Bahrain: The U.S.’S partner in the GCC
The U.S.’S private sector is a priority for the economically invigorated kingdom
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