Introduction
At present, the Kingdom of Bahrain can be viewed as a high-income country in which the proportion of affluent citizens is very high. This paper is aimed at discussing the economy of this state. In particular, much attention should be paid to the factors that contributed to the rapid development of Bahrein. Furthermore, one should clearly identify potential economic risks to which this country can be exposed. It is also critical to examine the strategies which are necessary to minimize these threats. Overall, one can argue that Bahrain has been able to attain considerable growth by relying on its natural resources, such as oil and natural gas. Additionally, the country tries to promote the development of other economic sectors such as tourism, finance, and construction industry. Nevertheless, the country may face considerable risks in the future due to such factors as the dependency on the petrochemical industry, declining supplies of natural resources, and shortage of skilled labor force. These are the main questions that should be discussed more closely.
The development of economy in Bahrain
Like many other countries, located in the Middle East, Bahrain has been able to achieve economic growth due to the increasing demand for oil and various petrochemical products. Additionally, the country is an exporter of natural gas. For instance, the country was able to increase its gross domestic product (GDP) during the period between 2001 and 2011. Currently, the average GDP per capita is about $ 51, 400 (Central Intelligence Agency, 2015). In terms of this criterion, Bahrain can be compared to various advanced countries.
However, the exportation of oil or natural gas is not the only factor that contributed to the economic growth of Bahrain. It should be mentioned that this country is the freest economy in the region. In other words, the government tries to remove barriers that can prevent people from participating in various economic activities. Similarly, foreign businesses can enter various sectors of the economy. Thus, the legal environment is also important for explaining the economic growth of this country.
Furthermore, the government of Bahrain pays attention to the diversification of the economy because this task is critical for the long-term development of the country. They focus on those industries that are not dependent on the exportation of petrochemical products. For instance, one can speak about the work of companies that export aluminum profiles as well as iron ore (Central Intelligence Agency, 2015). Additionally, it is important to consider service organizations that work in the tourist sector. Additionally, Bahrain is an important financial center in the Middle East. Apart from that, the country has invested capital in various forms of infrastructure. For instance, one can speak about roads, Internet access, power stations, and so forth. The initiatives have been critical for the attraction of foreign companies. These are some of the positive aspects that can be identified.
Potential risks
Nevertheless, there are certain important problems that should be taken into account. In particular, the supplies of oil and natural gas in Bahrain are expected to last for at most two decades. Admittedly, it is possible that new oil fields can be discovered; however, one cannot rely on the potential availability of these resources. One should keep in mind that at present, oil and refining account for 73 percent of the revenues derived through exports (Central Intelligence Agency, 2015).
Furthermore, this sector of the economy constitutes 21 percent of the total GDP. Apart from that, one should keep in mind that the price of oil has dropped significantly during 2014. Moreover, it is quite possible that this trend can persist in the near future. To a great extent, this tendency can be explained by the rapid development of various technologies. While discussing natural resources, one should mention that freshwater resources of Bahrain will soon be depleted.
Additionally, the economy of the country can be profoundly influenced by the political unrest in the Middle East. This argument is particularly relevant if one speaks about the wave of protests, which are known as the Arab Spring of 2011. At that time, the GDP of the country declined. These factors can affect the development of the local economy because this region is continuously influenced by the military conflicts between and within states. This is one of the main problems that should not be overlooked by people who design the economic policies of Bahrain.
One should also note that the percentage of expatriates in Bahrain is very high. In particular, foreign employees constitute 44 percent of the entire labor force (Kloep, 2012, p. 96). It should be noted that this trend has been observed in various high-income countries of the Middle East. This tendency indicates that many local people are not able to meet the professional standards set by local or foreign companies. Furthermore, they may have no incentive to seek employment.
Overall, the availability of a very skilled labor force is vital for the attraction of investors. This problem can fully manifest itself at the time when oil revenues may decline, and the country will need to look for new sources of revenues. These examples indicate that the country is exposed to various risks, and it should strengthen its resilience to these stressors.
On the whole, some of the strategies implemented by the government have been effective. In particular, one should speak about the investment in such areas as the financial service industry, infrastructure, tourism, and so forth. These initiatives are important for the sustainability of this country. Nevertheless, more attention should be paid to the quality of the labor force. These people should be prepared to work in various sectors of the economy, especially those businesses that are involved in the development and improvement of information technologies. This is why it is critical to focus on education in Bahrain. Admittedly, some steps have already been taken; for instance, it is possible to speak about the opening of Bahrain Polytechnic in 2008. Such policies should be continued because the benefits of such investments will be fully justified during the next two decades.
Conclusion
This discussion shows that Bahrain has benefited from the oil boom, which was observed during the last decade. In turn, many citizens of the country have achieved affluence. However, this state may soon encounter several important risks. These challenges are related to the declining supply of oil and natural gas. Apart from that, one should speak about such difficulties as political instability in the Middle East and the insufficient professional level of the local labor force. These are the main problems that should be addressed. At this point, the key task of policy-makers is to focus on the work of various educational institutions in Bahrain since they can play a critical role in raising the professional level of local employees.
Reference List
Central Intelligence Agency. (2015). The World Factbook: Bahrain. Web.
Kloep, M. (2012). Managed Equipment Services as a Conceptual Business Opportunity Model for the GCC with Focus on UAE: An Institutional and Economic Analysis. New York, NY: Books on Demand. Web.