Bahrain

KEY FACTS Official name: Al Mamlakah al Bahrayn (Kingdom of Bahrain) Head of State: King Hamad bin Isa al Khalifa (ruler since Mar 1999; King since 14 Feb 2002) Head of government: Prime Minister Sheikh Khalifa bin Sulman al Khalifa Area: 676 square km (35 islands) Population: 699,400 (2004) Capital: Manama Official language: Arabic Currency: Bahraini dinar (BD) = 1,000 fils Exchange rate: BD0.38 per US$ (fixed) GDP per capita: US$10,096 (2003) GDP real growth: 4.00% (2003) Labour force: 300,000 (2003) Unemployment: 15.00% (2003) Inflation: 0.40% (2003) Balance of trade: US$1.60 billion (2003) Foreign debt: US$3.70 billion (2003)

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ince his accession to the throne in 1999, King Hamad bin Isa al Khalifa has instituted a process of political liberalisation, including establishing a bicameral parliament with an elected lower house and an appointed upper house. He has also instituted a nominally independent judiciary, dismantled the state security laws and security courts, encouraged exiled opposition figures to return and permitted the formation of trade unions. However, the process has been tightly controlled to ensure that the ruling family and its close associates maintain control of both political and economic power.

Bahrain is likely to remain vulnerable to political unrest – the King has not yet addressed the root causes of social tension: chronic unemployment and falling living standards. Tensions in Bahrain will continue to be affected by the uncertain regional situation, such as the aftermath of the 2003 Iraq War and relations with an increasingly unstable Saudi Arabia and also Iran, which for decades laid claim to Bahrain.

Elections The first municipal elections were successfully held in the first half of 2002. Just 111

Nations of the World: A Political, Economic and Business Handbook over 50 per cent of the electorate voted in the two rounds of the elections, which returned conservative Islamists to all the seats up for election. Although Shi’a Muslims account for around 70 per cent of the population, they gained control of less than half the seats, because of a distorted allocation of electoral districts. The same process was applied to the national elections, which were held in October 2002, with constituencies ranging from a low 500 voters in Sunni areas to 12,000 in Shi’a wards. As a result, the national elections were boycotted by a number of political societies (political parties remain banned), including the main Shi’a political group, the Al Wefaq (Islamic National Accord) society, the leftist National Democratic Action society and the pan-Arab Nationalist Democratic Rally. The societies were also protesting against the 2002 constitution which gives the appointed upper house greater powers than the elected lower house. Turnout in the national elections was 53.2 per cent of registered voters, slightly up from the 51.3 per cent turnout in the municipal elections. However, the figure disguised considerable differences between the constituencies, with estimates as low as 20 per cent in some of the Shi’a areas. In addition, voters had their passports stamped, sparking fears that failure to vote could lead to problems in the future when dealing with the state bureaucracy. Although the outcome of the elections is not clear cut because of the lack of political parties, the lower house is dominated by Islamists and conservatives. However, if a split does occur it will be between Sunni and Shi’a, particularly over social

issues. The dominance of conservative Islamists could result in the new legislature obstructing further political and economic changes, as happens in Kuwait. In mid-February 2003, the chamber voted against approving the issue of a US$500 million eurobond on the grounds that it was un-Islamic because the loan pays interest. In addition, the funds were to be used to fund ventures involving alcohol.

Tensions Although the reforms will need several years to take effect, they should make a major contribution in reducing tension in the country and undermining the opposition to the government, which has dominated the political environment from the mid-1990s to the end of the decade. The tensions generated in Iraq and Israel tend to spill over into domestic politics, fomenting regular demonstrations. The societies which originally boycotted the election have, however, agreed not to resort to violence to achieve their ends, but to work with the government through a process of dialogue. Although tensions have been held in check, there were some incidents in the first half of 2003 which indicate that the political reform process still has some way to go.

External relations By 2010, Bahrain will see its economy aligned more closely with the other GCC countries of Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). A customs union between the GCC countries was introduced in 2003, with duties on goods imported into GCC countries fixed at a harmonised rate of 5

KEY INDICATORS Population

Bahrain

Unit

1999

2000

2001

2002

2003

m

0.61

0.63

0.65

0.66

0.68

Gross domestic product (GDP) US$bn GDP per capita

US$

6.60

7.80

7.90

8.40

6.87

9,880

10,600

11,141

12,700

10,096 4.0

GDP real growth

%

4.0

5.3

5.0

4.1

Inflation

%

-1.3

-0.7

0.5

-1.0

0.4

bn cu m

8.4

8.6

8.9

9.2

9.6

Exports (fob) (goods)

US$m

4,140.4

5,700.5

5,386.0

5,790.0

5,800.0

Imports (fob) (goods)

US$m

3,468.4

4,373.4

4,418.0

4,990.0

4,200.0

Balance of trade

US$m

672.1

1,327.1

968.0

800.0

1,600.0

Current account

US$m

-340.4

112.8

-240.0

-125.0

– 1,800.0

Natural gas output

Total reserves minus gold

US$m

1,369.0

1,564.1

1,684.0

1,726.0

Foreign exchange

US$m

1,283.4

1,478.3

1,598.5

1,631.0

–

per US$

0.38

0.38

0.38

0.38

0.38

Exchange rate

112

per cent. No duties are applied to imports from other GCC states. A single currency pegged to the US dollar is to be introduced within the GCC countries in 2010. There are also plans to introduce EU-style economic convergence criteria in the run-up to the single currency. In the international sphere, the King has maintained a fine balance in relation to the US, which bases its Fifth Fleet on the island and provides a regional security umbrella for Bahrain and the other GCC states. Bahrain has been awarded the informal status of ‘major non-Nato ally’ of the United States, placing Bahrain among a very small group of nations which enjoy this status, including Jordan and Egypt. This award is testament to Bahrain’s long-standing political, military, economic and cultural relationship with the United States. The government has openly supported the US’s war on terrorism, covertly assisting the US in the 2003 Iraq War, while openly criticising US policy in the region, particularly in relation to Israel. However, anti-US sentiment on the street will increase unless a political solution in Iraq, which includes a complete US withdrawal, is found to satisfy ordinary Bahrainis.

