Bahrain Economic Quarterly

Second Quarter 2012

Table of Contents
The Economic Outlook ................................................................................................................. 3
The Global Outlook............................................................................................................................... 3
The Regional Outlook ........................................................................................................................... 6
Bahrains Economy ............................................................................................................................... 7

Special Articles ............................................................................................................................ 12

Microfinance: An Untapped Opportunity ........................................................................................... 13
Bahrain Global Rankings Performance ............................................................................................... 22

Chart Set ...................................................................................................................................... 43

Sources ......................................................................................................................................... 53
Abbreviations .............................................................................................................................. 54

export demand. Their growth prospects

hence remain far stronger than those of the
advanced economies. Growth forecasts for
2012 by the IMF, OECD, IIF and
Bloomberg show China leading major
economies and the IMF is expecting growth
of 7.8% for the year, still strong compared to
mature economies but down from previous
years. China has had rapid growth over the
past decade. The US is expected to see 2-3%
growth while the Euro area will likely
remain
mired
in
recession.

The Economic Outlook

The global economic outlook remains

unusually fragile with the situation in the
Euro-zone being the main source of
uncertainty. However, also the US is facing
mounting fiscal challenges while growth is
clearly slowing in the Asian economies. The
already established dichotomy between the
relatively stagnant advanced economies and
much more resilient emerging markets looks
certain to persist, although we are
witnessing a renewed turn to stimulus
measures in both cases. The GCC region is
set for growth with buoyant oil prices
boosting fiscal balances, and governments
planned infrastructure projects expected to
underpin growth in many sectors. Bahrain
is expected to see a clear improvement in its
growth this year with the EDB forecasting
growth of 2.4% for the year, up from 1.9%
in 2011.1

GDP Growth Forecasts

2012

9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
United States

The Global Outlook

IMF

The European crisis represents the largest

risk of discontinuity globally, as the
structural weaknesses persist and the Euro
area dips into recession once again.
Unresolved issues related to the debt crisis
remain a cause for uncertainty and negative
market sentiment in Europe, although the
US economy has begun to show tentative
signs of recovery.

Euro Area

OECD

IIF

Japan

China

Bloomberg Consensus

Mature Economies
Mature economies are still reeling from the
effects of the global economic crisis, which
was triggered by the financial crisis of 2008
The US has begun to show weak signs of
recovery, with minimal positive growth in
all quarters over the past year, with the
exception of the fourth quarter of 2011 when
it grew 4% over the previous quarter. Japan
experienced much more volatile quarterly
growth, peaking at 8% in the third quarter of
2011 and then dropping to 0.1% in the next
quarter. Growth picked up in 2012 to 5% in
the first quarter, and dropped again to 2% in

Emerging economies, by contrast, while still

facing concerns, are profiting from stronger
local demand and even relatively resilient
1

This is based on the new GDP breakdown which uses 2010

as the base year. The previous base year, 2001, would give
real growth of 2.2% in 2011 and a projected 3.7% in 2012.

the second quarter of this year. Euro area

growth mirrored the Japanese pattern at
lower rates, dipping into the red at the end of
2011 (-1.3%) and contracting again in the
second quarter of 2012 (-1%) after a faint
positive reversal in the first quarter.

1.6
1.4
1.2
1.0
0.8

Mature Economies
Quarterly GDP (YoY)
percentage growth

10%

ECB Policy Rate

Percentage
2010-2012

0.6

0.4
0.2

8%

0.0

6%
4%

Source: ECB

2%

Although Germany saw an improvement

with a rise from 43 in July to 49.2 in
September, this does little to dispel fears of
a continued crisis as readings below 50
signal a contraction.

0%
-2%
Q3 2011

Q4 2011

United States

Q1 2012

Q2 2012

Euro Area

Japan

Other concerns in the Euro-zone stem from

the widening dichotomy between the
economically stable countries like Germany
as opposed to the fiscally challenged
peripheral economies such as Spain and
Greece. As the political resistance to
austerity mounts, it is still unclear whether
there will be a Greek exit from the union,
while formal bail-outs of the much larger
economies Spain and Italy are seen as
increasingly likely.

Source: US Federal Reserve, Eurostat, Bank of

Japan, OECD, IMF

The Euro-zone continues to be in a mild

recession, albeit with considerable internal
variation, and the future remains unclear.
This has led to a far more interventionist
stance by the European Central Bank (ECB),
designed in part to counter the effects of the
ongoing fiscal consolidation. The ECB
lowered the key rate to 0.75% in July, a
historical low, and it has issued longer-term
loans to banks while signaling its
willingness to boost government bond
purchases. Despite this, the leading
indicators remain negative with, for
instance, the Markit Eurozone PMI
Composite Output Index showing little
change from 46.4 in June to 46.1 as of
August.

The crisis in the Euro-zone has in turn had

some global spillover effects through lower
trade
volumes,
reduced
European
investment, and weaker performance by
foreign
companies
with
European
operations. This has been one of the
negatives affecting the US economy as well,
although growth has otherwise benefited
from some improvements in retail sales and
manufacturing, as well as an incipient
turnaround in the housing sector.
4

Nonetheless, the economy still remains

reliant on exceptional stimulus measures
with little sign of a sustained improvement.
Among other things, planned fiscal
tightening by approximately 4% of GDP
is expected by some observers to pull the
economy back into recession by next year.
This was one of the factors prompting the
US Federal Reserve to renew formal
quantitative easing in September. The openended QE3 is likely to involve purchases
of US$85 billion of longer-term securities
per month through the end of 2012 alone. In
addition, the Fed plans to keep long term
interest rates near zero levels until 2015.

demand for their minerals and other raw

materials, weaker export demand is spelling
lower growth. The IMF projects growth of
3.2% this year, down from 4.5% last year.
Part of the reason for the slower growth is
weak global demand, particularly in the US
and Europe.
Emerging Economies
Quarterly GDP
Percentage growth

8%

6%

4%

2%

Emerging Economies
0%

Emerging economies continue to outperform

their advanced counterparts with, for
instance, the Asia Pacific (this also includes
some high income countries such as Japan
Korea and Australia) region achieving a
strong 7% growth during the first quarter of
this year. Much of this is due to greater
macroeconomic
stability
and
more
conservative management than in advanced
countries.

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-2%
Latin America
Emerging Europe

Asia/Pacific

Source: US Federal Reserve, Eurostat, Bank of Japan,

OECD, IMF

The Asia-Pacific region still constitutes the

backbone of global growth with China alone
contributing more to the global GDP growth
than the advanced economies taken together.
The most recent Chinese data points to a
fairly marked slowdown, however, and the
government has formally reduced its growth
target from 8.0% to 7.5%. In response, the
authorities have taken measures to
accelerate planned investment projects and
to undertake renewed monetary easing.
Many are concerned by Chinas high
dependence on exports against the backdrop
of a weakening global economy. In the
second quarter of the year, Chinas GDP
growth dropped to a 3-year low of 7.6%,
mainly due to weaker exports. Exports,
however, continue to make up a large

In spite of their resilience, emerging markets

are affected by the global slowdown. The
emerging economies of Central and Eastern
Europe proved particularly vulnerable to the
global crisis having benefitted from the
boom and large capital inflows prior to
2008. While these drove rapid growth, they
also created vulnerabilities through large
current account imbalances. While growth
remains positive, it has been slowing
because of the regions exposure and
proximity to the suffering Euro-zone.
Although the Latin American economies
have benefitted from the structural growth in
5

portion of Chinas GDP as efforts to

rebalance growth have brought limited
results.

Crude Oil Petroleum Prices

USD per barrel
140
130
120
110

The Regional Outlook

100
90

The GCC is not immune to the effects of the

global slowdown, and the main areas which
we expect to be affected are trade, tourism,
and reduced capital flows. Nonetheless, the
outlook for the GCC countries remains
favorable, although last years rapid rebound
in growth is likely to give way to relative
stabilization. The GCC countries are
expected to see real GDP growth of around
5% for 2012, down from 6.4% last year.

80
70
Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Jan-10

Apr-10

60

Source: bp Brent oil price history

The key regional challenges remain dealing

with current and upcoming unemployment,
reducing the economies dependence on oil,
increasing integration in the GCC and
selecting key industries to support which
will stimulate growth of the private sectors.

A key factor supporting the strong regional

growth prospects is the persistence of
historically high oil prices which in turn can
support government spending. Crude oil
prices reached $113.36 per barrel at the end
of August 2012, up from June this year, but
still not as high as the levels seen in 2011.
The increase comes from increased regional
political tension as well as reduced risk
aversion, partly in connection with the
increases in unconventional monetary
stimulus measures around the world. The
higher oil prices are generally being used by
governments to provide support to the nonoil sectors. The region is further benefiting
from increased oil production, partly in
response
to
production
disruptions
elsewhere as well as the Iranian sanctions.
Saudi Arabia has been the key swing
producer in this regard with estimated spare
capacity of 2.5 million barrels per day. Its
output has in recent months averaged around
10 million barrels per day.

The UAE in particular is feeling the effects

of the global downturn with GDP growth
expected to drop to 4% down from 5.2% last
year according to the IMF due to fiscal
consolidation and the weak global economy.
Kuwait, Saudi Arabia and Qatar are
expected to lead growth with rates of around
6%. In the case of Qatar, this marks a sharp
drop from the double digit rates seen during
the recent natural gas investment boom.
Nonetheless the growth prospects for Qatar
remain favorable, with the government
expecting to spend around 10% of its GDP
(around $39 billion) on infrastructure and
total
project
disbursements.
Budget
surpluses are expected to remain ample. The
fiscal surplus is expected to be 7.8% of GDP
for 2012 and current account at 22% of GDP
this year. However, the global slowdown
will undoubtedly affect Qatar as funding for
projects and infrastructure depends to a
degree on foreign investment, partnerships,
6

and partly
syndications.

externally

funded

loan

% change
YOY

In Saudi Arabia, the strong 7.1% growth last

year received a major boost from increased
government spending supported by high oil
prices and increased production levels.
However, also the private sector is
beginning to gather momentum. Nonhydrocarbon GDP grew by 5.1% in 2011,
led
mainly
by
construction
and
manufacturing. Economic growth has
received a boost from the governments
emphasis on housing, most notably through
a project designed to build half a million
new affordable homes by means of a $110
billion fiscal package. Access to housing is
also likely to receive a boost from the recent
approval of the long-awaited mortgage law
and banks have already sharply increased
their real estate lending. Efforts are also
underway to reform the labor markets, for
instance through a new jobseekers
allowance and a broader program designed
to boost the employment of Saudi nationals
in the private sector. Among other things,
the government has boosted the funding for
small and medium-sized enterprises. We
expect Saudi growth to normalize this year
due to slower growth in government
spending and oil prices and production even
as the private sector recovery continues to
gather momentum. Saudi growth in Q1 was
5.9%, a rate that decelerated further to 5.5%
in Q2.

GCC Real GDP

YOY Percentage Growth
2006-2013*

30
25
20
15
10
5

0
-5
-10

Bahrain
Oman
Saudi Arabia

Kuwait
Qatar
United Arab Emirates

*2012 and 2013 growth figures are IMF estimates

Source: IMF, World Bank and CIO

Bahrains Economy
The EDB expects Bahrains GDP to grow
by at least 2.4% in 2012,2 driven above all
by increased manufacturing and government
spending. The first two quarters of the year
have generally been characterized by
favorable trends. Real GDP grew by 4.2% in
the second quarter relative to the same
quarter last year after businesses began to
recover from the events of 2011. Relative to
the first quarter of the year, GDP fell by
around 1%, which makes it the first negative
quarter on quarter growth since last year.
However, the drop was almost entirely due
to falling volumes from the Abu Safa field
while the non-oil sector continued to
rebound, indeed by a remarkable 8.1% YoY.

