How the growth of one country has always helped the other
Bahrain is a small, island nation in the Arabian Gulf. And it is not particularly blessed with natural resources, unlike its larger neighbours like Saudi Arabia and the UAE.
The kingdom had long depended on pearls and such from its surrounding seas for its wealth. In recent times, the dependence has been on oil. Not necessarily the oil from its own territory, but from sharing in the fortunes of its larger, more populous neighbours.
While the country does still have the bulk of its wealth come from oil, especially in terms of the funds accessible to the public sector, it has other diversified sources for its economic strength as well. It has invested heavily in the banking and tourism industries in recent years, with laws and regulations designed to promote the growth of these two strategically important sectors.
The country has tried to position itself as a financial centre of sorts for the middle east and especially GCC economies. And it has had some success in it, as evidenced by the steady growth in its GDP over the present decade.
Key to the continued efforts to diversify and strengthen the country’s economy is its strong international relations. Bahrain maintains strong ties with various nations and has often taken a moderate stance on political issues. It maintains especially strong connections with countries in the GCC, including UAE, Oman, Kuwait and especially, the Kingdom of Saudi Arabia.
Bahrain’s strong ties to KSA has always been a boon for the country, as wealth from the oil-rich regional powerhouse flowing into Bahrain through various means.
How have its ties with KSA helped Bahrain?
Bahrain’s wealth comes from a variety of different sources, the chief among them being petroleum. For the country’s increasingly diversified economy, there are many ways in which relations with Saudi are extremely important.
Tourism
Bahrain, with its liberal policies, have the advantage when it comes to attracting tourism in the ME, especially from other countries within the region. It also has the advantage of being a low-cost alternative to other expensive options in the region such as Dubai, UAE. With its significant investments made into tourism, the country has done well to attract travellers from all over the world.
The country with the highest number of visitors has consistently been Saudi Arabia, by far, in recent years. People from KSA have poured into the country for all that it has to offer, from luxury hotels, historic sites, entertainment facilities and sporting infrastructure.
With the arrival of people, comes significant funds from KSA that gets injected into the country, giving the economy further strength. While the arrival of tourists has slowed down in the past year due to the ongoing pandemic and travel and quarantine restrictions, it is expected to pick up the pace soon as vaccines become commonplace.
Essential products
Anyone who has lived in Bahrain will know the long line of trucks coming from Saudi Arabia to the country, through the King Fahad Causeway.
Trucks come into the country every single day, bringing essentials like milk and bread, produced in large quantities in the factories and farms in KSA. Bahrain’s residents, citizens and expatriates alike, have depended on these arrivals from Saudi for essential products for several years now.
For Bahrain, KSA acts as a reliable source that is necessary for the small island country. And for KSA, Bahrain presents an important market and one that is easily accessible thanks to their strong relations.
Refineries
While Bahrain does have its own oil deposits from which it produces petroleum, it relies even more on the refineries in the country. The BAPCO refinery in the country produces around 260,000 barrels of refined oil per day. However, the country’s oil production is limited and stabilized at only around 40,000 barrels per day. This does leave the question of where all this oil comes from. The answer is, of course, KSA.
A significant portion of the refinery production of BAPCO comes from oil that is pumped from Saudi Arabia. Crude oil that has been brought in from Aramco’s oil fields are then refined in Bahrain and later exported.
This presents a massive source of revenue for the Bahraini economy and one that would not be possible without the strong relations it has with the Kingdom of Saudi Arabia.
How will its ties with KSA help Bahrain’s economy in the future?
While oil revenues are significant, they cannot be expected to be perennial. The world and its needs are changing, and soon, oil will no longer be as powerful a resource as it is now. Both Bahrain and Saudi Arabia recognise this fact and have taken steps to strengthen their economies beyond petroleum. As Saudi Arabia grows and gains strength beyond what comes from oil, so does Bahrain.
Tourism
While KSA has, for the first time in its history, opened itself up for tourism, it doesn’t mean Bahrain has anything to worry about.
In fact, the increased efforts from KSA to place itself as a tourism destination is only going to have a positive impact on Bahrain. Saudi Arabia does have a lot to offer to tourists, like the canyons and deserts and wildlife that is not found anywhere else. However, there are things that it cannot offer, and Bahrain can.
At least a small portion of the international visitors to Saudi are bound to come to Bahrain as well, for the entertainment options that it can present. There is likely to be a domino effect that will carry over to visitors from different nations to either country, leading to strong growth in the industry for both.
Financial Center
Bahrain has a very strong financial sector, with significant investments made by the public and private sector into banking. It has done well to place itself as a financial centre for companies and investors in the ME.
With the increasing investment in Saudi Arabia by international companies and individuals, the financial institutions in Bahrain stand to benefit. Their strong ties present Bahrain as an attractive option ahead of the likes of the UAE and Qatar.
Service Industry
With the increasing growth of industries beyond oil in KSA, comes the need for service providers.
Consulting firms in the region have the lion’s share of their clientele coming in from Saudi Arabia these days. With the country’s focus on developing a diversified and industrial economy, comes the demand for the services offered by the numerous service companies that have based themselves in Bahrain.
As Saudi Arabia’s economy and businesses grow, so will the B2B service providers from Bahrain.
Both the countries have traditionally gathered much of their economic strength from oil and petroleum. However, with the rapidly changing world and oil demand expected to decline, they both need to diversify.
The good news is, both of them seem to understand this, judging from their recent decisions and policies. And when one country grows, the other is bound to grow with them.
If you want to learn more about how investing in Bahrain presents the perfect gateway into business in the ME, connect with us. We provide comprehensive services ranging from consulting, sponsoring and HR to trading of commodities and specialised equipment to businesses operating in and around Bahrain.