Economy of Bahrain
Encyclopedia
According to the 2011 Index of Economic Freedom
published by the Heritage Foundation
and the Wall Street Journal, Bahrain
has the freest economy in the Middle East and North Africa region http://www.heritage.org/index/ and is tenth overall in the world. An alternative index, published by the Fraser Institute
, puts Bahrain in 44th place tied with 7 other countries.
For purchasing power parity comparisons, the US Dollar is exchanged at 0.30 Bahraini Dinars only. Mean wages were $19.81 per manhour in 2009.
workforce sending home a portion of its earnings. In 2003 and 2004, the balance of payments performance improved due to rising oil prices and increased receipts from the services sector. As a result, the current account balance registered a surplus of US$219 million in 2003 and a surplus of US$442 million in 2004, compared with a deficit of US$35 million in 2002. Bahrain's gross international reserves increased substantially in 2004 to US$1.6 billion, compared with US$1.4 billion in the previous three years (2001–2003).
and tourism
. The Kingdom is the main banking hub for the Persian Gulf
and a centre for Islamic finance, which has been attracted by the strong regulatory framework for the industry. According to the International Monetary Fund
's Financial System Stability Assessment of Bahrain's financial regulatory environment, published on 6 March 2006, found:
In 2005, Bahrain signed the US-Bahrain Free Trade Agreement
, becoming the first Persian Gulf state to sign such a bilateral trade agreement with the United States
. A massive privatisation programme is underway to sell off key government assets: utilities, banks, financial services, and telecommunications have started to come under the control of the private sector.
As a result the economy has been well positioned to exploit the extra revenues generated in the region thanks to the sustained high oil prices since 2002. In January 2006, the United Nations Economic and Social Commission for Western Asia
cited Bahrain as the fastest growing economy in the Arab world.
Between 1981 and 1993, Bahrain Government expenditures increased by 64%. During that same time, government revenues continued to be largely dependent on the oil industry and increased by only 4%. Bahrain has at times received significant budgetary support and project grants from Saudi Arabia
, Kuwait
and the United Arab Emirates
.
The government has used its modest oil revenues to build an advanced infrastructure in transportation and telecommunications. Bahrain is a regional financial and business center. Tourism
, especially from the region, has proved another significant source of income.
Bahrain has benefited from the oil boom since 2001, with economic growth of 5.5%. It has succeeded in attracting investment from other Persian Gulf states partly because it used the revenues of the 1970s-early 80s boom to invest in infrastructure development and other projects to improve the standard of living; health, education, housing, electricity
, water, and roads all received attention.
The success of ventures such as the Bahrain Grand Prix
has raised the Kingdom's international profile, and combined with the boom in Islamic banking
, has encouraged major airlines to resume services to the country, with Lufthansa
announcing on 14 March 2006 that it would schedule three flights a week to Manama from Frankfurt.
As part of its efforts to build a modern economy, Bahrain has initiated a series of labour reforms under Minister of Labour Majeed Al Alawi
in order to bring the labour market in to line with international standards.Bahrain intends to expand its high tech industries, invest in research and development, and strengthen its competitive edge within a global economy. In 2006,it was announced that the Bahrain Science and Technology Park,a Kuwait Finance House Bahrain initiative would be a reflection of this effort to create a diversified economy, provide high quality jobs for locals and international workforce, providing a place for innovative and inventive thinking that will have direct benefits to the island nation.
In 2009 it was announced that the Bahraini Government would be developing land next door to the Bahrain International Circuit
. The project being managed by @bahrain is a world-class mix of facilities including a state-of-the-art exhibition and convention facility, a choice of hotel accommodations ranging from mid-market to luxury, a multi-purpose indoor arena, an automotive club and engineering facility, retail and leisure establishments, a tech-tainment (technology interacting with entertainment) centre, a research institute, a technology park and a focus on education and training. @bahrain is part of the Mumtalakat group of companies and will dedicate more than 1 million square meters of business, entertainment and educational space with a value in excess of $2bn (BD 850 million), making it one of the largest investment projects to take place in Bahrain in the past five years.
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
Bahrain is generally a country which is open to creating a unique economy which is fast growing and open for all to create business opporturnities.
and natural gas
, the only significant natural resources in Bahrain, dominate the economy and provide about 60% of budget revenues. Bahrain was the first Gulf state to discover crude oil. Because of limited reserves, Bahrain has worked to diversify its economy over the past decade. Bahrain has stabilized its oil production at about 40,000 barrels (6,400 m³) per day, and reserves are expected to last 10 to 15 years. The Bahrain Oil Company refinery was built in 1935, has a capacity of about 250,000 barrels (40,000 m³) per day, and was the first in the Persian Gulf. After selling 60% of the refinery to the state-owned Bahrain National Oil Company in 1980, Caltex
, a U.S. company, now owns 40%. Saudi Arabia provides most of the crude for refinery operation via pipeline. Bahrain also receives a large portion of the net output and revenues from Saudi Arabia's Abu Saafa offshore oilfield.
