lished in in­dus­try, lo­gis­tics, in­fra­struc­ture, health care, ed­u­ca­tion and tourism. “Why is Bahrain grow­ing while no one else was? The an­swer is sim­ple: be­cause the gov­ern­ment of Bahrain is not a ma­jor player in the econ­omy,” says Mah­mood H. Al-kooheji, CEO of Mum­ta­lakat, Bahrain’s sov­er­eign wealth fund. Ac­cord­ing to him, the main dif­fer­ence is that the coun­try’s pri­vate sec­tor is vi­brant and ac­tive: “When oil prices went down, all of the sur­round­ing economies suf­fered. But 80 per­cent of Bahrain’s GDP is non-govern­men­tal and it is the pri­vate sec­tor that is car­ry­ing the coun­try for­ward.

U.s.-bahrain re­la­tions: 120 years of friend­ship

Much be­fore their GCC neigh­bors, states Prime Min­is­ter Prince Khal­ifa bin Sal­man Al Khal­ifa, Bahrain’s gov­ern­ment pushed hard for the pri­vate sec­tor through var­i­ous pri­va­ti­za­tion pro­grams. “It was also a pioneer in la­bor re­forms and we were able to se­cure a pos­i­tive com­mer­cial environment that led to it be­com­ing the first coun­try to sign a free trade agree­ment with the U.S. in 2006,” adds Al-kooheji. As a re­sult, the U.S. is now Bahrain’s se­cond-largest trad­ing part­ner, with 11 per­cent of its to­tal ex­ports go­ing to its West­ern ally and nearly 9 per­cent of its im­ports com­ing from there, giv­ing a shared trade value of over $2 bil­lion a year. Bahrain also shares the U.S.’S com­mit­ment to democ­racy, equal­ity and en­cour­ag­ing pop­u­lar par­tic­i­pa­tion. The coun­try holds reg­u­lar mu­nic­i­pal and par­lia­men­tary elec­tions ev­ery four years, and on 24 Septem­ber, the prime min­is­ter is­sued a de­cree an­nounc­ing that the next ones will take place si­mul­ta­ne­ously on 24 Novem­ber.

In 1995, Bahrain started act­ing as host to the U.S. Navy’s Fifth Fleet—an­other mile­stone in the 120 years of close friend­ship that Bahrain’s King Ha­mad bin Isa Al Khal­ifa hailed on meeting Pres­i­dent Don­ald Trump in 2017, not­ing that it was “based on a very good foun­da­tion of mu­tual un­der­stand­ing and strat­egy that we have worked on.” Bahrain’s prime min­is­ter is keen to en­sure that the king­dom’s ties with the U.S. re­main strong and to con­tinue boost­ing co­op­er­a­tion be­tween the two as long-term al­lies, while adding that a friendly re­la­tion­ship with the U.S. is im­por­tant not only for the king­dom but also for the wider re­gion: “The U.S. is a su­per­power that has po­lit­i­cal and eco­nomic weight, and plays a vi­tal role in main­tain­ing global se­cu­rity and sta­bil­ity.”

Bahrain’s gov­ern­ment has given Mum­ta­lakat a man­date to man­age, im­prove and en­hance the king­dom’s as­sets, and to fur­ther di­ver­sify its econ­omy into new ar­eas of in­ter­est. Within this, the U.S. mar­ket is a clear pri­or­ity, says Al-kooheji: “Four years ago, Mum­ta­lakat had zero in­vest­ments in the U.S. To­day, they com­prise 8.3 per­cent of our port­fo­lio. It is, and will con­tinue to be, a very promis­ing econ­omy.” As a sov­er­eign wealth fund, Mum­ta­lakat func­tions like any fi­nan­cial in­sti­tu­tion—it is run com­pletely com­mer­cially and all de­ci­sions are based on fi­nan­cial re­view. It is cur­rently in­vested in the U.S. ed­u­ca­tion, ser­vices and real es­tate sec­tors, and is par­tic­u­larly in­ter­ested in fur­ther in­vest­ing in health care, ed­u­ca­tion and re­new­able en­er­gies. “Com­mer­cially,” de­clares Al-kooheji, “all of these are vi­able.”

Ma­jor new oil and gas dis­cov­er­ies

Bahrain Prime Min­is­ter Prince Khal­ifa bin Sal­man Al Khal­ifa points to an­other fac­tor that could dra­mat­i­cally in­vig­o­rate the king­dom for many years to come and bol­ster its for­eign in­vest­ment—2018’s mas­sive off­shore discovery of an es­ti­mated 80 bil­lion bar­rels of oil and 10-20 tril­lion cu­bic feet nat­u­ral gas. Bahrain’s big­gest oil and gas find in decades is likely to at­tract sig­nif­i­cant pri­vate international in­vest­ment to the coun­try’s en­ergy sec­tor, which has pre­vi­ously been fairly closed to in­vestors. And the gov­ern­ment is do­ing all it can to help this by, for ex­am­ple, set­ting up a pri­vate eq­uity fund for en­ergy of $500 mil­lion to $1 bil­lion.

This sig­nif­i­cant discovery is set to have a sub­stan­tial im­pact on the king­dom’s eco­nomic and fis­cal strength, but the gov­ern­ment has no in­ten­tion of turn­ing away from its core strat­egy of di­ver­si­fi­ca­tion, through the ef­forts of Mum­ta­lakat, and main­tain­ing a busi­ness environment that en­ables the pri­vate sec­tor to con­tinue to be the en­gine of im­pres­sive eco­nomic growth.

U.S. Pres­i­dent Don­ald Trump and King Ha­mad bin Isa Al Khal­ifa

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