This assumes that the temporary disruption in the Abu

Saafa field only fully normalizes by the end of the year. An
earlier rebound or any compensation would boost the
contribution of the hydrocarbons sector.

This points to good progress of the

increasingly broad-based recovery.
Bahrain GDP growth
Quarterly change

BD
million
2,600

4%

2,550

There has been a particularly strong rebound

in parts of the service sector that recorded
the sharpest falls last year. For instance, the
hotels and restaurants category grew by
6.5% in the first quarter and 5.5% in the
second quarter. This sector took one of the
hardest hits in 2011, when it fell by 17%
compared to the previous year.

2%

2,500
2,450

project aimed at raising production in the

Awali field by Tatweer petroleum. The
target is to double oil production within the
first 5 years of operations by using enhanced
oil production techniques.

0%
2011 2011 2011 2011 2012 2012
Q1
Q2
Q3
Q4
Q1
Q2

-2%

2,400

-4%

2,350

-6%

2,300

growth

GDP

Construction grew by 10% in the first

quarter (quarter on quarter) and shrunk
slightly by 0.7% in the second quarter
compared to the first, reflecting government
spending on infrastructure and housing. This
still indicates a 7% recovery compared to
the same period last year. Manufacturing
followed a similar trend, growing 13% in the
first quarter over the fourth quarter of last
year, and then slower at 1% in 2012.

-8%

Source: CIO

Most sectors have by now experienced a

clear rebound since last year, including
mainstays
such
as
construction,
manufacturing and hotels and restaurants.
Virtually all the the second quarter weakness
has come from temporary production
disruptions in the mining (oil and gas)
sector, which contracted by 7% relative to
the first quarter, and 10% relative to the
second quarter of 2011.

Growth is likely to pick up further in 2013

due to a growth in infrastructure spending,
as more than 20,000 housing units are set to
be built by the government in the coming
five years. In addition, Bahrain is expecting
to receive its first tranche of the $10 billion
GCC fund this year, most of which will be
spent on government projects to improve
infrastructure and social conditions in
Bahrain.

The Central Informatics Organization has

rebased real GDP, and the base year is now
2010 instead of 2001. This means that
mining (mainly oil and gas extraction) now
makes a much bigger contribution to GDP
(21.5% in 2011) reflecting the higher oil
prices in 2010, and thus the fall in it had a
proportionately greater impact on the overall
GDP.
Despite the recent reversals, we expect oil
production to increase in the second half of
the year. It should be noted that oil
production is expected to increase over the
coming decade, in particular due to the
8

several months showed negative growth. In

January, February and March credit to the
public sector shrank between 8 and 9
percent each month, which makes a decrease
in value of between BD 17 million and BD
21 million each month. This indicates
renewed confidence by banks in the private
sector as well as growing demand for credit,
signaling increased liquidity in the private
sector, and is indicative of a more
broadbased recovery led by the private
sector.

Bahrain Sectoral Growth

Quarterly

40.0%

20.0%

0.0%
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
-20.0%

-40.0%

2010

2011
2012
Mining
Manufacturing
Construction
Wholesale & Retail Trade
Hotels & Restaurants
Transport & Communications
Financial Services

Source: CIO

Year on Year Growth in Credit to the

Private sector and Government
2011-2012

Finance, which currently makes up 17% of

GDP, has been affected repeatedly by
global and local events. First the global
financial crisis in 2008 led to a liquidity
squeeze all over the world, and a somewhat
delayed effect was felt in Bahrain during
2009. Soon thereafter, several investment
banks were affected by the drop in the real
estate market prices in the region. Another
hit came following the unrest in 2011 when
the sector, particularly wholesale banking,
faced uncertainty and capital flight. Most
recently, one of Bahrains largest investment
banks, Arcapita, filed for Chapter 11
bankruptcy in the US. Overall, the finance
sector experienced a 2.7% YoY contraction
in the first half of this year compared to the
first half of 2011.

1200
1000
800
600
400
200
0
-200 Jan Mar May Jul Sep Nov Jan Mar May Jul
-400
2011
2012
YoY growth in credit to the Government
YoY growth in credit to the Private Sector
Source: Central Bank of Bahrain

Unemployment lagged behind the weaker

performance of output in 2011, and
increased to its highest level during the
current data series of 4.7% as of June 2012.
Dealing with this social challenge remains
one of the pressing issues facing policy
makers in Bahrain today.

Despite signs of weakness in the wholesale

banking sector, the retail banks continue to
show robust growth in assets. Retail banks
lending - a good indicator of confidence in
the market- has grown. The year on year
growth in credit to the private sector has
increased substantially this year relative to
2011, reaching an increase of BD 1 billion
in July, a 19% increase. Loans to
government did not exhibit the same
consitency or magnitude of growth, and
9

Unemployment Rate
Percentage

Inflation rate
Consumer Price Index
2009-2012

6%

5
5%

4.5

4%

3.5

3%

2%

2.5

1%

2
6/2012

3/2012

9/2011

12/2011

6/2011

3/2011

9/2010

6/2010

3/2010

12/2010

-2%

12/2009

-1%

9/2009

0%

1.5

-3%

Source: Ministry of Labour

Source: Central Informatics Organization

Inflationary pressures in Bahrain have

remained relatively weak in recent months,
partly because of the negative contribution
of housing costs in an environment where
rents are still trending down. However,
inflation jumped to 4.2% in June of 2012 in
a marked turnaround from a deflationary
period in 2011 when it fell to -2% in April.
Some of the contributors to inflation have
been higher prices in categories such as
recreation and culture, alcoholic beverages
and tobacco as well as restaurants and food
and
non-alcoholic
beverages
which
increased to a lesser extent. However, most
of the increase was due to a base effect
resulting from the period of exceptionally
low price growth in 20113.

Growth of Consumer Price Index

Categories
July 2011-July 2012
Communication
Housing, water,
Education
Healthcare services
Clothing and footwear
Restaurants
Food and non-alcoholic
Miscellaneous goods
Transport
Furnishing, household
Alcoholic beverages
Recreation and culture
-10.0% 0.0% 10.0% 20.0% 30.0%
Source: Central Informatics Organization

The weights of the consumer price index reveal that the

largest contributions to the basket used to measure the CPI
was the category of food and non-alcoholic beverages,
followed by miscellaneous goods and services, recreation and
culture and education- these are all categories which recorded
growth over the period which explains the sharp growth in
CPI over the past year. Communication dropped by 5.6% and
makes up 5.4% of the basket, slowing the growth in CPI.

10

CPI Weights
Percentage
1.3% 1.0%
2.0%

Food and nonalcoholic

beverages
Miscellaneous
goods and services
Recreation and
culture

5.1%

16%

5.4%
5.6%

7.1%

Education
Communication

7.0%
Restaurants
Electricity gas &
other fuels
Transport services
Source: Central Informatics Organization

11

Special Articles
This edition of Bahrain Economic Quarterly
contains two special articles that provide an
analysis of the microfinance industry in
Bahrain and the positioning of the Kingdom
within the global rankings.
The Microfinance article provides an
examination of the microfinance market in
Bahrain, identifying key players and
evaluating different aspects of the industry.
The history and landscape of the
microfinance industry dates back to 1998
and a brief outline traces its evolvement to
the present day. An overview of all the
microfinance providers services and the
composition of their loans is given. Finally
the article looks at possible improvements in
the sector, and outlines several challenges
which it faces.
The Global Rankings article assesses
Bahrains standing in international indices
and reviews the Kingdoms performance in
various component indices. This piece
provides an update about the Kingdoms
progress and identifies areas for further
improvement. The analysis lists the most
recent global rankings of Bahrain according
to 16 leading international indices.
Evaluation of the reports demonstrates that
Bahrain has attained impressive results in a
number of indices. Although some of this
standing has been eroded lately, Bahrains
position remains highly competitive on a
global scale.

12

share risks with their customers. Despite the

growth of microfinance in recent years, it is
estimated that only 10% of the worlds
economically active poor have access to
even the most basic financial services.5

Microfinance: An Untapped Opportunity

What is Microfinance?
The idea behind modern day microfinance is
often attributed to Dr. Muhammed Yunus,
winner of the Nobel Peace Prize and a
Bangladeshi university professor who
decided to create a bank which would
extend financing to the poor. Its central
objective was to reduce the exploitation of
the poor by lenders and, by doing so, allow
them to invest and create self-employment
opportunities. This institution, known as
Grameen Bank, remains a model for many
microfinance institutions worldwide, which
are seeking to replicate its success.4

Other factors differentiating MFIs from

regular banks include:

The term microfinance refers to the

provision of financial and non-financial
services such as credit, savings, cash
transfers and insurance to low-income
individuals. The goal of microfinance
institutions (MFIs) -- entities who provide
this particular type of financing -- is to
enable their clients to escape poverty by
starting their own businesses and eventually
generating a steady source of income.

The loans offered by MFIs are usually

modest in size, far smaller than those offered
at conventional banks. Due to the
disproportionate
administrative
costs
associated with small loans, conventional
banks prefer to focus on larger tickets where
the proportion of such costs is lower. As a
result, a large segment of the population in
need of small loans are likely to struggle to
gain access to funding from conventional
sources. Due to these factors, MFIs are often
not for profit, and a large part of their
mission is social development. They also
4

Minimal collateral requirements

Minimal guarantees
Core business that usually does not
depend on collecting deposits
Shorter loan tenors
Higher interest rates
A not for profit operating model
designed to boost social wellbeing
A predominance of business start-up
funding
Efforts designed to help clients succeed
through initiatives such as workshops,
training, and regular follow-ups
Occasionally
the
reliance
on
unconventional methods such as group
financing, a method in which several
people apply for a loan as a group and
share a joint responsibility for it. If the
group defaults, then they will all be
exempt from future loans. This creates
social pressure to repay the loan

Benefits of Microfinance
Recent estimates by the Social Insurance
Organization indicated that close to 88% of
businesses in Bahrain are micro-enterprises.
Micro-enterprises are defined as businesses
that hire up to 10 employees, and have a
capital investment of up to BD 20,000 for
the manufacturing sector, and annual

Judith Brandsma & Deena Burjorjee, Microfinance in the

Arab States (New York: United Nations Capital
Development Fund, 2004)

Grameen Bank <www.grameen-info.org>

13

turnover of up to BD 100,000 for all other

sectors. In view of the sectors importance
for the economy of Bahrain, microfinance
can serve as an important tool for boosting
overall economic development.

by dividing the total welfare pay-outs by the

number of eligible welfare recipients) from
BD 291 to BD 836 per month in the same
period.
Throughout the history of Microfinance,
women have dominated among MFI clients.
The main reason for this has been their
greater vulnerability to poverty. They
nonetheless tend to be more likely to use
additional sources of income to nurture and
develop their families, by spending on
education, nutrition and health for other
household members. Generally, they tend to
have better repayment rates, which makes
them more attractive customers to financial
institutions. Microfinance can also serve as
a powerful tool for the empowerment of
women, who are more likely to be
dependent on their spouses in developing
nations.

Poverty and income inequality have become

increasingly salient socio-economic issues in
recent years. Microfinance has historically
been proven to provide a powerful tool to
help alleviate them. The advantage of
microfinance over government- funded
programs is the lesser fiscal burden involved
in the former. Moreover, by relying on
microfinance, low-income individuals can
be expected to create a living for themselves
and become economically independent
instead of relying on regular grants from
private or public organizations.
Recent figures indicate that an increasing
number of Bahrainis are resorting to social
welfare as a source of income. The number
of people receiving social welfare, according
to Ministry of Human Rights and Social
Development figures, grew by 93% between
June 2009 and April 2010 alone.

