Despite having weathered the 2008 global economic crisis comparatively well, GCC economies, still heavily hydrocarbon-dependent, have showed signs of strain in recent months, as oil prices have slumped. Bahrain is perhaps rather more sensitive to regional economic pressures than some of its more oil-rich neighbours, as highlighted by the recent downgrades by ratings agencies.
Governments across the region are taking sensible steps to help address the challenges now faced. A two-pronged approach is observable in Bahrain and other GCC economies, as these states attempt to simultaneously increase government revenues (partly through reducing costs), as well as stimulate growth and accelerate economic diversification (thereby reducing dependency on hydrocarbon income).
Bahrain is implementing a programme of structural economic and fiscal reforms designed to strengthen long-term development and (ambitiously) achieve a balanced budget within three budgetary cycles. On the revenue-boosting side, one ratings agency noted recently: “The government is making headway in its consolidation plan, introducing price increases on fuel, accelerating fee increases on tobacco and alcohol, and cost-cutting at the ministry level.” A VAT roll-out across the GCC in 2018 has been much talked about, and in Bahrain, further rises in electricity and water rates are widely anticipated.
On the growth-stimulus and diversification side, H. E. Sheikh Mohammed Bin Essa Al Khalifa, Political and Economic Affairs Advisor to H. R. H. Prince Salman bin Hamad Al Khalifa, notes that Bahrain has “only 5% of the [oil & gas] resources on a per capita basis in comparison to the rest of the GCC,” and he says that in light of this, Bahrain has “achieved more with less.”
Sheikh Mohammed occupies the roles of Chairman and Acting Chief Executive of Tamkeen, a government-sponsored programme tasked with developing Bahrain’s private sector and positioning it as the key driver of economic development, which has assisted more than 130,000 Bahraini small and medium enterprises, micro-businesses and individuals since its establishment in 2006.
One of the aims of government-sponsored diversification is to position Bahrain as a regional tech hub, fostering private sector entrepreneurship in the technology sector.
Tamkeen aims to promote entrepreneurial culture as a viable career option, especially amongst Bahraini youth. A recent Ernst &Young survey found that 70% of young Bahrainis were interested in the idea of starting their own business; twice as much as anywhere else in the Gulf.
Through one Tamkeen initiative, in collaboration with the Bahrain Economic Development Board, C5 Accelerate (a London and Bahrain-based technology investment joint venture) and Amazon Web Services, Bahrain is now home to a US$100 million venture tech business “incubator” fund managed by C5. Although based in Bahrain, the fund is open to entrepreneurs from across the MENA region.
The GCC has a young population with significant spending power and keen interest in technology, creating a strong platform for tech investment. Bahrain has advanced information and communications technology (ICT) infrastructure, a comparatively mature and liberal ICT regulatory framework and one of the highest mobile and broadband penetration rates in the world, offering an ideal testing ground for new technologies and ideas.