Oil still counts Bahrain’s 125 million barrels of proven oil reserves are located in the onshore Awali field, the first oil field to be developed in the Gulf. Discovered in 1932, Awali’s crude oil production peaked at more than 75,000 barrels per day (bpd) in the 1970s, but has declined since then. Bahrain also has potential oil reserves offshore in the Gulf of Bahrain. These areas became available for exploration and potential exploitation following the International Court of Justice’s March 2001 resolution of a territorial dispute between Bahrain and Qatar over the Hawar Islands located between the two countries. The court awarded sovereignty over the islands to Bahrain, allowing Qatar to retain the neighbouring islands of Zubarah and Janan. Bahrain has since awarded two blocks off the country’s south-eastern coast to Petronas of Malaysia and another block to ChevronTexaco. Both companies have since begun to explore their concessions. The Calgary-based EnCana Corporation has also become involved in offshore exploration. Bahrain receives oil via submarine pipeline from Saudi Arabia. Some of this oil comes from the Abu Saafa offshore field, which lies in Saudi Arabian waters. All the field’s 140,000bpd of production is

Bahrain donated to Bahrain. The Saudi petroleum company Aramco has undertaken development work aimed at increasing Abu Saafa’s production capacity to as much as 300,000bpd in 2004. The remainder of the oil that Bahrain receives from Saudi Arabia comes from the oil fields around Dammam. Unlike the Abu Saafa oil which it receives as a gift, Bahrain purchases the Dammam oil, albeit at a discounted rate. Unlike other Gulf states, Bahrain exports refined petroleum products rather than crude. The country’s only refinery, Sitra, is located south of Manama and has a current capacity of 248,900bpd. Bahrain exports most of the Sitra refinery’s products to India and the Far East. The Sitra refinery was built in 1936 and has been modernised several times. The Bahrain Petroleum Company (Bapco) is pursuing a US$600–US$900 million modernisation programme, which will increase overall capacity. It will also introduce hydrocracking facilities to allow production of 40,000bpd of low sulphur diesel. This project is due to be completed during 2004. In 2002, the government authorised Bapco to initiate a study of the feasibility of building a US$1.5 billion petrochemical complex at Sitra. Consolidation of Bahrain’s state-owned petroleum sector began in 2000, when the upstream Bahrain National Oil Company (Banoco) began merging into Bapco. The merger was completed in 2002. The new entity, the Bahrain Petroleum Company BSC, is charged with the exploration, production, refining, marketing and distribution of Bahraini oil for domestic use and the international market.

Economy Due in large measure to its liberal environment, Bahrain has evolved into a regional financial centre. The business centre of Manama, the capital city of Bahrain, is home to leading international financial and commercial institutions, including Salomon Smith Barney, HSBC, Coca-Cola, IBM, UPS and Ericsson., Citicorp, American Express, Nomura Investment Banking, Arab Banking Corporation, Gulf International Bank, DHL and Investcorp. The presence of such corporations in Bahrain is testament to its liberal and transparent economy and cosmopolitan living environment. Bahrain was a founder member of the World Trade Organisation (WTO) and has been consistently ranked among the top most economically free countries in the world over the past eight years, by the Heritage Foundation and the Wall Street

Journal. Bahrain has also been rated as the freest economy in the Middle East and the Arab world. Economic performance in 2003 was steady, with real GDP growth of 4.0 per cent, down on the 4.1 per cent recorded in 2002. Some observers forecast GDP growth of 5.4 in 2004. Increased foreign reserves US$1.76 billion at the end of 2003, a positive trade balance of US$1.6 billion and inflation of only 0.4 per cent all point to continued growth. Short term interest rates were 1.1 per cent. Although Bahrain faces increasing competition from Dubai in the financial services sector, which accounts for over 20 per cent of GDP, it has the advantage of history and a well-regulated environment. In addition, the authorities are responding by promoting the fast growing Islamic finance sector. Much of the diversification relies on oil revenues; most of the funds passing through the banking system are oil-derived. Privatisation has been limited, primarily due to the entrenched interests of an economic elite unwilling to relinquish its role in the economy. However, the process was boosted in 2002, when the government issued a decree, permitting gradual privatisation in the tourist and communications sector, transport, electricity and water, the ports and airport services, the oil and gas sector and the postal service. The government has already initiated the process for liberalising the telecommunications sector. Bahrain has adopted an overall strategy of creating an open economy. Inward investment plays an important role in this strategy, bringing in new expertise, knowledge and funding. Bahrain was the first country in the Gulf to exploit its oil commercially in the early 1930s. It was also the first to develop non-oil industries. In the twenty-first century, Bahrain now has a number of well-established, non-oil dependent industries, as well as the infrastructure needed to sustain them. The selection of Bahrain as the regional base for so many major international companies underlines the attractive investment climate that Bahrain has created. As well as duty-free access to the larger GCC market. Bahrain’s inward investment regulatory and promotional activities are undertaken by its Economic Development Board (EDB). The EDB is responsible for formulating and overseeing Bahrain’s economic development strategy. The EDB’s principal objective is to attract foreign direct investment (FDI) to Bahrain and has

identified six main economic sectors which capitalise on Bahrain’s competitive advantages and present significant investment opportunities. These sectors include information technology and telecommunications, education and training services, tourism healthcare services, downstream activities and financial services.