Many developing nations have high levels of

income inequality and a generally small
middle-class.
Successful
microfinance
programs can help grow a larger middle
class and potentially make it a majority
rather than a minority of the population.

Eligible Welfare Recipients

Number of People
Growth: 93%

The origins of Bahraini microfinance can be

traced to the launch in 1998 of the
MicroStart Program, which was designed to
combat unemployment while seeking to
diversify the economy away from its finite
oil resources. The MicroStart project was a
joint collaboration between the United
Nations Development Program (UNDP) and
the Ministry of Labour and Social Affairs
along with the NGOs (Awal society and the
CMWS). The main objective of this project

Apr-10

Feb-10

Mar-10

Jan-10

Dec-09

Oct-09

Nov-09

Sep-09

Jul-09

Aug-09

Jun-09

History and Landscape of Microfinance

Institutions in Bahrain

75,904

80,000
70,000
60,000
50,000 39,356
40,000
30,000
20,000
10,000
-

Source: Ministry of Human rights and Social

Development, EDB Analysis

Moreover, the average welfare payments

given to welfare recipients also rose (taken
14

was to provide small short-term loans to

low-income individuals, with a slight focus
towards women. The program created a
system of sustainable credit delivery, as well
as a management capacity for this system in
several national welfare Non-Government
Organizations (NGOs). The total budget for
this project was $1.5 million.

economy built on oil wealth to a productive,

globally competitive economy, shaped by the
government and driven by a pioneering
private sector an economy that raises a
broad middle class of Bahrainis who enjoy
good living standards through increased
productivity and high-wage jobs.
Our
society and government will embrace the
principles of sustainability, competitiveness
and fairness to ensure that every Bahraini
has the means to live a secure and fulfilling
life and reach their full potential.

Statistics from the UNDP indicate that this

project was relatively successful and by
2002, around 7,600 loans had been given to
approximately 4,300 low-income individuals
for a total value of around $2.5 million.
These amounts made up around 40% of
social assistance beneficiaries, or 30% of
registered unemployed nationals at that
time.6

The new project named Expansion of

Micro Finance Services to the Needy
Citizens in the Kingdom of Bahrain; was
officially signed between the MoSD and the
UNDP on February 2008 for a three-year
period ending in January 2011. The major
objective of the new project was to create
an enhanced environment for equitable job
creation and sustainable economic growth.
As such, the primary focus was to expand
the number of loan recipients / micro
entrepreneurs through three distinct action
areas, these are:

This project provided training to the NGOs

(Awal society and the CMWS) to move
from a charitable approach to lending, to a
more banking oriented approach, and
estimates indicate that it increased the
societies revenues between 25-50%.
Societies were also given grants from the
UNDP and MOLs funds to kick-start their
lending.

As a result of the success MicroStart and the

highly positive impact it had on poverty
reduction and civil society capacity
development, the Government of Bahrain
(represented by the Ministry of Social
Development MoSD) along with the
UNDP decided to continue the project with
the purpose of expanding its impact and
provide more focus on youth and women as
its primary target. At the national level, the
project contributes to achieving the national
economic vision for the year 2030 which
states that we aspire to shift from an
6

Targeting the youth,

Increasing focus on women as loan
recipients, and
Increasing the number of NGOs
participating in the project to expand
access to credit through prudently
managed civil society actors (NGOs).

The total project budget amounted to US$

1.4 million of which US$ 500,000 was to be
provided by the Ahli United Bank,
US$500,000 by the Ministry of Social
Development
and
the
remaining
US$400,000 by UNDP which was to raise
this amount as part of its partnership with
the government of Bahrain or from other
resources.

Salman, Ali, UNDP. Personal interview. April 2012.

15

After consideration of the paradigms in the

global microfinance industry, witnessing a
growing
number
of
Regulated
Microfinance Institutions and Microfinance
Banks entering into the field, the MoSD
and Ahli Bank decided to re-channel part of
their financial contribution to the
Microfinance project to help establish a
regulated Microfinance Institution, later
called the Family Bank - FB. The
decision was taken with a view to rooting
the project within the mainstream financial
system in the Kingdom of Bahrain and
guaranteeing the continuation of activities
beyond the life of the project,
notwithstanding the role of the NGOs as
partners besides the bank.

Microfinance Banks
Table (1): Comparison of MFIs

Bahrain has by now seen the emergence of

two microfinance lending institutions
Ebdaa Bank and Family Bank. In addition,
the Bahrain Development Bank which
currently finances slightly larger loans to
SMEs, initially offered micro financing.
These banks target the same markets as the
societies mentioned above, although the size
of loans offered by the societies tends to be
smaller (see figure below).

Ebdaa
200 5,000
4-15%
annually *
1,885,000

Family
500 7,000
12%**

Net Profit 2011

NA

-519,576

Number of loans
since inception

2,624

861

Total value
loans (BD)

3,571,249

1,309,999

68%

64%

Range (BD)
Interest
rate
(p.a.)
Paid up capital
(BD)

In addition, the banks are licensed by the

Central Bank of Bahrain, and thus have
more stringent regulations than the societies
do. Examples include a minimum capital
requirement, Central Bank licensing fees,
audit and publication of financial statements.
There are also restrictions on the amount of
capital that can be lent out relative to the
liabilities (also known as gearing), which
apply to the licensed MFIs.

of

% of loans given
to women
Shareholding

Private
public

and

5,000,000

Private
public

and

Source: Family Bank and Ebdaa Bank

*depending on the product, tenor,
**6% subsidized by Tamkeen

Ebdaa Bank
Ebdaa bank is a closed joint stock company
which is 60% privately owned. It was
formed in 2009 and aims to improve the
social and economic conditions of Bahrainis
through microfinance. Unlike family bank it
16

is not an Islamic bank, and offers

conventional as well as sharia compliant
services.

Ebdaa Bank Range of Loan Amounts

Bahraini Dinars
60%
50%

Table (2): Ebdaa bank loans by age

40%

Age

Percentage of Total Loans

30%

18 - 27

14.90%

20%

28 - 35

26.14%

10%

36 - 45

26.52%

0%

46 - 64

32.43%

Source: Ebdaa Bank

% of total loans in this range

When looking at the geographic distribution

of Ebdaa Banks loans by governorate, a
clear predilection for the Northern
directorate can be seen as in the case of
Family Bank. The capital and southern
directorates received a disproportionately
low share of loans, probably in reflection of
higher relative incomes in these areas.

Source: Ebdaa Bank

Source: Ebdaa Bank

The largest proportion of Ebdaa Banks

loans, 32%, goes to people above the age of
46, closely followed by 36-45 year-olds who
received 26.5% of the total, and 28-35 year
olds who accounted for a comparable 26%
share. 18-27 year olds received around 15%
of total loans.

Ebdaa Bank Loans by

Governorate
% of total number of loans
2012
Muharr
aq
17%

The vast majority of loans are of short

maturity, with over 84% being 24 months or
less.

Norther
n
36%

Family Bank

Central
35%

Source: Ebdaa Bank

The Family Bank was established in 2010 as

the first Islamic microfinance bank in the
Middle East. It, much like other MFIs in
Bahrain, aims to serve low-income families
by financing their entrepreneurial projects.
In addition to funding, it provides start-up
services such as help with market research
and training courses. As can be seen in the
table above, the Family Banks recent
results show that maintaining profitability is
a challenge. To achieve the objectives of the
program
funding
community-based
organizations, Family Bank signed

Souther
Capital n
8% 4%

The range of Ebdaa Bank loans is between

BD 200-5000, with over 50% of the loans
being of very small size, between BD 200
and BD 1000. As seen in the chart below,
largest loans are relatively rare, with only
4% in the range of BD 4001- BD5000.

17

cooperation agreements with several

associations helping individuals and families
with limited incomes.7

The Northern Governorate has been the

largest beneficiary of Grameen program
financing, the Family Banks largest
program. It received 32% of the total funds
disbursed, although only 23% of the
population live there. The Southern
Governorate on the other hand received 1%
of Grameen program financing, and has a
much higher percentage of population (8%)
relative to the funds received. Muharraq also
received a larger portion than its population,
with 26% of financing relative to 15% of
population.

The vast majority of loans given by the

Family Bank are in the trade sector, which
accounts for 65% of the total loans given.
Other popular sectors include food-related
businesses (11%) and the services sector
(6%). Fishing and Manufacturing make up
5% and 4% of total loans respectively,
followed by Gift & Stationary Services,
Agriculture and Salon Services at 3% each.
Trade tends to be a common business for
low-income persons due to the lower fixed
costs and labour required to set up shops.
Many trading businesses can be run by one
person, often the owner himself, and do not
require machinery or a large space. Foodrelated services can be expected to be
popular among women in the informal
sector, as many can create food preparation
and distribution companies. This is
convenient especially for mothers with
children at home.

The Grameen program offers group

financing and lower loan amounts than the
other
Family
Bank
program,
the
Microenterprise Financing (MEF). It also
offers loans to entrepreneurs who are just
starting and/ or who do have Commercial
Registrations. Geographic areas with high
concentration of loans tell us where
microfinancing has been most widely used,
perhaps due to more needy Bahrainis living
in those locations. It may also indicate
geographic areas which might be unaware of
the programs available, and could be
targeted by MFIs.

Family Bank
Composition of loans by sector

Manufac
turing
4%
Fishing
5%

Gift &
Stationar Agricultu
re
y
3%
Services
3%

Salon
services
3%

Grameen Program Beneficiaries by

Geographic Location

Other
Services
6%
Food
related
11%

Muharra
q, 26%
Trade
65%
Central,
33%

Source: Family Bank

Source: Family Bank

El Shabrawy, Atef. Family Bank. Personal Interview, April

2012.

18

Norther
n, 32%

Sourther
n, 1%
Capital,
8%

These societies are an important part of the

microfinance industry, and supporting them
is crucial as they reach the lowest income
groups and deal with clients on a personal
basis, forming lasting relationships with
them and following their success and failure.

Population by Governorate
Bahrain 2009

Muharra
q
15%

Northern
23%

Central
27%
Capital
27%

Microfinance Challenges and Possible

Improvements

Southern
8%

Source: Family Bank

Clients-specific issues
A recent market research survey conducted
by Planet Finance for the Ministry of
Human Rights and Social Development
looked at approximately 500 microfinance
entrepreneurs, some clients and some nonclients. These entrepreneurs specialize in a
variety of activities ranging from traders, to
street vendors, to services and handicrafts.
The survey results indicated that men tended
to be more involved in services and
commerce, whereas women tended towards
less profitable activities, like handicrafts and
street vending.

Microfinance Societies (NGOs)

In addition to the two banks, two NGOs
offer Microfinance in Bahrain. Both the
Awal Womens Society and the CMWS
were involved in the initial launch of the
MicroStart program, and were trained and
supported by the UNDP and the government
of Bahrain. These societies have a
successful track record and offer loans of
even smaller amounts than the microfinance
banks. In the words of a society member, the
people with whom they deal value a word
more than any signed agreement. This
appears to be true as both societies have
very low default rates of around 2%.