The Bahrain National Gas Company operates a gas liquefaction plant that utilizes gas piped directly from Bahrain's oilfields. Gas reserves should last about 50 years at present rates of consumption.
The Gulf Petrochemical Industries Company is a joint venture of the petrochemical industries of Kuwait, the Saudi Basic Industries Corporation, and the Government of Bahrain. The plant, completed in 1985, produces ammonia
and methanol
for export.
Bahrain's other industries include Aluminum Bahrain, which operates an aluminum smelter—the largest in the world with an annual production of about 525,000 metric tons—and related factories, such as the Aluminum Extrusion Company and the Gulf Aluminum Rolling Mill Company (GARMCO)http://www.garmco.com. Other plants include the Arab Iron and Steel Company's iron ore pelletizing plant (4 million tons annually) and a shipbuilding and repair yard.
Bahrain's development as a major financial center has been the most widely heralded aspect of its diversification effort. International financial institutions operate in Bahrain, both offshore and onshore, without impediments. In 2001, Bahrain's central bank issued 15 new licenses. More than 100 offshore banking units and representative offices are located in Bahrain, as well as 65 American firms. Bahrain's international airport
is one of busiest in the Persian Gulf, serving 22 carriers. A modern, busy port offers direct and frequent cargo shipping connections to the U.S., Europe, and the Far East. Internationally recognised Bahraini companies include Investcorp
, the venture capital firm credited with turning around the fortunes of Gucci
.
, petroleum
production and processing account for about 60% of export
receipts, 60% of government
revenues, and 30% of GDP
. Economic conditions have fluctuated with the changing fortunes of oil
since 1985, for example, during and following the Gulf War
of 1990-91. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Persian Gulf
. A large share of exports consists of petroleum products made from imported crude
. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of both oil and underground water resources are major long-term economic problems.
Oil
and gas companies are taxed 46 percent on income derived from the sale of hydrocarbons and derivative products.
There is no personal income tax in Bahrain.
Employers and workers must pay social insurance contributions as follows:
(1) for old-age, disability and survivor protection: for Bahraini employees, employers pay 10% of salary plus constant allowances, workers pay 5% plus constant allowances; for non-Bahraini employees, employers pay 3% of salary plus constant allowances (then being entitled only to employment injury benefits).
(2) for unemployment insurance: since June 1, 2007, all wages are subject to a 2% tax, paid for equally by the employer and the employee, applicable both to nationals and non-citizens and supplemented by a government contribution of 1%. This makes Bahrain the first of the GCC
countries to implement a UI scheme.
Index of Economic Freedom
The Index of Economic Freedom is a series of 10 economic measurements created by The Heritage Foundation and The Wall Street Journal. Its stated objective is to measure the degree of economic freedom in the world's nations....
published by the Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...
and the Wall Street Journal, Bahrain
Bahrain
' , officially the Kingdom of Bahrain , is a small island state near the western shores of the Persian Gulf. It is ruled by the Al Khalifa royal family. The population in 2010 stood at 1,214,705, including 235,108 non-nationals. Formerly an emirate, Bahrain was declared a kingdom in 2002.Bahrain is...
has the freest economy in the Middle East and North Africa region http://www.heritage.org/index/ and is tenth overall in the world. An alternative index, published by the Fraser Institute
Fraser Institute
The Fraser Institute is a Canadian think tank. It has been described as politically conservative and right-wing libertarian and espouses free market principles...
, puts Bahrain in 44th place tied with 7 other countries.
Macro-economic trend
This is a chart of trend of gross domestic product of Bahrain at market prices estimated by the International Monetary Fund with figures in millions of Bahraini Dinars.| Year | Gross Domestic Product | US Dollar Exchange | Inflation Index (2000=100) |
|---|---|---|---|
| 1980 | 1,158 | 0.37 Bahraini Dinars | 79 |
| 1985 | 1,375 | 0.37 Bahraini Dinars | 97 |
| 1990 | 1,703 | 0.37 Bahraini Dinars | 94 |
| 1995 | 2,199 | 0.37 Bahraini Dinars | 100 |
| 2000 | 2,996 | 0.37 Bahraini Dinars | 100 |
| 2005 | 4,859 | 0.37 Bahraini Dinars | 104 |
For purchasing power parity comparisons, the US Dollar is exchanged at 0.30 Bahraini Dinars only. Mean wages were $19.81 per manhour in 2009.