Outlook Unemployment cuts across all levels of the population, including university graduates, many of whom have been educated in the West. These graduates have been at the forefront of a series of peaceful demonstrations held throughout 2002 and 2003. While these protests do not immediately threaten political stability, they place greater pressure on the government not only to speed up ‘Bahrainisation’ but also to implement further economic liberalisation. Furthermore, among the young (who make up the majority of the labour force), the unemployment rate is estimated to be as high as 25 per cent. Political tensions remain latent but a breakdown of the political liberalisation process could see a return to the violence of the 1990s. These tensions will continue to be affected by the uncertain regional situation. The long term success of the economy will depend on the ability of the government to overcome entrenched interests and adopt an economic programme of liberalisation and diversification.

Risk assessment Economic Political Regional stability Stock market

Good, improving Good, stable Poor Underdeveloped

COUNTRY PROFILE Historical profile Bahrain became a British protectorate in the nineteenth century; government was split between the ruling Sheikh (Bahrain was a traditional monarchy) and the British. 1928 Iran claimed ownership of Bahrain; the dispute was not resolved until 1970 when Iran accepted a UN report stating that the vast majority of Bahrainis wanted to retain their complete independence. 1942–61 Sheikh Sulman bin Hamad al Khalifa ruled Bahrain. He was succeeded by Sheikh Isa bin Sulman al Khalifa. 1968 Britain announced its intention to withdraw from the Gulf by 1971. The British plan was to form a single state consisting of Bahrain, Qatar and the Trucial States, but this idea never found good political ground.

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Nations of the World: A Political, Economic and Business Handbook 1971 Bahrain and Qatar became independent states. 1973 The constitution was promulgated. 1974 Legislative elections were held to elect a 30-member National Assembly. 1975 The National Assembly refused to ratify a bill to arrest and detain people for up to three years without trial, and was dissolved by the ruler, Sheikh Isa. The government subsequently ruled by decree. 1981 Bahrain was one of the six founder members of the Gulf Co-operation Council (GCC). 1990 Bahrain actively supported the allied forces against Iraq in the Gulf military conflict. 1999 Sheikh Isa bin Sulman al Khalifa died and was succeeded by his son, Sheikh Hamad bin Isa al Khalifa. 2001 Women were able to vote for the first time during a two-day referendum on constitutional reform. The reforms were approved by more than 98 per cent of the electorate. 2002 The state was declared a constitutional monarchy. As part of the reforms, legislation was approved to allow women to stand for office. In the legislative elections (the first since 7 December 1973), parliament was split between Islamists and secular and independent representatives. The elections were boycotted by the influential Shi’ite Al Wefaq (National Accord society) and also by three political societies belonging to the traditional opposition. 2003 The King approved a two-year budget in June. 2004 In July, Bahrain became the first fully liberalised telecommunications market in the Gulf. Political structure Constitution The constitution was promulgated in 1973. In 1975, the ruler, Sheikh Isa, dissolved the unicameral National Assembly a year after it was elected, when it refused to ratify a government-sponsored bill to arrest and detain people for up to three years without trial. The Majlis as Shura, an unelected consultative council with no legislative or executive powers, was formed in 1992 and expanded in 1996, comprising 40 appointed members. The government ruled by decree, through a cabinet. Municipal officials were appointed by the ruler. The 14/15 February 2001 referendum calling for a monarchy and an elected legislature won 98.4 per cent of the popular vote, and on 14 February 2002, the state was declared a constitutional monarchy and the ruler was proclaimed King. Form of state Constitutional monarchy from 2002

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The executive The prime minister makes all appointments to the cabinet. All other government positions are filled by the relevant ministries. National legislature The King announced in February 2002 that there will be a bicameral legislature, one chamber to be elected by the people from October 2002 and another chamber – a consultative council of experts – to be appointed by the government. The elected chamber will be responsible for watching over the government. Both chambers will have equal power with regard to legislation. As part of the reforms, courts have been granted the power of Judicial Review. Courts have the power to overrule laws if they are deemed to be unconstitutional. Women can also run for political posts. Legal system Based on constitution of 1973 and Sharia (Islamic law). Last elections 24 /31 October 2002 (parliamentary) (the first since 7 December 1973, after which, in 1975, the National Assembly was dissolved) Results: Parliamentary: the 40-seat parliament was split between Islamists and secular and independent representatives; turnout was 51.3 per cent Next elections 2006 Political parties Political parties are not permitted, however, independently sitting MPs may be members of political societies.