The average monthly sales turnover for

micro-entrepreneurs is BD 535, and the
average profit margin is BD 290. This is
slightly higher than the Bahraini minimum
wage of BD 250 but lower than median
wage of BD 489 as of the fourth quarter of
2011. This is something which may be
improved through better guidance for
entrepreneurs. Further, females run smaller
business than males with 80% of small
businesses with low sales turnover being
controlled by females while they account for
only 40% of the larger businesses. The
reasons for this trend may include the
sectoral preferences of women, as well as
the amount of time which they can spend on
their businesses. Increasing guidance for

Table (3): Comparison of NGOs

Awal

CMWS

Number of loans since

inception

15,273

17,341

Value of loans since

inception (BD)

3,789,800

3,239,050

Manufacturing

23%

20%

Trade

62%

66%

Services

15%

14%

Source: Awal Society and CMWS

19

women could encourage them to enter more

profitable industries.

industry has, increase awareness as more

money can be spent on marketing, and give
low income persons a single source which
can give them information on all their
options, reducing the time and difficulty it
takes them to compare their options on their
own.8

Some of the most prevalent challenges faced

by micro-entrepreneurs are sourcing money
and the amount of monthly cash flow
generated from the activity. Interestingly,
the reimbursement of credit, keeping
financial records and registering activities
are the least challenging.

Regulatory and Legislative Challenges

Bahrain currently has two MFIs licensed by
the Central Bank of Bahrain (CBB), Family
Bank and Ebdaa Bank. However, the CBB
does not have a licensing framework
specifically for MFIs, and the two existing
institutions are registered under Volume 1
and 2, under which both mainstream
conventional and Islamic banks are licensed.
They hence operate under the same
regulations as their larger counterparts.

Clients and non-clients awareness of MFIs is

generally low, and thus something which
could be improved through nation-wide or
state-led marketing. For example those
receiving
unemployment
and
other
government benefits could be notified of
various micro-financing options.

Competition
Among some MFIs main concerns were
increasing competition in the market. The
rise in the number of industry players in
Bahrains small market has squeezed profit
margins, and increased MFI dependence on
government and donor sponsors. As a result
industry players have little to no profits. In
order for the micro-finance industry to be
sustainable going forward, it is essential to
reduce such dependencies.

The CBB is currently in the process of

developing a sector-specific framework for
microfinance. This will include more lenient
regulations than those applied to regular
banks when it comes to minimum capital
requirements, licensing fees, and public
disclosure requirements, but also more
stringent gearing requirements. It will
exempt MFIs from capital adequacy
requirements, and include things such as
consultancy services. Currently, there is no
legislation that covers the micro-financing
activities of societies.

One possible option for the industry would

be consolidation. Smaller players tend to
have higher relative costs, and cannot take
advantage of economies of scale. Indeed,
international experience has shown that
competition between MFIs in one country
can limit their ability to achieve their goals
of helping low-income individuals as MFIs
will tend to be more attracted to consumer
loans, which limits their economic impact
on low-income individuals. Consolidation
could strengthen the impact which the

Also, as the majority of the microfinance

customers are considered informal this
sector needs regulatory and technical
support. Despite the registration as
productive family members in the MOSD,
the legal status of these micro activities is
often not fully formalized, although such
8

Al Qassim, Wahid. Ebdaa Bank. Personal interview. April

2012.

20

activities are tolerated. This issue can be

addressed through better regulation and
creating a legal structure for such entities.

Cultural challenges
Group financing is not very popular in
Bahrain despite MFI attempts to offer it to
their clients. This is mainly due to the
different cultural differences between
Bahrain and countries where the model took
shape. Bahrainis are more inclined to take
independent loans and to repay them on
their own. Though there is a strong sense of
community,
independence
regarding
financial matters is a value Bahrainis seem
to hold high.
Some MFIs also found the need to introduce
Islamic financing to their products. This is
due to the strong cultural and religious
values which tend to govern their client
base.
In addition, Bahrains culture of welfaredependence may also pose a challenge. It
will take education and training to instil an
entrepreneurial mind-set, and move people
away from depending on social assistance.
Although microfinance in Bahrain has
developed remarkably since its initiation in
1998, in order for it to be most effective
certain reforms must be made. These
reforms will ensure that the sector is
sustainable and helps Bahrainis have higher
incomes and become self-sufficient and
independent.

21

Some reports and indices rely only on

statistical data while others build their
findings on a combination of statistics and
survey data. Statistical data consist of
indicators
capturing
quantitative
information, such as inflation rates, GDP,
and life expectancy. These data sets are
collected by international organizations
including the IMF, the World Bank, and
various United Nations agencies from
reporting national entities (central banks and
statistical agencies) in their member states.
The survey data is more qualitative in nature
and covers a variety of issues such as the
protection of property rights, independence
of the judiciary, and the quality of the
educational system.

Bahrain Global Rankings Performance

This article benchmarks the Kingdoms

international position in comparison to
other economies with respect to a number of
key economic and social indicators. It
assesses Bahrains standing in international
rankings and reviews the Kingdoms
performance in various component indices.
This piece provides an update about the
Kingdoms progress in international
rankings and identifies areas for further
improvement. The analysis lists the most
recent global rankings of Bahrain according
to 16 leading international indices that are
usually issued and updated on an annual
basis. The analysis uses data from a number
of widely respected sources including
research and findings from the Heritage
Foundation, Transparency International,
United Nations Development Programme
(UNDP) , United Nations Conference on
Trade & Development (UNCTAD), World
Bank , the World Economic Forum and the
Fraser Institute.

111/135
145/163

Bahrain has attained impressive results in a

number of recent global rankings. Although
some of this standing has been eroded of
late, Bahrains position remains highly
competitive on a global scale. The indices
that showed improvement were global
competitiveness, corruption perception,
education development index, and travel and
tourism. The table below provides a
snapshot of the Kingdoms performance in
the latest reports compared to the previous
ones.

Freedom of the World

Economic Freedom
Financial Development
Networked Readiness
Enabling Trade
Logistics Performance
Global Competitveness
Doing Business
Travel & Tourism
Human Development
Corruption Perception
Education Development
Gender Gap
Enviroment Performance

160
140
120
100
80
60
40
20
0

Introduction

7/144
12/179
24/60
27/142
30/132
32/155
37/142
42/185
40/139
42/187
46/183
51/127

Bahrain's Worldwide
Rank

The article addresses each index and helps

illustrate the areas where the kingdom is
outperforming
or
underperforming
internationally.

Source: Various Reports

22

Table (1): Bahrains comparative ranking

Index
Economic
1.
Freedom
Economic
2.
Freedom of the
World
Ease
3. of Doing
Business
Global
4.
Competiveness
Financial
5.
Development
Networked
6.
Readiness
Corruption
7.
Perception
Education
8.
Development
Travel
9.
and
Tourism
Competiveness
Logistics
10.
Performance
Enabling
11.
Trade
Gender
12. Gap
Environmental
13.
Performance

Latest
rank
12

Previous
rank
10

Change
in rank
-2

10

+2

42

39

-3

35

37

+2

24

23

-1

27

30

+3

46

48

+2

51

45

-6

40

41

+1

48

32

-16

30
111
145

22
110
-

-8
-1

Programme. The Kingdom continues to

feature in the category of Very High
Human Development countries.
The
2011
HDR
presents
Human
Development Index (HDI) values and ranks
for 187 countries for the year 2011
The HDI is a summary measure for
assessing long-term progress in three basic
dimensions of human development: a long
and healthy life, access to knowledge and a
decent standard of living.
As in the 2010 HDR, a long and healthy life
is measured by life expectancy. Access to
knowledge is measured by i) mean years of
adult education9, and ii) expected years of
schooling for children of school-entrance
age10. Standard of living is measured by
Gross National Income (GNI) per capita
which is expressed in 2005 constant prices.

Bahrains HDI value and rank

Source: Various reports

Bahrains HDI value for 2011 is 0.806.

Among the countries in the Very High
Human Development category are Norway,
Australia, Netherlands, the United States
and New Zealand.

Evaluation of the reports suggests that

Bahrains main comparative strengths
include the following:

Macroeconomic stability (low inflation)

Favorable tax regime
Strong banking and finance sector
High standard of human development
Efficient business regulations
ICT readiness

Between 1980 and 2011, Bahrains HDI

value increased from 0.651 to 0.806, an
increase of 24% thanks to an annual increase
of about 0.7%. The rank of Bahrains HDI
for 2010 was 39th out of 169 countries.
However, it is misleading to compare values
and rankings with those of previous reports,
because
the
underlying
data
and

Human Development Index

Bahrain occupied the 42nd position out of
187 countries in the 2011 Human
Development Report (HDR) published by
the
United
Nations
Development

the average number of years of education received in a lifetime by people aged 25 years and older
10
the total number of years of schooling a child of schoolentrance age can expect to receive if prevailing patterns of
age-specific enrolment rates stay the same throughout the
child's life

23

methodology have changed, while the

number of countries included in the HDI has
increased to 187. Moreover, a number of
key indicators for many countries were
unavailable in the 2010 report. Bahrains
HDI remains the 3rd highest within the GCC
region.

To ensure as much cross-country

comparability as possible, the HDI is based
primarily on international data from the UN
Population Division, the UNESCO Institute
for Statistics (UIS) and the World Bank. To
allow for assessment of progress in HDIs,
the 2011 report includes recalculated HDIs
from 1980 to 2011 according to its new
methodology. These are displayed in Table
3 below.

Table (2): Bahrains overall rank in the 2011

Human Development Index
GCC Rank

Economy

2011 rank

1
2
3
4
5
6
Total

UAE
Qatar
Bahrain
KSA
Kuwait
Oman
187 economies

30
37
42
56
63
89

The Kingdom continues to perform well in

health and education, the two main
components of the HDI. Life expectancy at
birth increased by 5.4 years, mean years of
schooling rose by 5.3 years and the expected
years of schooling advanced by 3.3 years.
Bahrains GNI per capita decreased by about
12% between 1980 and 2011. Table 3
reviews Bahrains progress in each of the
HDI indicators.

Source: 2011 Human Development Report

Table (3): Bahrains HDI trends based on consistent time series data, new component indicators and
new methodology
Life expectancy
at birth

Expected years
of schooling

Mean
years of
schooling

GNI
per
capita
(2005 PPP$)

HDI value

1980

69.6

10.0

4.1

31,987

0.651

1985

71.3

13.1

5.2

21,224

0.700

1990

72.3

13.5

6.0

19,302

0.721

1995

73.0

13.6

7.2

21,302

0.750

2000

73.7

13.4

8.3

22,715

0.773

2005

74.3

13.4

9.0

27,102

0.795

2010

74.9

13.4

9.4

27,874

0.805

2011

75.1

13.4

9.4

28,169

0.806

Source: 2011 Human Development Report

24

Assessing progress relative to other

countries

Emirates. They are ranked 37 and 30

respectively (see Table 4).

Bahrains 2011 HDI of 0.806 is below the

average of 0.889 for countries in the very
high human development group and above
the average of 0.641 for the Arab States.
Among the Arab States, countries closest to
Bahrain in terms of their 2011 HDI rank and
population size are Qatar and United Arab
Table (4): Bahrains HDI indicators for 2011 relative to selected countries and groups

Bahrain
Qatar
United
Arab
Emirates
Arab States
Very high HDI

HDI
value

HDI
rank

Life
expectancy
at birth

Expected
years of
schooling

Mean years
of schooling

GNI per
capita
(PPP US$)

0.806
0.831
0.846

42
37
30

75.1
78.4
76.5

13.4
12.0
13.3

9.4
7.3
9.3

28,169
107,721
59,993

0.641
0.889

70.5
80.0

10.2
15.9

5.9
11.3

8,554
33,352

Source: 2011 Human Development Report

The 2012 Index of Economic Freedom

measures the level of economic freedom on
10 pillars: business freedom, trade freedom,
fiscal freedom, government size, monetary
freedom, investment freedom, financial
freedom, property rights, freedom from
corruption and labour freedom.

