How has Bahrain’s economic strategy changed to address the global credit crunch?
The strategy has not really changed, it has just increased its emphasis on certain aspects. Bahrain has a long record of diversification and of working to increase productivity. So it is doing more of the same, with an increased focus on the higher value, highly skilled aspects of the economy. The economy is well diversified and has continued to grow. For example, employment in the fourth quarter of last year was positive even during the start of the downturn.
I think there is a time lag between events in the West and when they reach us, so we are cautiously optimistic about 2009. We feel our strategy is serving us well, allowing us to weather these challenges.
Globally, it’s been a difficult time for the financial services sector. Has this led to an increased focus in Bahrain on other areas, such as tourism?
It’s clear to say that the financial services sector won’t be the roaring engine it was last year. That said, just a few weeks ago we had an Irish bank open its offices here. We still have companies coming in because of Bahrain’s cost base and its access to the market.
Other sectors are continuing to grow, such as tourism. Our focus within tourism is more regional than international and has always been the Saudi and other GCC markets, for family weekend getaways. This market will be less affected by the global downturn, and it’s something we are focusing on.
One of BEDB’s main goals is to attract foreign investors to Bahrain. How has this market segment been impacted?
We noticed people thinking twice about investing from late last year, but let’s not forget that the Gulf is still one of the growth areas in the world. What’s helping Bahrain now is that it’s had the lowest cost operating base in the region, and an open economy that gives companies equal treatment. When growth was 10 per cent in the region, nobody really worried about their costs as long as the growth was there. Today, costs matter. We’re still seeing interest and discussion, but at a slower rate.
Bahrain’s oil reserves are limited when compared to other GCC countries and it has a high break-even oil price. What is being done to strengthen its economic position?
There are two separate things. Firstly, the oil price refers to the treasury and the government budget. But our economy is the least dependent on oil, so daily lives and economic activity don’t depend on it. They depend on tourism and other things. Bahrain offers: one, the cost of doing business and, two, access to the markets. Companies can come and own their own businesses, they don’t need a sponsor, and they have access to the GCC from here. The third aspect is the quality of life, as there is a good balance between work and family activities.
The fourth, and perhaps most important thing, is access to a well-trained workforce that can serve the market. We believe [in] any company willing to invest for the long run; we’re not interested in companies that want to come for a year or two and make a quick buck and leave. The company needs to localise, and our trained workforce is a great asset.
Do you predict Bahrain will suffer the same levels of job losses and departures that have been reported elsewhere in the region?
It’s difficult to say. But Bahrain has built a demand-driven model over the years that is based on fundamentals rather than on attracting large amounts of international investments. Today this is serving us well, because it’s proving more sustainable and helping us to weather the storm. Yes, we are part of the global community, and sales and orders are down for companies, but they are still sustainable.
We haven’t had mass lay-offs, even within the financial sector, which has seen mass redundancies around the world. There are challenging times ahead and the question is, how long is it going to last? If this becomes a multi-year global depression, then we’ll have to look at it again, but if you’re looking at a downturn of one or two years, we’ll come out of this very strongly.