Bahrain Essay

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Bahrain is a small Arab state (665 sq. km; estimated population 508,573 in 2007) situated in the Persian Gulf. It is an archipelago consisting of two main islands, Bahrain and Al Muharraq, and more than 30 smaller islands. The country’s economy depends on processing crude oil, manufacturing, financial and commercial services, and tourism. Manama, its main port, commercial center, and capital, is located on the northeastern end of Bahrain Island.

About 90 percent of Bahrain’s population live in urban areas, mainly in Manama and Al Muharraq. Islam is the religion of almost all Bahrainis and the majority of nonnatives. About 70 percent of native Bahrainis belong to the Shia sect of Islam, while the remaining population, including the ruling al-Khalifa clan, belong to the Sunni sect. Christians and other religious minorities represent about 19 percent of the total population. Languages spoken include Arabic (the official language), English, Farsi, and Urdu.

In 2002 the Emir of Bahrain, Sheikh Hamad bin Isa al-Khalifa, declared himself king and approved plans for a constitutional monarchy. The executive branch consists of the king and an appointed prime minister and cabinet. The National Assembly consists of an appointed 40-member Consultative Council and an elected 40-member Chamber of Deputies. In the 2006 elections, the Shia-dominated opposition secured 18 seats while Sunnis secured 22 seats.

Bahrain’s gross domestic product (GDP) is $16.9 billion (official exchange rate) or $34,700 per capita (estimated 2007). Services account for 56 percent of the GDP, industry for 43 percent, and agriculture for less than 0.5 percent. Since the discovery of petroleum in the 1930s, oil production and refining has been a mainstay of the country’s economy. However, depletion of oil reserves prompted governmental actions to develop other industries. In the 1970s the government started establishing aluminum smelting as an important industry. In a further effort at diversification, the government has also promoted industries such as ship repair and tourism. Bahrain is a worldwide center of Islamic banking. The country is also home to offshore banking units of large multinational banking companies because of its generous financial regulations and tax rules.

The government controls the oil and gas industry, heavy manufacturing, transportation, and certain other sectors. However, light manufacturing, banking, and commerce are managed by private firms, including multinational corporations. In 2006 Bahrain implemented a free trade agreement with the United States, the first of its kind in the Gulf region. Bahrain was described as the freest economy in the Middle East according to the 2006 Index of Economic Freedom published by the Heritage Foundation/Wall Street Journal.

Because the country’s refining capacity is much larger than the domestic production of petroleum, Bahrain imports about 225,000 bbl/d of crude oil from Saudi Arabia for refining and further processing. Other imports include machinery, transportation equipment, food, and chemicals. Exports include petroleum and its products, aluminum, and manufactured goods. Petroleum refining and production account for more than 60 percent of Bahrain’s exports, representing about 11 percent of GDP (exclusive of allied industries). Bahrain’s major trading partners are Saudi Arabia, India, Japan, the United States, and the United Kingdom.

Of the country’s labor force of 363,000 (estimated 2007), 79 percent work in industry, 20 percent in services, and 1 percent in agriculture. The unemployment rate is quite high (about 15 percent), at times contributing to discontent among Shias who are historically less advantaged and more prone to unemployment than Sunnis.


  1. Almossawi, “Starting and Sustaining Small Enterprises in the Kingdom of Bahrain: Investors’ Needs, Available Incentives, and Obstacles,” World Review of Entrepreneurship, Management and Sustainable Development (2005);
  2. Alyousha, “Investigating Bahrain Business Cycles,” Applied Economics (1997);
  3. Lawson, Bahrain: The Modernization of Autocracy (Westview Press, 1989).

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