Economic Freedom
Bahrain has consistently been the regional
top performer in terms of economic
freedom. This position is evident in the
Kingdoms performance in two prominent
economic freedom indices discussed below.

Figure 2 displays the scores of the top 15

freest economies (in order from highest to
lowest) according to the Index. It is apparent
that Bahrain is among the strongest and
most competitive economies in the world, a
group that includes countries such as the
United States, Hong Kong, Singapore and
Australia. In addition, Bahrains score is
higher than those of some European
economies, for example: the United
Kingdom and the Netherlands.

Index of Economic Freedom

The 2012 annual Index of Economic
Freedom published by the Heritage
Foundation and the Wall Street Journal
ranked Bahrain the 12th freest economy in
the world out of 179 countries. Bahrain
remains the freest economy in the Middle
East and North Africa (MENA) and its
economic freedom is well above the world
average. Bahrain is the only country from
the MENA region to feature in the Top 20.

25

Top 15 Freest Economies

Hong Kong
Singapore
Australia
New Zealand
Switzerland
Canada
Chile
Mauritius
Ireland
United States
Denmark
Bahrain
Luxembourg
United Kingdom
The Netherlands

100
90
80
70
60
50
40
30
20
10
0

According to the index, Bahrains main

strengths are the financial sector, its
openness to global commerce, and its
competitive and efficient regulatory
environment. A key area for improvement
would be to reduce the high level of public
spending which raises questions about fiscal
sustainability. In addition, the index implies
that improvements in property rights and
corruption are critical for establishing a freer
economy.
Table (6): Bahrain in details

Source: 2012 Economic Freedom

Overall

Bahrains economic freedom score is 75.2

which is well above the world average. Its
overall score is 2.5 points less than last year
due to declines in six of the 10 composites,
including freedom from corruption, property
rights, and government spending.

Business
freedom
Trade
freedom
Fiscal freedom
Government
spending
Monetary
freedom
Investment
freedom
Financial
freedom
Property
rights
Freedom from
corruption
Labour
freedom

The report highlights that the Kingdom has

been undergoing a challenging transition to
greater openness and transparency, more
visibly since early 2011. Compared to many
other countries, Bahrain performs quite well
on many of the four pillars of economic
freedom. The report stresses that the
Kingdoms openness to global commerce is
sustained by its competitive and efficient
regulatory environment.

2012
score
75.2

2011
score
77.7

Change
-2.5

76.5

77.4

-0.9

82.8

82.8

99.9
72.2

99.8
80.2

0.1
-8

70.4

74

-3.6

75.0

75

80.0

80

55.0

60

-5

49.0

51

-2

91.1

97

-5.9

Source: 2012 Index of Economic Freedom

Table (5): Index of Economic Freedom, GCC

Ranking
GCC
2012
Rank

Economy

2012
rank

1
2
3
4
5
6
Total

Bahrain
12
Qatar
25
UAE
35
Oman
47
Kuwait
71
KSA
74
179 economies

2011
rank

10
27
47
34
61
54

change

-2
+2
+12
-13
-10
-20

Economic Freedom of the World

Bahrain is ranked as the 7th freest economy
in the world in the Economic Freedom index
of the 2012 Economic Freedom of the World
Report published by the Fraser Institute. The
index measures the degree to which policies
and institutions of countries are supportive
of economic freedom in five broad areas:
size of government, legal system and
property rights, access to sound money,

Source: 2012 Index of Economic Freedom

26

and

regulations sub-area of credit market

regulation.

Hong Kong retains the highest rating for

economic freedom, 8.90 out of 10. The other
top 10 nations are: Singapore, 8.69; New
Zealand, 8.36; Switzerland, 8.24; Australia,
7.97; Canada, Bahrain, 7.94; Mauritius,
7.90; Finland, 7.88; and Chile, 7.84. The
rankings of other large economies include:
United States (18th), Japan (20th), Germany
(31st), South Korea (37th), France (47th), Italy
(83rd), Mexico (91st), Russia (95th), Brazil
(105th), China (107th), and India (111th).

Table (8): Bahrains rank in the areas of the

2012 Economic Freedom Index

freedom to
regulations.

trade

internationally

1
2
3
4

Bahrain has increased its scores and

improved its relative level of economic
freedom.

Economy

2010
score

2010
rank

2009
rank

2010
score

2009
score

Change in
score

Size
of
Government
Legal System &
Property Rights
Access to Sound
Money
Freedom
to
Trade
Internationally
Regulation

6.88

6.56

+0.32

7.0

6.76

+0.24

9.18

+0.18

7.90

7.93

-0.03

8.73

8.74

-0.01

9.0

10

-1

8.87

8.74

+0.13

Labour Market
Regulations

8.33

7.48

+0.85

Business
Regulations
Total score

10

Credit Market
Regulation

Table (7): Economic Freedom of the World,

2012 and comparisons with the 2011 report
GCC
rank

Areas

Change
in rank

Bahrain

7.94

10

+3

UAE

7.83

11

17

+6

Qatar

7.7

17

Kuwait

7.66

19

15

-4

Oman

7.64

20

38

+18

KSA
Total

7.06
10

65
144

141

Source: 2012 Economic Freedom of The World Report

Doing Business
In 2011, Bahrain ranked 42nd out of 185
economies in the 2013 Doing Business
Report published by The World Bank and
International Finance Corporation. The
Doing Business report measures ten areas of
business regulations and their enforcement
across 185 economies. Singapore tops the
overall ranking, Hong Kong SAR, New
Zealand, United States of America and
Denmark round out the top five.

Source: 2012 Economic Freedom of The World Report

Bahrain in details
The Kingdom has improved in the areas of
size of government, legal system and
property rights and access to sound
money. Positive progress took place also
in two sub-areas of regulations, namely
business and labour Regulations. On
the other hand, Bahrains rank has showed
slight deterioration in freedom to trade
internationally and dropped in one of the
27

Bahrain dropped 3 places to 42nd in the 2013

rankings, but despite this deterioration,
Bahrain performs comparatively well in
many areas and occupies the 7th position
worldwide in dealing with construction
permits and the 7th position in tax payments
and the 27th position in resolving insolvency.
Areas of improvement for Bahrain include:
trading across borders where the Kingdom
moved up 2 places to 49th, and enforcing
contracts (2 places up to 114th).

Ease of Doing Business Rank

Regional Average ( MENA)
Kuwait
Oman
Bahrain
Qatar
United Arab Emirates
Saudi Arabia
0

100

200

Source: 2013 Doing Business Report

Bahrain ranks 4th in the MENA region and

ranks 42nd worldwide amongst 185
economies

Bahrains ranking dropped most markedly in

the area of business start-up where it fell
from 84th in 2012 to 88th in 2013. The
second largest drop was in protecting
investors, where Bahrain dropped three
ranks to 82nd. The third largest drop was in
getting credit, which saw a decline from
127th in the previous year to 129th.

Table (9): Ease of Doing Business, 2013 and

comparison with 2012
GCC
rank
1
2
3
4
5
6

Country

2013
2012*
Change in
rank
rank
rank
KSA
22
23
+1

UAE
26
29
+3

Qatar
40
40
No Change
Bahrain
42
39

-3
Oman
47
49
+2

Kuwait
82
77
-5

Total
185
183
Source: 2013 Doing Business Report*All Doing Business
2012 rankings have been recalculated

The other areas saw only minimal variations

of one position.

Table (10): Bahrains rank in the pillars of the 2012 Doing Business Index
Rankings
DB 2013 rank DB 2011 rank

Change in rank

Starting a business

88

84

-4

Dealing with construction permits

-1

Getting electricity

48

49

+1

Registering property

29

29

No change

Getting credit

129

127

-2

Protecting investors

82

79

-3

Paying taxes

-1

Trading across borders

54

53

-1

Enforcing contracts

113

113

No change

10

Resoling insolvency

27

27

No change

Source: 2012 Doing Business Report

28

Table (11): Global Competiveness Index

Global Competitiveness
Bahrain occupied the 35th position in the
Global Competitiveness Report 2012-2013
published by the World Economic Forum.
The Global Competitiveness Index (GCI),
which is based on 12 key indicators,
provides a comprehensive picture of the
competitiveness landscape in countries
around the world at all stages of
development. The 12 pillars include
institutions, infrastructure, macroeconomic
stability, health and primary education,
higher education and training, goods market
efficiency, labour market efficiency,
financial
market
sophistication,
technological readiness, market size,
business sophistication, and innovation.

GCC
rank

Country

2012
rank

2011
rank

1
2
3
4
5
6

Qatar
KSA
UAE
Oman
Bahrain
Kuwait
Total

11
18
24
32
35
37
144

14
17
27
32
37
34
142

Change
2011 2012
+3
-1
+3
- +2
-3

Source: 2012-2013 Global Competitiveness Report

Financial Development
Bahrain ranked 24th out of 60 economies in
the 2011 Financial Development Report
published by the World Economic Forum,
dropping one place compared to last year.
The Financial Development Index analyses
aspects of financial systems, including the
institutional environment, the business
environment, financial stability, banks,
capital markets, and overall capital
availability and access. Bahrains average
score is 3.9 (out of a possible 7). Honk
Kong- SAR tops the overall ranking,
followed by the United States, United
Kingdom, Singapore and Australia.

Switzerland tops the overall ranking,

followed by Singapore, Finland, Sweden,
and the Netherlands. In the Middle East and
North Africa, Qatar (11th), the United Arab
Emirates (24th) and Bahrain (35th) improved
their performance while Saudi Arabia (18th)
and Kuwait (37th) saw slight decline.
Bahrain moved up two positions to 35th
place this year. The improvement in the
Kingdoms standing reflects a better
institutional framework (21st) and greater
macroeconomic stability (29th). Bahrains
competitiveness
reflects
highly
efficient goods and labour markets (ranked
16th and 21st respectively), developed
financial markets (18th) and high quality of
infrastructure (29th).

Bahrain ranks 2nd in the GCC and 24th

worldwide in the Financial Development
Index. The Kingdom delivers relatively
sound performances in both the business and
institutional environments. It has relatively
strong corporate governance (17th) and a
high degree of financial sector liberalization
(15th). Bahrain ranks 1st in the tax pillar.
Financial stability offers mixed results for
Bahrain where it ranks very high in terms of
banking system stability (2nd). However the
overall score in the pillar is offset by a 51st
place rank in currency stability.

Going forward, putting the country on a

more stable development path will require
further investment with a view to improving
the quality of scientific research institutions,
enhancing
the
university-industry
collaboration in R & D and developing the
Kingdoms capacity for innovation.
29

The banking and financial services

improved in rank from 14th to 11th. Nonbanking financial services placed 36th in
2011 from 42nd place in 2010

ICT Readiness
Bahrain continues to feature prominently in
the top 30 economies and is leading the
Arab world in The Global Information
Technology Report 2012, produced by the
World Economic Forum in cooperation with
INSEAD. The Kingdom has also improved
its position within the top 30 global
economies, climbing three places, and is
now ranked 27th out of 133 economies
worldwide.

Table (12): Bahrains rank in the Financial

Development Index
GCC
2011
Rank
1
2
3
4
5
6

Economy

2011 rank

KSA
23
Bahrain
24
UAE
25
Kuwait
28
Oman
Qatar
60 economies

2010
rank

change

26
23
21
28
57

+3
-1
-4
-

The Networked Readiness Index (NRI)

assesses how prepared countries are to use
ICT effectively on four criteria:

Source: 2011 Financial Development Report

There has been a drop in financial stability

from 23rd place in 2010 to 37th in 2011. This
is likely due to a drop in rank of risk of
sovereign debt crisis from 22nd in 2010 to
41st in 2011. The business environment is a
strong advantage, ranking 16th, although it
has dropped two places from 2010. The cost
of doing business has fallen five places to
15th and the Kingdom has a relatively low
score for currency stability, ranking 51st.
Financial disclosure needs to be improved
and has dropped from 36th place in 2010 to
37th place. Financial markets placed 45th,
performing worse than the 42nd position
achieved last year. Non-banking financial
services represent an area for improvement.
Bahrain is also limited in its levels of
securitization (51st).

