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Economy of Bahrain

From Academic Kids

Bahrain has a mixed economy, with government control of many basic industries, including the important oil and aluminum industries. Between 1981 and 1993, Bahrain Government expenditures increased by 64%. During that same time, government revenues continued to be largely dependent on the oil industry and increased by only 4%. Bahrain has received significant budgetary support and project grants from Saudi Arabia, Kuwait, and the United Arab Emirates.

Privatization could help Bahrain's economy. However, as of the Spring 2001 the government of Bahrain still wholly owned the Bahrain Petroleum Company. Utilities, banks, financial services, and telecommunications have started to come under the control of the private sector.

The government has used its modest oil revenues to build an advanced infrastructure in transportation and telecommunications. Bahrain is a regional financial and business center. Regional tourism also is a significant source of income. Bahrain benefited from the region's economic boom in the late 1970s and 1980s. During that time, the government emphasized infrastructure development and other projects to improve the standard of living; health, education, housing, electricity, water, and roads all received attention.

Petroleum and natural gas, the only significant natural resources in Bahrain, dominate the economy and provide about 60% of budget revenues. Bahrain was the first Persian Gulf state to discover oil. Because of limited reserves, Bahrain has worked to diversify its economy over the past decade. Bahrain has stabilized its oil production at about 40,000 barrels (6,400 m³) per day, and reserves are expected to last 10 to 15 years. The Bahrain Oil Company refinery was built in 1935, has a capacity of about 250,000 barrels (40,000 m³) per day, and was the first in the Persian Gulf. After selling 60% of the refinery to the state-owned Bahrain National Oil Company in 1980, Caltex, a U.S. company, now owns 40%. Saudi Arabia provides most of the crude for refinery operation via pipeline. Bahrain also receives a large portion of the net output and revenues from Saudi Arabia's Abu Saafa offshore oilfield.

The Bahrain National Gas Company operates a gas liquefaction plant that utilizes gas piped directly from Bahrain's oilfields. Gas reserves should last about 50 years at present rates of consumption.

The Persian Gulf Petrochemical Industries Company is a joint venture of the petrochemical industries of Kuwait, the Saudi Basic Industries Corporation, and the Government of Bahrain. The plant, completed in 1985, produces ammonia and methanol for export.

Bahrain's other industries include Aluminum Bahrain, which operates an aluminum smelter--the largest in the world with an annual production of about 525,000 metric tons --and related factories, such as the Aluminum Extrusion Company and the Persian Gulf Aluminum Rolling Mill. Other plants include the Arab Iron and Steel Company's iron ore pelletizing plant (4 million tons annually) and a shipbuilding and repair yard.

Bahrain's development as a major financial center has been the most widely heralded aspect of its diversification effort. International financial institutions operate in Bahrain, both offshore and onshore, without impediments. In 2001, Bahrain's central bank issued 15 new licenses. More than 100 offshore banking units and representative offices are located in Bahrain, as well as 65 American firms. Bahrain's international airport is one of busiest in the Persian Gulf, serving 22 carriers. A modern, busy port offers direct and frequent cargo shipping connections to the U.S., Europe, and the Far East.

Economy - overview: In Bahrain, petroleum production and processing account for about 60% of export receipts, 60% of government revenues, and 30% of GDP. Economic conditions have fluctuated with the changing fortunes of oil since 1985, for example, during and following the Persian Gulf crisis of 1990-91. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Persian Gulf. A large share of exports consists of petroleum products made from imported crude. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of both oil and underground water resources are major long-term economic problems.

GDP: purchasing power parity - $8.6 billion (1999 est.) <p>GDP - real growth rate: 4% (1999 est.) <p>GDP - per capita: purchasing power parity - $13,700 (1999 est.) <p>GDP - composition by sector:
agriculture: 1%
industry: 46%
services: 53% (1996 est.) <p>Population below poverty line: NA% <p>Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA% <p>Inflation rate (consumer prices): 0.5% (1998 est.) <p>Labor force: 295,000 (1998 est.)
note: 44% of the population in the 15-64 age group is non-national (July 1998 est.) <p>Labor force - by occupation: industry, commerce, and service 79%, government 20%, agriculture 1% (1997 est.) <p>Unemployment rate: 15% (1998 est.) <p>Budget:
revenues: $1.5 billion
expenditures: $1.9 billion, including capital expenditures of $NA (1998) <p>Industries: petroleum processing and refining, aluminum smelting, offshore banking, ship repairing; tourism <p>Industrial production growth rate: 3.4% (1995) <p>Electricity - production: 4,770 GWh (1998) <p>Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998) <p>Electricity - consumption: 1,090 GWh (1999) <p>Electricity - exports: 0 kWh (1998) <p>Electricity - imports: 0 kWh (1998) <p>Agriculture - products: fruit, vegetables; poultry, dairy products; shrimp, fish <p>Exports: $3.3 billion (f.o.b., 1998) <p>Exports - commodities: petroleum and petroleum products 61%, aluminum 7% <p>Exports - partners: India 18%, Japan 11%, Saudi Arabia 8%, South Korea 7%, UAE 5% (1997) <p>Imports: $3.5 billion (f.o.b., 1998) <p>Imports - commodities: nonoil 59%, crude oil 41% <p>Imports - partners: Saudi Arabia 45%, United States 10%, United Kingdom 6%, Japan 5%, Germany 4% (1997) <p>Debt - external: $2 billion (1997) <p>Economic aid - recipient: $48.4 million (1995) <p>Currency: 1 Bahraini dinar (BD) = 1,000 fils <p>Exchange rates: Bahraini dinars (BD) per US$1 - 0.3760 (fixed rate) <p>Fiscal year: calendar year

Reference

Much of the material in this article comes from the CIA World Factbook 2000 and the 2003 U.S. Department of State website.

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