the general, the technical or the commercial. The government is seeking to establish Bahrain as a regional centre for human resource development. In addition to several universities, there are a number of training centres, such as the Bahrain Training Institute (BTI) and the Bahrain Institute of Training and Finance (BITF) that are designed to prepare local graduates for the modern, technology driven workforce. There are 188 government-owned and 42 private schools. Literacy rate: 91 per cent and 82.6 per cent for males and females respectively (World Bank). Compulsory years: 6 to 15. Enrolment rate: Boys 105 per cent, girls 106 per cent total primary school enrolment of the relevant age group (including repetition rates) (World Bank). Health Health services in Bahrain are of a high quality and all Bahrainis receive free health care from the state. There are a mixture of government and private hospitals, with additional government health centres and maternity hospitals. Life expectancy: 73.3 years (World Bank) Infant mortality rate: 13 per 1,000 live births (World Bank). Fertility rate/Maternal mortality rate: 2.3 births per woman (World Bank) Head of population per physician/ bed: 1 physician and 2.9 beds per 1,000 people

Population 699,400 (2004) Ethnic make-up Bahrain’s inhabitants are mostly Arab, with a sizeable minority of Iranian descent. Approximately 63 per cent of the population are Bahrainis, 13 per cent are from the Indian subcontinent, 10 per cent non-Bahraini Arabs and 8 per cent Iranians. Religions According to the constitution, Islam is the state religion. The majority of the population are Muslims (85 per cent), 70 per cent of whom are Shia and 30 per cent Sunni. Half of the Shia population is under 15 years of age. The remaining 15 per cent of the population are indigenous Christian, Jewish, Hindu and Parsee minorities.

Welfare The government provides direct financial assistance to those considered needy in addition to assistance provided by religious organisations and local charitable societies. There are seven social centres operated by the ministry of labour and social affairs (MoLSA) that provide training and assistance, especially to needy women. Public and private facilities for the elderly, handicapped and orphaned provide first class care, using the latest professional methods, approaches, and equipment. The number of needy families on government assistance lists has been growing for the past decade at double the rate of the population growth. Family support The social assistance programme provides approximately BD30 (US$80) per month to every family being assisted.

Education Primary schooling lasts for six years between the ages of six and 12. Secondary education lasts for three years and offers students a choice of three main branches:

Main cities Manama (capital, estimated population 149,900 in 2003), Rifa (91,800) Muharraq (84,500) Isa Town (69,100), Sitrah (62,500), Jid Hafs (53,000).

Bahrain Languages spoken English is widely spoken. Persian (Farsi), Hindi and Urdu are also frequently used. Official language/s Arabic Media The government is the most liberal of any in the Gulf towards broadcasting and the press, although its control over radio and television would be considered strict by Western standards. Press Dailies: The principal daily newspapers in Arabic are Akhbar al Khaleej and al Ayam. English-language dailies include Bahrain Tribune, Gulf Daily News, Bahrain Voice and Middle Xpress. Business: Falcon Publishing Group and Al Hilal Publishing and Marketing Group, each produce several magazines and directories on business, industry, finance, banking and travel. Broadcasting Radio: The state-owned Bahrain Broadcasting Station transmits two services, one in Arabic and the other in English. Otherwise, it is possible to receive Capital Radio, the Voice of America, BBC World Service and services from Oman, Qatar, Abu Dhabi and the popular, music-oriented Aramco service from Dhahran. Television: Bahrain Channel 4 in Arabic; Bahrain Channel 55 in English broadcast nightly. Other TV stations received in Bahrain include RAK (Ras al Khaimah), Dubai 10, Dubai 33, Dubai 41, Kuwait 8, Kuwait 10, Qatar 9, Qatar 11, Qatar 37, Oman 8, Abu Dhabi 5, Abu Dhabi 31, Saudi 6, Saudi 29 and Aramco 3 (English), depending on conditions. Economy Bahrain is the least wealthy of the six Gulf states. Its hydrocarbon reserves are small, and crude oil production is declining, however hydrocarbons still account for around 30 per cent of GDP making Bahrain reliant on the industry. However, oil reserves are expected to completely run out by 2010 and this has intensified the diversification process into both oil refining and financial services. Bahrain hopes to develop into a Free Trade and Service Hub in the region and has set up an Economic Development Board (EDB) to help realise its economic aims. Attracting foreign investment is a key objective. Bahrain is a member of the World Trade Organisation (WTO) and is well prepared to meet the demands of international competition. In 2002 Bahrain became a regional financial and banking centre with the introduction of an international Islamic financial centre that deals specifically with products complying with Sharia. This International Islamic Financial Market (IIFM) is

likely to grow and will assist Bahrain’s need for diversification. Bahrain saw good GDP growth of 4 per cent in 2003 and this figure is expected to rise over 2004. The war in Iraq has not severely hindered economic growth, however the threat of terrorism remains and has adversely affected investor confidence. Unemployment is high in Bahrain at around 15 per cent, with many of these youths. The declining oil industry will mean possible job losses in the next few years. External trade Imports Main imports are mineral fuels, lubricants and related materials, machinery and transport equipment, manufactured goods, chemicals, food and live animals, miscellaneous manufactured articles and others. Main sources: Saudi Arabia (30.1 per cent of 2002 total), US (11.7 per cent), Japan (7.1 per cent), Germany (6.5 per cent), UK (5.6 per cent). Exports Main exports are mineral fuels and lubricants, manufactured goods, aluminium, chemicals, miscellaneous manufactured articles, machinery and transport equipment, and others. Main destinations: US (4.5 per cent of 2002 total), India (3.2 per cent), Saudi Arabia (2.3 per cent), Japan (1.7 per cent), Republic of Korea (1.7 per cent). Agriculture Farming The agricultural sector typically accounts for 1 per cent of GDP and employs 5 per cent of the workforce. Apart from being a small island, development of agriculture is limited by labour shortages, lack of water and salinity of the soil. The major crop is alfalfa for animal fodder, although farmers produce modest amounts of crops including dates, watermelons, pomegranates, bananas, potatoes, eggplants and tomatoes for the local market. Government agricultural plans emphasise drainage to reduce salinity, improvement of the soil and new irrigation and cultivation techniques; experiments with hydroponics are also under way. The land tenure system, under which over 60 per cent of cultivable land is held on three-year leases, discourages the stability needed for development. The lack of grazing inhibits livestock production. One large dairy has annual milk production of 500,000 litres. Small dairy farmers, responsible for 15 per cent of production, have established a co-operative and constructed a milk pasteurising plant.