General business, regulatory and

political environment for ICT
The readiness of three stakeholder
groups individuals, businesses and
governments to use and benefit from
ICT;
The readiness of infrastructure and
digital
content,
alongside
its
affordability and the skills required;
The impact on economic and social
conditions.

Sweden and Singapore continue to top the

rankings followed by Finland, Denmark,
Switzerland and Netherlands.
Bahrains performance is remarkable in
many aspects. The Kingdom creates a fairly
sophisticated enabling environment for
entrepreneurship and innovation (11th) that,
coupled with good ICT readiness (25th) in
terms of infrastructure, affordability, and
overall skills, has brought the kingdom to
the forefront of ICT readiness. This progress
has been led by a strong commitment from
the government (4th), although this has not
yet been matched by the business

Overall, improvements need to be made in

non-banking financial services and financial
markets, as well as stabilizing the currency
and monitoring the cost of doing business.

30

community (39th). As a result, the progress

in innovation and shifting toward more
knowledge-based activities (54th) has been
limited. Efforts to integrate ICT in a more
general innovative ecosystem at the
corporate level should help to boost the
desired economic impacts of ICT and
technology more broadly.

The Corruption Perception Index ranks

countries based on how corrupt a country's
public
sector
is
perceived
to
be. Country scores indicate the perceived
level of public sector corruption on a scale
of 0 - 10, 0 being absolutely corrupt and 10
being the least corrupt. The findings of the
2011 CPI show that the vast majority of the
183 countries recorded a score below five.

The Kingdom can further improve its

competitiveness by:

New Zealand, Denmark and Finland top the

list, while North Korea and Somalia are at
the bottom of the index.

Raising the level of existing scientific

institutions and creating new ones
Fostering scientific research and
technological innovation
Encouraging and increasing company
spending on R & D
Enhancing
university-industry
collaboration in R&D

As shown in Figure 5, Bahrain is perceived

to be the 3rd least corrupt country in the
GCC, moving up from 4th place in 2010. It
has scored 5.1 out of a possible 10 (10 being
least corrupt).
Corruption Perception Index

Table (13): Networked Readiness Index, 2012

Economy

2011
rank
30

Change

Bahrain

2012
rank
27

+3

Qatar

28

25

-3

10
9
8
7
6

7.2

6.8
Qatar

5.1

4.8

UAE

UAE

30

24

-6

KSA

34

33

-1

Bahrain

Oman

40

41

+1

Oman

Kuwait

62

75

+13

Kuwait

Total
economies

142

138

4.6

4.4

Saudi Arabia

Source: 2012 Global Information Technology Report

Corruption Perception

Bahrain was the only GCC country that

succeeded in improving its ranking in the
2011 CPI. The Kingdom advanced by two
notches to arrive at position 46 globally.

The Corruption Perception Index, published

by Transparency International, ranks
Bahrain 46th out of 183 countries. It moved
up two places from 48th place in 2010.

31

Table (14): Corruption Perception Index

GCC 2011
rank

Economy

2011 Score

2011 rank

2010 rank

change

Qatar

7.2

22

19

-3

2
3

UAE
Bahrain

6.8
5.1

28
46

28
48

+2

Oman

4.8

50

41

-9

Kuwait

4.6

56

54

-2

KSA

4.4

57

50

-7

Total economies

10

183

178

Source: 2011 Corruption Perception Index

Table (15): Education Development Index

Further improvement is likely to be

conditional on stricter implementation of the
United
Nations
Convention
against
Corruption. Bahrain needs to look into the
possibility of joining the OECD AntiBribery Convention which criminalizes the
bribery of foreign public officials.

2004

2008

EDI

0.953

0.966

Primary Adjusted NER1

0.982

0.993

Adult Literacy Rate

0.865

0.908

0.964

0.973

0.989

Gender
Index

Education

Specific

EFA

Survival Rate to Grade 5

The Education for All (EFA) and Education

Development Index (EDI) published by
UNESCO ranked Bahrain 51st out of 127
countries in the 2008 EFA report. The EDI
provides an overall assessment of a
countrys education system in relation to the
EFA goals. The EFA goals include universal
primary education, adult literacy, gender
parity and equality, and quality of education.
The latest EFA index data was in 2008
where Bahrain scored 0.966 (out of 1.00)
and was featured in the category of High
Education Development countries.

Source: 2008 Education Development Index

The figure displays Bahrains EDI scores for

each component, showing comparatively
high scores. The lowest score is the adult
literacy rate (0.908), though it is still high
compared to global standards.

32

The figure illustrates the placement of the

GCC countries in the global rankings.
Bahrain has the second highest ranking in
the GCC after the UAE.

Bahrain's Education Development

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

0.966

0.993
0.908

0.973

0.989

Travel and Tourism GCC Rankings

95

100
90
80

EDI

Primary
Adjusted
NER1

Adult
Gender Survival
Literacy Specific
Rate to
Rate
EFA Index Grade 5

70

62

61

60
50

Source: UNESCO Education Development Index

40

40

42

30

30

Bahrains score in 2008 improved on the

previous EDI which was published in 2004.
In 2004, Bahrain ranked 45th out of 125
countries. As shown in the table below, even
though Bahrain ranked lower in 2008, the
2008 scores are higher than 2004.

20
10
0
UAE

Bahrain Qatar

KSA

Oman Kuwait

Source: WEF Travel and Tourism Report

Bahrain is ranked 2nd in the GCC and 40th

overall, up one place since the last
assessment. The country benefits from good
transport infrastructure, particularly for
ground transport (ranked 11th), and from a
well-developed
tourism
infrastructure
th
(ranked 26 ).

Travel & Tourism

The
2011
Travel
and
Tourism
Competitiveness Report published by the
World Economic Forum aims to provide a
platform for a multi-stakeholder dialogue to
ensure the development of strong and
sustainable national Travel & Tourism
industries capable of contributing effectively
to international economic development. The
report ranked Bahrain 40th out of 139
countries. The rank improved one place
since the 2009 report.

Bahrain also has high-quality human

resources (29th), along with high levels of
safety and security. On the other hand,
policy rules and regulations could be more
supportive of the sectors development
(ranked
58th),
and
environmental
sustainability remains a particular area of
concern (123rd).

Within the index, there are three subcategories. Bahrain ranked 20th in Travel
and Tourism (T&T) business environment
and infrastructure, 62nd in T&T regulatory
framework and 78th in T&T human, cultural,
and natural resources.

33

Table
(16):
Travel
Competitiveness Index

&

Tourism

Table (17): Logistics Performance Index

GCC
2012
Rank

Economy

2012
rank

2011
rank

Change

UAE

17

24

+7

Qatar

33

55

+22

KSA

37

40

+3

Bahrain

48

32

-16

GCC
2011
rank
1

Economy

2011
rank

2009
rank

Change

UAE

30

33

+3

Bahrain

40

41

+1

Qatar

42

37

-5

Oman

61

68

+7

Oman

62

60

-2

Kuwait

70

36

-34

Total

155

155

KSA

62

71

+9

Kuwait

95

95

Total
economies

139

133

Source: 2012 Logistics Performance Index

The Table below presents the score and rank

for each component that make up the overall
LPI. In 2012, Bahrains overall score was
3.05 out of 5.00 compared to a 3.37 in 2011.
On a global scale Bahrain continued to
perform well overall. The quality of the
trade and transport infrastructure is good and
the process of tracking and tracing
consignments is efficient. However,
Bahrains position has regressed in some
components of the LPI with the sharpest
declines recorded in the efficiency of the
customs clearance process and the quality of
logistics services.

Source: 2011 Travel and Tourism Report

Logistics Performance Index

The Logistics Performance Index (LPI)
assesses a given countrys efficiency of
customs clearance processes, quality of trade
and transport related infrastructure, ease of
arranging competitively priced shipments,
quality of logistics services, ability to track
and trace consignments, and the frequency
with which shipments reach the consignee
within the scheduled time. The 2012 LPI,
published by The World Bank, ranked
Bahrain the 48th most efficient in the world.
Bahrain also ranks 4th in the GCC.

34

Table (18): Bahrains rank in the pillars of the 2012 Logistics Performance Index
2012 Score

2012 Rank

2011 Score

2011 Rank

Overall LPI

3.05

48

3.37

32

-16

Customs

2.67

60

3.05

37

-23

Infrastructure

3.08

43

3.36

30

-13

International shipments

2.83

72

3.05

54

-18

Logistics competence

2.94

53

3.36

30

-23

Tracking & tracing

3.42

34

3.63

26

-8

Timeliness

3.42

60

3.85

39

-21

155

155

Total economies

Change in rank

Source: 2012 Logistics Performance Index

custom administration - a rise of 3 places

from the previous report. Bahrain is also
strong in the quality of port infrastructure
which ranks 12th, a rise of 5 places, and air
transport infrastructure (17th) - up 3 places.
Another distinct advantage is Bahrains
regulatory environment which occupies the
10th position compared to 25th in the
previous report. This is mainly driven by a
transparent and efficient institutional
framework. Another measure under the ETI
is the Government Online Service Index
which Bahrain ranked 9th, largely due to an
active role by the government in promoting
its online services. The Kingdom was also
able to reduce the average number of days it
takes to export goods from 14 to 11 days,
improving the rank from 40th to 33rd.

Trade
Bahrain occupies the 5th position in the
MENA region and 30th worldwide in the
Global Enabling Trade report published by
the World Economic Forum.
The Enabling Trade Index (ETI) measures
the extent to which economies have
developed institutions, policies and services
facilitating the free flow of goods over
borders and to destinations. The index
breaks the enablers into four areas: market
access, border administration, transport and
communications infrastructure, and business
environment.
Singapore and Hong Kong SAR continue to
occupy the top two positions in the Enabling
Trade Index ranking, followed by Denmark,
Sweden and New Zealand.

Despite progress achieved in specific areas,

Bahrain could further benefit from its
strategic geographic location through greater
development in its transport services.
Bahrain occupies the 67th position with
respect to the availability and quality of
transport services. Also, Bahrain ranks 59th
with respect to General Agreement on Trade
in Services (GATS) commitments in the
transport sector. Bahrain ranks 45th in terms

Bahrain, although dropping 8 positions to

30th in the 2012 report as compared to the
2010 report, still demonstrates solid
performance across many indicators in the
analysis. Administration at the border has
improved further from an already high level.
The Kingdom ranks 12th in the efficiency of
35

of cost of importing goods and 48th in terms

of cost of exporting goods reflecting the 15day average time needed to import goods.
Ease and affordability of shipment is another
area that needs improvement as Bahrain
occupies the 72nd position.

FDI outflows from West Asia rebounded by

54% in 2011 after bottoming out at a fiveyear low in 2010. Bahrain ranked 9th in West
Asia with $781 million in 2011.
Some GCC countries experienced a dip in
FDI in 2011, but FDI flows in the finance
sector in Bahrain bounced back strongly in
2011 after a period of serious decline in the
wake of the global financial crisis. After
attracting investment of $1.8 billion in 2008,
the inflow dropped to $257 million in 2009
and to $156 million in 2010.

