Future of Earth: You have been in the GCC region for more than a decade, working in strategic position and rubbing shoulder with the policy makers, industry and academia. How do see the position and importance of Bahrain’s economy with that of the entire Gulf region?
Dr. Mona: Bahrain is considered a vibrant high value and low-cost gateway to Gulf region and the combined economic volume of GCC countries is more than USD 1.6 trillion. The kingdom’s mature regulatory framework, low cost of doing business, and highly skilled national and expat workforce with 400 financial institutions make it a compelling business location for the Asset and Wealth Management industry.
The Kingdom of Bahrain presents a huge potential for the investments in the all vital sectors of the economy. Bahrain is the Gulf region’s freest market and offers the most liberal business environment with the best market access to the growing Gulf economies.
Future of Earth: Global predictions see the GCC economy playing a very important role in the world economy in the near future. What is your comment viewing this both from a bird’s eye view as well as from someone who can see this up-close?
Dr. Mona: The growth has focused world attention on the GCC economies—not only as exporters of oil and gas, but as investment destinations with major infrastructure projects, booming tourism and financial services sectors. As US economic growth has slowed, GCC investors have begun to diversify their assets more widely, making investments in Asia, Africa and within the Gulf region itself. Developing economies in Asia are intensifying their trade links with the Gulf and some of the world’s poorest countries have become increasingly dependent on remittances from the millions of foreign workers transforming the skylines of Gulf cities. In my opinion, GCC will become an important investment partner in emerging economies.
Further, in order to strengthen food security, GCC countries are exploring wide-ranging purchases of agricultural land in regions such as Africa, Central Asia and Southeast Asia, These investment could boost agricultural production and employment in poor countries.
Future of Earth: Bahrain’s economy is closely linked to the fluctuation in global crude oil prices as the rest of the region. However, its impact is much narrower compared to other Gulf countries due to the relatively diverse nature of the Bahraini economy. Can you elaborate on the diverse nature of Bahrain’s economy that has insulated it to a large extent from fluctuations of the oil prices?
Dr. Mona: Bahrain’s economy is closely linked to the fluctuation in global crude oil prices as the rest of the region. However, its impact is much narrower compared to other Gulf countries due to the relatively diverse nature of the Bahraini economy. Bahrain has one of the most diversified economies in the Gulf, with strong Banking and Tourism sectors. The share of oil sector in GDP has fallen from 43.6% in Year 2000 to 17.8% in Year 2018.
At an early stage the kingdom sought to diversify its economy and established itself as a leading regional financial Centre in the 1970s and 1980s. During Lebanon’s civil war, it was Bahrain’s well-established regulatory system that encouraged various banks seeking safety and stability to move and set up base in Bahrain.
Moreover, Bahrain has led the region in economic diversification and differs from its neighbours by setting up Bapco and exporting refined petroleum products rather than crude oil; also, Alba is known for its technological strength and high-quality aluminum and is one of the largest smelter in the world. The Kingdom is also making substantial investments in its ICT infrastructure and ecosystem in a bid to make digitization and creative tech-based entrepreneurship key drivers of economic activity. Probably, all these initiatives have led to a lesser impact of Bahrain from fluctuations of the oil prices.
Future of Earth: Bahrain’s financial sector plays a preeminent role among Gulf countries and contributes significantly to local economy. How far is this true? Could you please elaborate on the same?
Dr. Mona: Bahrain’s financial sector is well-developed and diversified, consisting of a wide range of conventional and Islamic financial institutions including retail and wholesale banks, specialized banks, insurance companies, finance companies, investment advisors, money changers, insurance brokers and securities brokers. The sector is well-positioned to offer a wide range of financial products and services, making it the leading financial center in the Gulf region. The financial sector, regulated by Central Bank of Bahrain, is the largest single employer in Bahrain, with Bahrainis representing over 65% of the workforce and is one of the key drivers of growth in the country.
I think, the banking sector has played a pivotal role in the emergence of Bahrain as a leading financial center in the region. Industry growth has been supported by an open market economy; stable and prudent fiscal policies, credible regulatory framework in line with international standards and a notably strong and well qualified workforce. All these factors have combined to cement Bahrain’s position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish a physical presence in the country.
Future of Earth: The island kingdom introduced a comprehensive VAT law that entered into force in January 2019, following other GCC members that introduced VAT earlier in 2018. New excise taxes were expected to have brought down the overall deficit. How do you envisage such measures will help Bahrain economy?
Dr. Mona: Kingdom of Bahrain’s move to introduce a 5% value-added tax will definitely boost the kingdom’s non-oil revenues and stabilize the public debt burden. This will help in raising the funds and ease the economy’s dependence on oil by finding alternative sources of revenue to bring down the budgetary deficit. Fundamentally, the implementation of VAT does point to an important policy shift towards leaning more on non-oil revenue, which would be positive for long-term fiscal stability.
Future of Earth: Bahrain has a large population of expat workers as well as local skilled workers. How do you forsee the labour market in the future?
Dr. Mona: As of now there is a significant presence of expat workers in the Kingdom of Bahrain from countries like India, Pakistan, Bangladesh, Philippines. But the government has realized the importance of strengthening the local work force to provide meaningful employment and contributing effectively to the economy.
Tamkeen is one such body that is supporting Bahranisation by providing employability skills to prepare work ready employees and enhancing the capabilities of the existing workforce of local Bahrainis through its diverse schemes. The Economic Development Board is also supporting these initiatives. This will lead to an increase in local workforce in financial sector, education, tourism, hospitality, IT and health to name a few. In my opinion looking at the volume of work force needed in diverse sectors, expat workers will continue to be a sizeable part of the work force in Bahrain, but the proportion of the local work force is bound to grow.
Future of Earth: Bahrain economy also faces certain pertinent challenges. What are these challenges according to you and how do you think Bahrain can deal with them?
Dr. Mona: All economies across the world are facing challenges like lack of economic opportunities, energy and environmental security, climate change etc. on similar lines Bahrain is facing challenges like rising inflation, sluggish growth in non-oil economy, limited prospects for oil sector growth etc. But the initiatives taken by the Government at various levels are translating these limitations into opportunities.
ABOUT DR. MONA SURI
Dr Mona Suri, Associate Professor, is the Academic Vice President at Royal University for Women (RUW), PFHEA, Higher Education Academy, UK, with a teaching experience of more than 31 years in India and Bahrain. Dr Mona has been teaching both at undergraduate and Post graduate level. She completed her studies in Fabric and Apparel Science from Delhi University, India. She has been actively involved in research and teaching and has successfully supervised six PhD and 45 Master’s students. She has many publications, presentations and awards to her credit. She has been part of many National Projects in Kingdom of Bahrain and India, including projects with the Supreme Council for Women and BAPCO in Bahrain and Ministry of Textiles in India. She has been actively involved in the Quality enhancement initiatives and raising the academic standards at RUW.