The estimated crop production for 2003 included: 11 metric tonnes (mt) potatoes, 16,508mt dates, 730mt bananas, 12mt pulses, 950mt citrus fruit, 130mt grapes, 3,397mt tomatoes, 21,518 fruit in total, 10,369mt vegetables in total. The estimated livestock production included: 16,718mt meat in total, 1,440mt beef, 83mt camel meat, 8,100mt lamb, 1,455mt goat meat, 5,640mt poultry, 2,000mt eggs, 14,390mt milk, 240mt cattle hides, 1,260mt sheepskins, 8,000mt greasy wool. Fishing The waters surrounding Bahrain have traditionally been rich, with more than 200 varieties of fish, many of which constitute a staple of the local diet. The discovery of oil in 1935 led to a steady decline in the fishing industry, which has been unable to meet domestic demand, noticeably since the 1970s. Moreover, pollution in the Gulf, since the 1980s, has increasingly threatened fish production and the shrimp industry. Fish catches have dropped amid claims of illigal fishing, habitat destruction from land reclamation and environmental pollution threatening overall fish stocks. In 1993, authorities began releasing young fish into local waters in order to boost stocks and later, in 1997, a trawler ban was enforced during the breeding season, in order to prevent fish stocks from being wiped out. Industry and manufacturing The industrial sector typically contributes 19 per cent to GDP and employs 34 per cent of the labour force. Bahrain’s most prominent non-oil industry is the Aluminium Bahrain (Alba) plant, which supplies various downstream manufacturing plants as well as the Gulf Aluminium Rolling Mill Company (Garmco). Aluminium exports are one of Bahrain’s biggest earners as a result of increased world prices. Alba dominates the manufacturing sector with a production capacity of 500,000 tonnes per year. Alba commissioned its 450,000 tonnes per annum coke calcining plant and 41,000 cubic metres per day seawater desalination plant in 2001. This was the first plant of its kind in the Middle East. More than 50 per cent of the aluminium produced at Alba is sold on the local and regional market, while the remainder goes mainly to the Far East. Export-oriented small- and medium-sized industries have been attracted to free industrial zones established at Mina Sulman, Ma’amir, Abu Gazal and North Sitra, which enjoy tax and duty incentives. Industries located in these areas include plastics, paper, steel-wool and wire-mesh producers, marine service industries,

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Nations of the World: A Political, Economic and Business Handbook aluminium, asphalt, cable manufacturing, prefabricated building and furniture. Iron and steel production is increasing. The Bahrain Ispat Company, under the control of the Indian Ispat Group (based in London), operates a plant with a capacity of 1.2 million tpy of iron briquettes produced from iron pellets. Industrial production increased by 2 per cent in 2003.

Energy There are three main power stations: Rifa, with a capacity of 700MW, Manama with 167MW and Sitra with 125MW. Domestic demand for electricity was estimated at 1,100MW in 2002 and should reach 1,600MW by 2005. Responding to the rise in demand, capacity is being increased by 630MW with a new generating plant due to come on-line in 2004.

Tourism Tourism is a major element of Bahrain’s economic strategy of diversification to replace its depleted oil reserves. Bahrain is second only to Egypt in the number of arrivals, receiving 4.8 million visitors in 2003. Around three-quarters of these come from neighbouring states, mainly Saudi Arabia and Kuwait, on short-term visits. The aim is to attract more visitors from the region, as well as from other markets. In addition to the existing causeway link with Saudi Arabia, a causeway to Qatar is scheduled to open in 2006. Bahrain is well-served with accommodation, leisure and conference facilities and continues to pursue an expansive infrastructure programme, involving private investment. The sector accounts for 15 per cent of GDP.

Financial markets Bahrain has a solid reputation as an international financial hub. Bahrain remains attractive as a result of a combination of factors, including its relative political stability, open and tax-free business climate, central geographical position, low costs, excellent communications and an accommodating government. The financial sector is one of the most diverse in the region and has the largest volume of transactions in the Middle East. The International Islamic Financial Market (IIFM) has attracted a number of major financial institutions to deal specifically in Sharia compliant deals.