Table (19): Bahrains rank in the 2012

Enabling Trade Index
GCC
2012
Rank
1

Economy

2012
Rank

2010
Rank

Change

UAE

19

16

-3

Oman

25

29

+4

KSA

27

40

+13

Bahrain

30

22

-8

Qatar

32

34

+2

Kuwait

66

65

-1

Total
economies

132

125

Source: 2012 Global Enabling Trade Report

Foreign Direct Investment

The 2012 World Investment Report
published by the UN Conference on Trade
and Development presents data on foreign
direct investment (FDI) and traces global
and regional trends in FDI.
Globally, FDI inflows rose 16% in 2011,
surpassing the 2005-2007 pre-crisis level for
the first time, despite the continuing effects
of the global financial and economic crisis
and the current debt crisis in Europe. FDI to
West Asia (broadly the Middle East region)
decreased by 16% in 2011 to $49bn,
affected by political instability and the
general deterioration of global economic
prospects during the second half of the year.

36

Table (20): GCC Inward FDI in $ US million

Year

Oman

KSA

Kuwait

UAE

Bahrain

Qatar

2005

1,538

12,097

234

10,900

1,049

2,500

2006

1,597

17,140

121

12,806

2,915

3,500

2007

3,332

22,821

112

14,187

1,756

4,700

2008

2,952

38,151

-6

13,724

1,794

3,779

2009

1,508

32,100

1,114

4,003

257

8,125

2010

1,142

28,105

319

5,500

156

4,670

2011

788

16,400

399

7,679

781

-87

Source: 2012 World Investment Report

Bahrain has been a significant outward

investor with outward FDI flows reaching
US$ 894 million in 2011, increasing from
US$ 334 million in 2010 but still below US$
1,791 million in 2009.

Table (21): FDI as a share of nominal GDP

Inward FDI(2005-2011) as a share of

nominal 2011 GDP

Economy

Inward FDI:2011 as a
share of nominal GDP

Oman

18%

KSA

28%

Kuwait

1%

UAE

20%

Bahrain

34%

Qatar

16%

Source: 2012 World Investment Report

40%
35%

34%
28%

30%
25%
20%
15%

The Global Gender Gap Report 2012

20%

18%

16%

10%
5%
0%

In the 2012 Gender Gap Report, published

by the World Economic Forum, Bahrain
ranked 111 out of 135 countries, with one
drop in rank from the previous year.

1%
Oman

KSA

Kuwait

UAE

Bahrain Qatar

Source: UNCTAD 2012 World Investment Report, EDB

The report ranks countries on their ability to

close the gender gap in four key areas:
access to healthcare, access to education,
political participation and economic
equality. The index scores can be interpreted
as the percentage of the gap that has been
closed between women and men.

According to the data, Bahrain has the third

lowest FDI inflows in the GCC. However
when the inward FDI is taken as a share of
nominal GDP, Bahrain has the highest share
(34%), as shown in figure 9 and the table
below.
37

According to the report in the fields of

health and education, while there remain
critical gaps in some countries such as
Pakistan, Ethiopia, Yemen and Benin,
progress has been strong globally with 96%
of health gaps and 93% of education gaps
been closed across the 135 economies
surveyed in the report. However, the global
economic gender gap stands at 60%, while
only 20% of the political participation gap
has been closed. No country in the world
has achieved gender equality.

high on both educational attainment and

health and survival, but scored low on
economic participation and political
empowerment.
Bahrain holds the third position among the
Arab countries and 111th among 135
economies. The Kingdom is characterized
by higher-than-average performances on
education
attainment and health
and
survival sub-indices partly due to
government investments within these two
sectors. Bahrain has almost closed health
and education gaps but show low levels of
womens
economic
and
political
participation. The kingdom remains well
positioned and its key strength continues to
lie in the area of education. Bahrains rank
has improved by 34 places in the
educational attainment sub-index from 81st
position to the 47th position. The secondary
and tertiary education enrolment rates for
women are higher than those of men, while
the primary education enrolment rate is
exactly the same for both genders. Gaps still
persist within economic participation,
particularly within senior positions, wages,
and leadership levels.

The five highest-ranking countries

Iceland, Finland, Norway, Sweden and
Ireland have closed between 78 and 86%
of their gender gaps. Bahrain has closed
63% of its gender gap.
Gender Gap Score
0.66

0.6392

0.64

0.632

0.6298 0.6264

0.62

0.5986

0.6

0.5731

0.58
0.56
0.54
UAE

Kuwait Bahrain Qatar

Oman

Table (22): Gender Gap Index

Saudi
Arabia

GCC
2011
Rank

Source: WEF 2012 Gender Gap Report

1
2
3
4
5
6

2011
rank

2010
rank

change

Economy
UAE
Kuwait
Bahrain
Qatar
Oman
KSA
Total

107
109
111
115
125
131
135

103
105
110
111
127
131
135

-4

-4

-1

-4

+2

No change

Figure 10 illustrates the order in which the

GCC countries fall in the Gender Gap Index,
and their overall score. Although on a world
scale Bahrain cannot compete, it is placed
3rd in the Gulf region.

Source: 2012 Global Gender Gap Report

The 2012 Global Gender Gap report has

ranked Bahrain at 111th globally in terms of
overall gender gap between males and
females; Bahrain scored 0.6298 (where 0.00
= inequality, 1.00=equality). Bahrain scored

Bahrain loses one place because of a

worsening perception of wage equality
between women and men for similar work.
The estimated average income for men is
$28,115 compared to $ 16,289 for women.
38

Another area with room for improvement is

economic participation of females which is
around 34% compared to 86% of male
participation. Bahrain also has a very low
level of female political participation.

The Kingdom has an educated talent pool

and would have much to gain through
greater female participation in the
workforce. This can be partly achieved
through putting in place practices and
policies
that
will
provide
equal
opportunities.

Table (23): Areas of Gender Gap

Economy

Economic participation
and opportunity

Educational
attainment

Health &
survival

Political empowerment

UAE

122

111

81

Kuwait

106

60

111

130

Bahrain

118

47

111

112

Qatar

107

36

127

133

Oman

127

96

62

129

KSA
Total

133

91

55

133

135 economies

Source: 2012 Gender Gap Report

Governance
The World Bank Worldwide Governance
Indicators (Kaufmann, 2011) capture six
key dimensions of governance: voice &
accountability, political stability and lack of
violence,
government
effectiveness,
regulatory quality, rule of law, and control
of corruption. They measure the quality of
governance in 215 economies.

Table (24): Bahrains performance in the

Worldwide Governance Indicators
Governance
Indicator

2011
Percentile
Rank11

2010
Percentile
Rank

21.3
Voice
and 14.1
Accountability
26.4
31.6
Political
Stability/Absence
of Violence
71.1
69.9
Government
Effectiveness
75.8
75.6
Regulatory
Quality
62.4
64.5
Rule of Law
63.6
Control
of 64.9
Corruption
100
Total
Source: 2012 Worldwide Governance Indicators

The indicators show that Bahrain scores

reasonably on some of the dimensions,
particularly: regulatory quality, government
effectiveness, control of corruption and rule
of law. In the area of regulatory quality,
Bahrain is the leading GCC country.
Bahrain also performs well against peers in
its government effectiveness and control of
corruption. By contrast, Bahrain does not
score well on the dimensions of voice and
accountability and political stability.

11

39

Change

-7.2

-5.2

+1.2

+0.2

-2.1
+1.3

Higher percentile ranks indicate better governance ratings

Environmental Performance

Conclusion

The 201012 Environmental Performance

Index (EPI) published by Yale University
ranks Bahrain 145th out of 163 countries.
The 2010 report was the first time Bahrain
was included in the index. The EPI
compares countries based on the extent to
which they preserve their environment.

The socio-political unrest that Bahrain

witnessed during 2011, coupled with
instances of broader instability in the Middle
East region, had an effect on the Bahraini
economy in the first quarter of 2011,
although the economy recovered faster than
expected in the second half of the year.
Additionally the first two quarters of 2012
have performed positively; real GDP in
Bahrain grew by 4.2% in the second quarter
relative to the same quarter last year.

Bahrains overall EPI score is 42.0 (out of

100). In the environment of public health
sector, Bahrain scored very highly (83.7).
Within this sector, Bahrain excelled in water
and its effects on humans (100), indoor air
pollution (94.7), and environmental burden
of disease (84.7). The main reason for the
score averaging out to be 83.7 is outdoor
pollution which had a relatively low score of
35.7.

Despite the recent challenges, Bahrains

economy remains in a strong position and
the Kingdoms key characteristics make it
extremely competitive on a global scale.
Above all, Bahrain benefits from
macroeconomic stability, low inflation, low
taxation, openness to global trade and a
strong financial sector. That said, there are
several improvements that need to be made
to strengthen Bahrains economy and
welfare, as well as to enhance its relative
standing in the GCC and MENA regions.
These include:

In the ecosystem vitality sector13, Bahrain

scored very poorly (0.23). This is due to low
scores in most of the sub-categories in this
sector. Fisheries scored (35.4), Agriculture
(34.5), Climate Change (25.49), Air
pollution (17.7), and Biodiversity and
Habitat (13.6).

In the GCC region, Bahrain ranks 5th and in

the MENA region it ranks 17th out of 19
countries. These results are an important
indicator for Bahrain, suggesting that more
attention should be placed on improving its
ecosystem vitality and reducing CO2
emissions.

12

The 2012 EPI is available but Bahrain is only featured in

the 2010 EPI
13
Ecosystem vitality scores are based on seven constituent
policy categories: air pollution (ecosystem effects), water
(ecosystem effects), biodiversity and habitat, forestry,
fisheries, agriculture and climate change.

40

Enhancing
the
university-industry
collaboration in R&D and further
improve the education system
Reducing Bahrains high public
spending (to avoid the risk of sovereign
debt crisis)
Reducing the time is takes to register a
property
Further empowering Bahraini females
and support their integration in the
labour market and help women in
achieving political positions
Increasing availability of credit for
consumers and businesses
Reducing the number of procedures an
investor has to go through

Reducing the time it takes to set up a

company
Encouraging innovation and research
and development
Reducing
restrictive
business
regulations
Increasing inward foreign direct
investment
Improving e-government services
Stricter implementation of the United
Nations Convention against Corruption
Improving adult literacy rates.
Improving the efficiency of custom
clearances and international shipments.

41

Chart Set

42

Chart Set
Key Economic Indicators
Annual Bahrain GDP Growth Rate

Inflation rate
Consumer Price Index

6%
5%

9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

4%
3%
2%
1%

2004

2005

2006

2007

2008

2009

2010

2011

Mar-12

Jan-12

Nov-11

Sep-11

Jul-11

May-11

Mar-11

Jan-11

Nov-10

Sep-10

Jul-10

May-10

Mar-10

Jan-10

Nov-09

-2%
2003

Sep-09

0%
-1%
-3%

Source: Central Informatics Organization

Source: Central Informatics Organization - revised figures

Quarterly GDP growth in constant prices

Bahraini exports and imports ending Apr 2012

USD mn

3,500
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%

3,000

2,500
2,000
1,500
1,000
500
Q1

Q2

Q3

Q4

Q1

2009

GDP quarterly growth

Q2

Q3

2010

Q4

Q1

Q2

Q3

Q4

Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan

Q4

2011

2005

GDP Y-o-Y growth

Source: IMF

Source: Central Informatics Organization , EDB analysis

43

2006

2007

2008
Exports

2009

2010

2011 2012

Bahrains Terms of Trade

Annual Percentage Change

Net International Investment Position

BD Millions

15%

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

10%
5%
0%
-5%
-10%
-15%
2005

2006

2007

2008

2009

2010

2011

2007

Source: Central Bank of Bahrain , National Oil & Gas Authority ,

Central Informatics Organization

2008

2009

2010

2011

Source: Central Informatics Orgnization , EDB analysis

Labour Market
Current Account Balance
Percent of Nominal GDP
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%

Employment by Nationality
Persons

Thousands
700
600
500
400
300
200
100
0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011f

2002

2003

2004
Total

Source: Central Informatics Organization

2005

2006

Bahraini

Source: Labor Market Regulatory Authority

44

2007

2008

2009

2010

Non-Bahraini

2011

Employment by sector
Persons

600,000

Public Sector Employment by Nationality

Persons
Thousands
60

500,000
400,000

50

300,000

40
30

200,000

20
100,000

10

2003

2004

2005

2006

2007

2008

Private sector employment

2009

2010

2002

2005

2006

2007

2008

2009

2010

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q3

Q1

2004

Bahraini

2011

Non-Bahraini

Source: Labor Market Regulatory Authority

Employment Growth Rate

Year on Year Percentage

Thousands

Private Sector Employment by Nationality

Persons

2003

2004

2005
Total

2006

2007
Bahraini

2008

2009

2010

2002

2011

2003

2004

2005

2006

Bahraini

Non-Bahraini

Source: Labor Market Regulatory Authority (LMRA)

Source: Labor Market Regulatory Authority

45

2007

2008

2009

Non-Bahraini

2010

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

0%

Q1

5%

Q3

10%

Q1

15%

Q3

450
400
350
300
250
200
150
100
50
0

20%

-5%

2003

Public sector employment

Source: Labor Market Regulatory Authority

25%

Q1

Q1

2011

Q3

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

2011

Banking and Finance

Bahrain's Unemployment Rate

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

M3*
BD bn

12
10
8
6
4
2

2008

2009

2010

2011

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

May

Sep

Jan

2007

May

Sep

Jan

2006

May

Sep

Jan

2005

May

Sep

Jan

May

2012

Source: Central Bank of Bahrain

* M3 is the broadest measure of the money supply in an economy. It includes currency, time
deposits, institutional and non institutional money-market funds and other large liquid
assets

Source: Ministry of Labor

Foriegn worker visa issuance

Retail and Wholesale Bank Assets

USD Million

Thousands
60

300,000

50

250,000

40

200,000

30

150,000

20

100,000

10

50,000
0
2009
Q1

Q2

Q3

Q4

2010
Q1

New Visas

Q2

Q3

Q4

2011
Q1

Q2

Q3

Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May

0
Q4

2005

Renewals

2006

Source: Central Bank of Bahrain

Source: Labor Market Regulatory Authority

46

2007

2008

2009

2010

2011

2012

Average Lending Rate

Annual Percentage

Real effective exchange rate index based on CPIs

2005=100

100

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

95
90
85
80
75

2005

2006

2007

2008

Business

2009

2010

2011

3%
2%
1%

2009

2010

2011

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3
2008

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May

2007

Q1

Q3

Q1

Q3

Q1

0%
Q3

2012

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

4%

Q1

2011

BHD/GBP

5%

2006

2010

Source: International Monetary Fund, World Bank WDI

Note: Measure of the value of a currency against a weighted average of several foreign currencies

Average Inter-bank Rate

Annual Percentage

2005

Q1

2009

Personal

Source: Central Bank of Bahrain

6%

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3

70

2012

Short term Interest rate -BHIBOR: 3 month

Interbank rate: Quarterly average: 6 months

2005

Source: Central Bank of Bahrain

2006

2007

Source: Central Bank of Bahrain

47

2008

2009

2010

2011

2012

BHD/EURO

Bahrain stock exchange index: All shares

July 2004=1000

3,500
0.7
3,000

0.6
0.5

2,500

0.4

2,000

0.3

1,500

0.2

1,000

0.1

500
Jan

0
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May

2011

May

Sep

Jan

2010

May

Sep

Jan

2009

May

Sep

Jan

2008

May

Sep

Jan

2007

May

Sep

2012

2005

2006

2007

2007

2008

2009

2010

2011

2003

2012

2004

2005

2006

2007

Refined oil
Source: National Oil & Gas Authority

Source: Central Bank of Bahrain

48

2008
Crude oil

2011

2009

2012

2010

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

May

Jan

Sep

May

Jan

Sep

May

Jan

Sep

May

Jan

Sep

May

Jan

Sep

May

Jan

Sep

May

Jan

Sep

Jan

Q1

Q1

Q3

Q1

Q3

28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000

May

2010

Quarterly oil production

Thousands of barrels

2006

2009

Production

BHD/JPY

2005

2008

Source: Bahrain Bourse

Source: Central Bank of Bahrain

Q3

Jan

2006

May

Sep

Jan

2005

May

Sep

Jan

May

0.0

2011 2012

Seasonally Adjusted Gas Production

Million cubic feet

Sales and Production

of Liquefied Petroleum Gas (LPG)

Value
BD Th

145,000
140,000

120,000

135,000

100,000

Volume
Barrel Th
4,100
4,000
3,900
3,800
3,700
3,600
3,500
3,400
3,300
3,200

130,000
125,000

80,000

120,000

60,000

115,000

40,000

110,000

20,000

100,000

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1

105,000

2003

2004

2005

2006

2007

2008

2009

2010

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2011 2012

Value

Source: National Oil and Gas Authority

Source: National Oil & Gas Authority

Oil price : Europe Brent Spot Price FOB

(Dollars per Barrel)

8/20
12

140

Hundreds
35

120

2/1/2012

Aluminium Monthly Prices

USD per Metric Ton

0
9/2004
12/2004
3/2005
6/2005
9/2005
12/2005
3/2006
6/2006
9/2006
12/2006
3/2007
6/2007
9/2007
12/2007
3/2008
6/2008
9/2008
12/2008
3/2009
6/2009
9/2009
12/2009
3/2010
6/2010
9/2010
12/2010
3/2011
6/2011
9/2011
12/2011
3/2012
6/2012

7/1/2011

5/1/2010

12/1/2010

3/1/2009

10/1/2009

8/1/2008

1/1/2008

5
6/1/2007

0
4/1/2006

10
11/1/2006

20
9/1/2005

15

2/1/2005

40

7/1/2004

20

12/1/2003

60

5/1/2003

25

3/1/2002

80

10/1/2002

30

8/1/2001

100

1/1/2001

Volume

source: US Energy Information

Administration

Source: International Monetary Fund via Index Mundi

49

Thousands

Aluminium Production
Metric ton

Seasonally Adjusted Electricty Production

GW/h
3,500
3,300
3,100
2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500

250
200
150
100
50
0

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2003
2004
2005
2006
2007
2008
2009
2010

2003
Source: Aluminium Bahrain

2005

2006

2007

2008

2009

2010

2011 2012

Source: Centeral Informatics Orgniazation

Petrochemical Production
Metric ton

Number of Construction Permits

Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1

4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12

Thousands
450
400
350
300
250
200
150
100
50
0

2004

2003

Source: National Oil and Gas Authority

2004

2005

2006

2007

2008

2009

Source: Ministry of Municipalities Affairs and Urban Planning

50

2010

2011 2012

Number of Newly Issued Commercial Licenses

Non-Bahraini Visitors by Mode of Transport Per Quarter

Thousands

Thousands

2.5

3,000

2.0

2,500
2,000

1.5

1,500

1.0

Total

Manufacturing

By Land

Construction

By Air

Q3

Q3

Q1 2011

Q1 2010

Q3

Q1 2009

Q3

Q1 2008

Q3

Q3

Q1 2007

Q3

Q1 2006

Q1 2005

Q3

Q1 2003

Q1 2004

Q1 2003
Q2
Q3
Q4
Q1 2004
Q2
Q3
Q4
Q1 2005
Q2
Q3
Q4
Q1 2006
Q2
Q3
Q4
Q1 2007
Q2
Q3
Q4
Q1 2008
Q2
Q3
Q4
Q1 2009
Q2
Q3
Q4
Q1 2010
Q2
Q3
Q4
Q1 2011
Q2
Q3

500

0.0

Q3

1,000

0.5

By Sea

Source: Ministry of Culture

Source: Ministry of Industry and Commerce

Telecommunication

Tourism
Non-Bahraini Visitors to Bahrain by Quarter

Mobile Subscribers
Th Persons

Thousands
2,000

3,500
3,000

1,500

2,500

1,000

2,000

500

1,500
1,000

500

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Q3

Q3

Q1 2011

Q1 2010

Q3

Q1 2009

Q3

Q3

Q1 2008

Q1 2007

Q3

Q3

Q1 2006

Q1 2005

Q3

Q1 2004

Q3

Q1 2003

0
Total mobile subscribers
Postpaid mobile subscribers
Source: Telecommunications Regulatory Authority
Source: Ministry of Culture

51

Prepaid mobile subscribers

Fixed Line and Broadband Subscribers

Thousands

350
300
250
200
150
100
50
0
2004

2005

2006

2007

2008

2009

2010

2011

Fixed telephone lines

Broadband subscribers
Source: Telecommunication Regulatory Authority

52

Sources

The Economic Outlook

IMF
World Bank
IIF
OECD
US Federal Reserve
Eurostat
Bank of Japan
Bloomberg
Brent Oil Price History

Microfinance: An Untapped Opportunity

Ministry of Labour
United Nations Capital Development
Fund
Grameen Bank
UNDP
Ebdaa Bank
Family Bank
Awal Society
Child and Mother Welfare Society

Bahrains Global Rankings Performance

Heritage Foundation 2012 Index of

Economic Freedom

53

Fraser Institute Economic Freedom of

the World
The United Nations Development
Program 2011 Human Development
Report
The World Bank 2012 Logistics
Performance Index
Transparency International 2011
Corruption Perception Index
UNESCO Education Development
Index
United Nations Trade and Development
2012 World Investment Report
World Bank 2012 Doing Business
Report
World Economic Forum 2012 Financial
Development Report
World Economic Forum 2012 Gender
Gap Report
World Economic Forum 2012 -2013
Global Competitiveness Report
World Economic Forum 2012 Global
Information Technology Report
World Economic Forum 2012 Global
Enabling Trade Report
World Economic Forum 2012 Travel
and Tourism Competitiveness Report
World Bank 2011 Worldwide
Governance Indicators
Yale University Environmental
Performance Index

Abbreviations

OECD: Organization for Economic

Cooperation and Development

CIO: Central Informatics Organization

SIO: Social Insurance Organisation

CMWS: Child and Mother Welfare Society

UAE: United Arab Emirates

CPI: Consumer Price Index

UNCTAD: United Nations Trade and

Development

CPI: Corruption Perception Index

UNDP: United Nations Development
Program

ECB: European Central Bank

EDB: Economic Development Board

UNESCO: United Nations Educational,

Scientific and Cultural Organization

EDI: Education Development Index

US: United States

EPI: Environmental Performance Index

WB: World Bank

ETI: Enabling Trade Index

WEF: World Economic Forum

FDI: Foreign Direct Investment

WGI: Worldwide Governance Indicators

GCC: Gulf Cooperation Council

WIR: World Investment Report

GCI: Global Competitiveness Index

YoY: Year on Year

GDP: Gross Domestic Product

HDI: Human Development Index
HDR: Human Development Report
IIF: The Institute of International Finance
IMF: International Monetary Fund
LMRA: Labour Market Indicators Library
LPI: Logistics Performance Index
MFI: Microfinance Institution
MOL: Ministry of Labour
MoSD: Ministry of Social Development
NGO: Non-Governmental Organization
NRI: Networked Readiness Index
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