Hydrocarbons Oil accounts for more than 60 per cent of exports and 50 per cent of government revenue, despite the declining importance of oil to the economy. In 2003, proven oil reserves were 125 million barrels, located in the Abu Saafa and Awali oil fields. Production was around 35,000 barrels per day (bpd) in 2002, with net oil exports of 15,000bpd. Exploration is going ahead around the Huwar islands now that the dispute with Qatar is over and ownership has been settled. Bahrain has offered concessions to foreign investors in a move to encourage further exploration. Bahrain exports refined products as opposed to crude oil and the country has significant refining capacity of around 250,000bpd (2002). The country’s sole refinery was built in 1936 by the Bahrain Petroleum Company (Bapco) and is undergoing a US$900 million modernisation programme which is due to be completed in 2004. Plans were drawn up in 1999 for the construction of a 500,000bpd refinery, but by 2003 work had yet to start. Bahrain is self-sufficient in natural gas. Proven gas reserves were 90 billion cubic metres in late 2003, with production at 9.6 billion cubic metres in 2003, all of which is consumed locally. However as there is a growing demand for electric power generation it is likely that imports of natural gas will increase. Bahrain does not produce or import coal.

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Banking and insurance There are more than 200 financial instiutions in Bahrain. The Bahrain Monetary Agency (BMA) introduced full regulations for its Islamic banking community in 2002. Central bank Bahrain Monetary Agency (BMA) is an independent judicial organisation and the central monetary institution. Main financial centre Manama Time GMT plus three hours Geography Bahrain is an archipelago of 33 islands. Only three of the islands are inhabited. The main island of Bahrain contains most of the population and is linked by a causeway to the island of Muharraq. Another causeway links Bahrain to Saudi Arabia. Climate Summer temperatures are hot and humid, reaching 49 degrees Celsius (C) in the shade, while January, the coldest winter month, has temperatures ranging from 2.8 degrees C to 28.3 degrees C. Humidity, particularly on the coast, can be extreme. Between December and the end of March the climate is temperate, with temperatures ranging between 19 and 25 degrees C. Dress codes A lightweight suit or lightweight jacket and trousers are advised. A long-sleeved shirt with a tie should be worn at business and official meetings but a jacket need not be

worn. Women should dress modestly. However, they can wear bikinis on certain beaches and the dress code for women is less severe than in Saudi Arabia or some other Islamic countries. Entry requirements Passports Passports are required by all. Visa Visas are required by all except nationals of Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). For details of requirements for business and tourist visas visit: www.bahrainedb.com/lifestyle/visa.stm. Tourist visas can be obtained on arrival at Bahrain airport, business visas must be applied for in advance. Journalists must make prior arrangements with the Ministry of Information. In 2001, the government announced that women arriving in Bahrain alone and without a visa would be refused entry. Lone female travellers are advised to obtain a visa before departure. Prohibited entry Israeli nationals or anyone holding a passport with an Israeli visa/stamp may be denied entry. Currency advice/regulations Any currency may be freely imported and exported. Customs Personal effects duty free. The duty free allowance is 400 cigarettes or 50 cigars and two bottles of alcoholic beverages, for non-Muslim passengers only, and 227ml of perfume for personal use. Jewellery, drugs, firearms and ammunition are subject to import permits. Prohibited imports Pornographic and obscene literature and pictures, cultured or undrilled pearls, and goods of Israeli origin are prohibited. Health (for visitors) Medical services in Bahrain are of high quality with a good general hospital in Manama and modern health centres in smaller communities. Medical insurance is advised. Consultations are offered at the American Mission Hospital, 133 Isa Al-Kabeer Avenue, Manama (tel: 253-447). Mandatory precautions Yellow fever certificate, for visitors arriving from infected areas. Advisable precautions Recommended immunisations are hepatitis ‘A’, polio, tetanus and typhoid. There is a risk of rabies. Water should be boiled or sterilised, or use bottled water. Milk is unpasteurised and should therefore be boiled or avoided. Dairy products made from local milk should be avoided. Fruit should be peeled and vegetables cooked. Meat and fish should be well cooked and eaten hot.

Bahrain Hotels First-class hotel capacity for 175,000 average-stay visitors. A 12 per cent service charge is usual. Major hotels and most restaurants are licensed. Credit cards All major credit cards are accepted. Public holidays Fixed dates 1 Jan, 17 Dec (National Day). Variable dates Eid al Fitr, Eid al Adha, Eid al Hijra, Ashura, Prophet’s Birthday. Working hours Thursday and Friday are weekly holidays. Regular hours are subject to change during the month of Ramadan. Some banks and businesses close on Saturday. Banking Sat–Wed: 0730–1200; Thu: 0730–1100; some branches are open three days weekly in the afternoon; some offshore banking units close on Sunday; 1000–1330 during Ramadan. Business Sat–Thu: 0800–1530 or 0800–1300, 1500–1730. Government Sat–Tue: 0700–1415; Wed: 0700–1400. During Ramadan government offices open 0930–1430. Shops Sat–Thu: 0830–1230, 1530–1830; large superstores are open Sat–Thu: 0800–1900; late opening Wed and Thu: 0800–1200, 1530–2130; some are open for a few hours on Fri in the Souk. Telecommunications Bahrain is the communications centre of the Gulf and has invested heavily in the sector since the late 1960s. There are excellent cable and satellite services using the latest digital exchange technology. Three earth stations, two working to the Intelsat satellite network and the third to the Arab satellite (Arabsat), together with a channel submarine cable to the UAE and Qatar, form Bahrain’s international outlets. The Bahrain Telecommunications Company (Batelco) has operated Bahrain’s telecommunications system since 1981 when the government purchased a 60 per cent stake of the network established and operated by the United Kingdom’s Cable and Wireless. Batelco has completed a major expansion programme, investing some BD100 million (US$265 million) to expand and upgrade the network further, which has a total of 145,000 lines. Bahrain’s two mobile systems have around 27,500 subscribers. In addition to this, Batelco also offers an IDD/fax service to 211 countries and a telex service to 181.

In July 2004, Bahrain became the first fully liberalised telecommunications market in the Gulf. Postal services Bahrain has a reliable and relatively expeditious postal service. Most business mail is delivered to private boxes rented from main Post Offices. Courier services Most major international courier firms serve Bahrain. Electricity supply 230V 50 cycles AC everywhere except Awali, which has 120V 60 cycles; various types of plug fitting, normally three-pin flat. Weights and measures Metric system (local measures are also used). Social customs/useful tips With its pleasant mix of Arab culture and Western conveniences, Bahrain has long been the most accessible of the countries in the Persian Gulf region. Hospitality to the stranger lies at the heart of Arabian life. Punctuality is not always a Bahraini virtue although this is changing. While the foreign businessman will be expected to arrive at a meeting punctually, his Bahraini counterpart may think nothing of being late. Traditionally much time is spent in exchanging small talk at business meetings and embarking on business matters before the atmosphere is favourable may cause offence. Decisions are often taken by consensus, according to the Arabian tradition, rather than exclusively on the advantages and disadvantages of the case submitted. Muslims pray five times a day although shops and offices do not close during prayer. Although alcohol is not forbidden by law, like pork, it is forbidden by Islam and should be consumed with discretion. It is polite to avoid eating, drinking or smoking in the presence of Muslims during daylight hours in the month of Ramadan (it is illegal to do so in public). Unless addressing members of the royal family normal Western forms of address and greeting are usual. Always shake hands on meeting and leaving. Security The general situation in Bahrain is calm. Visitors to Bahrain should keep in touch with developments in the Middle East. Any increase in regional tension might affect travel advice. There have been sporadic incidents of violent protest, but these have not been directed against visitors. It is advisable to avoid village areas, especially after dark, and areas which have been the scene of demonstrations and incidents in the past. Local security precautions, religious and social sensitivities should be observed and respected.

The level of street crime is far lower than in the West because of the severity of the penalties traditionally imposed. The influx of immigrant workers from the early 1970s led to higher incidents of theft. However, murder and violent crimes such as mugging and rape remain extremely rare. Getting there Air Europe has the best air connections with Bahrain; the best fares are usually from Italy or Greece. Flights from the US tend to be expensive and harder to find. Fares are cheapest during the low seasons of early January to mid-June and mid-October to mid-December. Routes between Bahrain and other Arab countries in the Gulf are well served. Flights from India and SouthEast Asia tend to be inexpensive, with especially good deals from Bangkok or Delhi. National airline: Gulf Air (owned jointly with Qatar, Oman and Abu Dhabi). International airport/s: Bahrain International, Muharraq (BAH), 6.5km north-east of city, with bar, restaurant, buffet, bank, shops, hotel reservations. Airport tax: International departures BD3; not applicable to transit passengers. Surface Road: The Saudi-Bahrain Causeway links Bahrain, Saudi Arabia and Qatar. Water: There are passenger ferries running between Iran and Bahrain; the trip takes about 16 hours each way. The route is served once every second week. There is a port tax of around US$8. Main port/s: Mina Sulman, Mina Manama and Mina Muharraq. Getting about National transport Road: Bahrain’s road network is fairly good. There are good tarmac roads between centres, and six-lane highways form a ring road by-pass system for Manama and Muharraq. Buses: A national bus company provides public transport throughout the populated areas of the country. Rail: There are no railways in Bahrain. Water: Dhow trips are arranged most weekends to sand bars and nearby islands from the old wharf (Mina Manama) on King Faisal Road. Boat trips to neighbouring islands are frequently arranged on Friday and publicised in the local press. City transport It is easy to cover Manama and Muharraq on foot, though renting a car will make it easier to get to farther-flung locations. Taxis: Taxis (with orange side wings and black-on-yellow number plates) are plentiful and fares are regulated. Agree a fare with the driver before booking. Fares are by meter and only vary when coming from the airport or when travelling by night.

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Nations of the World: A Political, Economic and Business Handbook Taxis are readily available for the 6.5km journey from Bahrain International airport to Manama, for which there is a charge in addition to the meter reading. Recommended fares from the airport are displayed outside the arrivals terminal. Shared taxis or ‘pick-ups’ can be hailed from any bus stop. They do not use meters. Fares vary depending on the destination, but are lower than standard taxi fares. However, they can be very cramped and uncomfortable. The ‘pick-ups’ have white and orange number plates, and a yellow circle with the licence number in black painted on the driver’s door. Car hire Insurance is compulsory and international driving licences must be validated at the Ministry of Interior Traffic Headquarters (near Isa Town) before use in Bahrain. Car hire firms are listed in the local telephone directory, and it is generally recommended to compare prices. Driving is on the right. Seatbelts are compulsory for both the driver and front seat passenger, and young children must be seated in the back. Road signs are in English and Arabic. The maximum speed limit on highways is 100kph, and on inner city roads it is generally between 50–80kph. If an accident occurs, the vehicle must not be moved until traffic police get to the scene.

BUSINESS DIRECTORY Telephone area codes The international direct dialling code (IDD) for Bahrain is +973 followed by subscriber’s number. Useful telephone numbers Emergency services Directory enquiries International enquiries International bookings Operator Time in Arabic Time in English Telephone faults

999 181 191 151 100 141 140 121

Banking Ahli United Bank Bahrain, 126 Government Avenue, PO Box 5941, Manama (tel: 221-700; fax: 224-322; e-mail: [email protected]). Al Baraka Islamic Bank, PO Box 1882, Manama (tel: 535-300; fax: 533-993; e-mail: [email protected]). Arab Banking Corporation, ABC Tower, Diplomatic Area, PO Box 5698, Manama (tel: 543-000; fax: 533-163; e-mail: [email protected]). Bahrain Development Bank, PO Box 20501, Manama (tel: 537-007; fax: 534-005). Bahrain Islamic Bank, Al Salam Tower, Diplomatic Area, PO Box 5240, Manama

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(tel: 535-888; fax: 535-707; e-mail: [email protected]). Bahraini Saudi Bank, PO Box 1159, Manama (tel: 211-010; fax: 210-989; e-mail: [email protected]). Bank of Bahrain & Kuwait, 43 Government Avenue, PO Box 597, Manama (tel: 223-388; fax: 229-822; e-mail: [email protected]). First Islamic Investment Bank EC, PO Box 1406, Manama (tel: 218-333; fax: 217-555). Gulf International Bank, PO Box 1017, Al-Dowali Building, 3 Palace Avenue, Manama (tel: 534-000; fax: 522-633; e-mail: [email protected]; internet site: http://www.gibonline.com). National Bank of Bahrain , PO Box 106, Manama (tel: 228-800; fax: 228-998; e-mail: [email protected]). TAIB Bank, Sehl Centre, Diplomatic Area, PO Box 20485, Manama (tel: 533-334; fax: 533-174; e-mail: [email protected]). Central bank Bahrain Monetary Agency, PO Box 27, Manama (tel: 535-535; fax: 533-342; e-mail: [email protected]).

Ministry of Justice and Islamic Affairs, PO Box 450, Manama (tel: 531-333; fax: 531-284). Ministry of Labour and Social Affairs, PO Box 32333. Manama (tel: 687-800; fax: 686-954). Ministry of Municipalities and Agriculture, PO Box 53, Manama (tel: 226-060; fax: 229-666). Ministry of Oil, PO Box 1435, Manama (tel: 291-511; fax: 293-007). Ministry of Transport, PO Box 10325, Manama (tel: 534-534; fax: 534-041). Prime Minister’s Office, PO Box 1000, Manama (tel: 200-000; fax: 532-839). Other useful addresses Aluminium Bahrain (Alba), PO Box 570, Manama (tel: 830-000; fax: 830-083; e-mail: [email protected]). Arabian Exhibition Management, PO Box 20200, Manama (tel: 550-033; fax: 553-288; [email protected]). Bahrain International Exhibition Centre, PO Box 11644, Manama (tel: 550-111; fax: 553-447; e-mail: [email protected]).

Travel information Bahrain International Airport, PO Box 586, Manama (tel: 321-151; fax: 324-096).

Bahrain National Gas Company (Banagas), PO Box 29099, Manama (tel: 756-222; fax: 756-991; e-mail: [email protected]).

Bahrain Tourism Company, PO Box 5831, Manama (tel: 534-321; fax: 531-353; e-mail: [email protected]).

Bahrain Petroleum Company (Bapco), PO Box 25555, Awali (tel: 704-040; fax: 704-070; e-mail: [email protected]).

Gulf Air, PO Box 138, Manama (tel: 228-820; fax: 224-452).

Bahrain Stock Exchange, PO Box 3203, Manama (tel: 261-260; fax: 256-362; e-mail: [email protected]).

Ministry of tourism Tourism Affairs, Ministry of Information, PO Box 26613, Manama (tel: 201-203; fax: 211-717; e-mail: [email protected]). Ministries Ministry of Cabinet Affairs, PO Box 26141, Manama (tel: 731-544; fax: 731-863). Ministry of Defence, PO Box 245, Manama (tel: 653-333; fax: 663-923). Ministry of Education, PO Box 43, Manama (tel: 680-105; fax: 687-866). Ministry of Electricity and Water, PO Box 2, Manama (tel: 546-666; fax: 533-035). Ministry of Foreign Affairs, PO Box 547, Manama (tel: 227-555; fax: 212-603).

Central Municipal Council, PO Box 53, Manama (tel: 276-060; fax: 263-666). Consultative Council (Majlis al-Shura), PO Box 2991 Manama (tel: 714-422; fax: 715-715). Customs Directorate, PO Box 15, Manama (tel: 725-333; fax: 725-534). Ports Directorate, PO Box 453, Manama (tel: 725-555; fax: 725-534). Internet sites Arab Banking Corporation BSC: http://www.arabbanking.com Arab Net: http://www.arab.net Arabia OnLine: http://www.arabia.com

Ministry of Health, PO Box 12, Manama (tel: 255-555; fax: 252-569).

Bahrain Promotions and Marketing Board: http://www.bpmb.com

Ministry of Housing and Public Works, PO Box 5802, Manama (tel: 533-000; fax: 536-431).

Gulf business explorer: http://www.igulf.com/main.htm

Ministry of Information, PO Box 253, Manama (tel: 781-888; fax: 682-777). Ministry of the Interior, PO Box 13, Manama (tel: 272-111; fax: 262-169).