Balance of Payments
Bahrain's current account balance is characterized by surpluses in merchandise trade and international services, and a large deficit in unilateral transfers, which is accounted for by the country's large expatriateExpatriate
An expatriate is a person temporarily or permanently residing in a country and culture other than that of the person's upbringing...
workforce sending home a portion of its earnings. In 2003 and 2004, the balance of payments performance improved due to rising oil prices and increased receipts from the services sector. As a result, the current account balance registered a surplus of US$219 million in 2003 and a surplus of US$442 million in 2004, compared with a deficit of US$35 million in 2002. Bahrain's gross international reserves increased substantially in 2004 to US$1.6 billion, compared with US$1.4 billion in the previous three years (2001–2003).
Diversification
Though Current GDP per capita shrank by 2.4% in the 1980s, it bounced back to a growth of 36% in the 1990s as a result of successful diversification initiatives. Bahrain's urgency in embracing economic liberalisation is due to its need to diversify the economy away from its limited oil supplies. Unlike its Persian Gulf neighbours, Bahrain has little oil wealth and the economy has expanded into banking, heavy industries, retailRetail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
and tourism
Tourism in Bahrain
Bahrain receives two million tourists a year. Most visitors are from Arab states of the Persian Gulf but there are an increasing number of tourists from outside the region....
. The Kingdom is the main banking hub for the Persian Gulf
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...
and a centre for Islamic finance, which has been attracted by the strong regulatory framework for the industry. According to the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
's Financial System Stability Assessment of Bahrain's financial regulatory environment, published on 6 March 2006, found:
- The financial system is enjoying strong performance under favorable circumstances, and is likely to remain a major contributor to overall growth. The main risk stems from potential overheating in the economies of the region, but the system should be resilient to likely shocks.
- Prudential regulations are modern and comprehensive, and supervision is generally effective, especially in the dominant banking sector. Supervisory capacity needs to be expanded in line with new regulations and to keep up with the growth and increasing sophistication of financial institutions.
- The further expansion of the Islamic sector, the development of housing finance, and the deepening of securities markets are important for the future growth of the financial system. The banking and insurance sectors will eventually undergo consolidation. http://www.imf.org/external/pubs/ft/scr/2006/cr0691.pdf
In 2005, Bahrain signed the US-Bahrain Free Trade Agreement
US-Bahrain Free Trade Agreement
The United States-Bahrain Free Trade Agreement was signed September 14, 2004. It was ratified by the United States House of Representatives on December 7, 2005 by 327-95, with 10 not voting. The United States Senate approved the bill on December 13, 2005 by voice vote. The President of the United...
, becoming the first Persian Gulf state to sign such a bilateral trade agreement with the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. A massive privatisation programme is underway to sell off key government assets: utilities, banks, financial services, and telecommunications have started to come under the control of the private sector.
As a result the economy has been well positioned to exploit the extra revenues generated in the region thanks to the sustained high oil prices since 2002. In January 2006, the United Nations Economic and Social Commission for Western Asia
United Nations Economic and Social Commission for Western Asia
The United Nations Economic and Social Commission for Western Asia , headquartered in Beirut, Lebanon, is one of the five regional commissions under the administrative direction of the United Nations Economic and Social Council. UN-ESCWA promotes economic and social development of Western Asia...
cited Bahrain as the fastest growing economy in the Arab world.
Between 1981 and 1993, Bahrain Government expenditures increased by 64%. During that same time, government revenues continued to be largely dependent on the oil industry and increased by only 4%. Bahrain has at times received significant budgetary support and project grants from Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
, Kuwait
Kuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
and the United Arab Emirates
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
.
The government has used its modest oil revenues to build an advanced infrastructure in transportation and telecommunications. Bahrain is a regional financial and business center. Tourism
Tourism in Bahrain
Bahrain receives two million tourists a year. Most visitors are from Arab states of the Persian Gulf but there are an increasing number of tourists from outside the region....
, especially from the region, has proved another significant source of income.
Bahrain has benefited from the oil boom since 2001, with economic growth of 5.5%. It has succeeded in attracting investment from other Persian Gulf states partly because it used the revenues of the 1970s-early 80s boom to invest in infrastructure development and other projects to improve the standard of living; health, education, housing, electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
, water, and roads all received attention.
The success of ventures such as the Bahrain Grand Prix
Bahrain Grand Prix
The Bahrain Grand Prix is a Formula One Championship race which first took place at the Bahrain International Circuit on 4 April 2004.The Bahrain Grand Prix, sponsored by Gulf Air, made history as the first Formula One Grand Prix to be held in the Middle East...
has raised the Kingdom's international profile, and combined with the boom in Islamic banking
Islamic banking
Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
, has encouraged major airlines to resume services to the country, with Lufthansa
Lufthansa
Deutsche Lufthansa AG is the flag carrier of Germany and the largest airline in Europe in terms of overall passengers carried. The name of the company is derived from Luft , and Hansa .The airline is the world's fourth-largest airline in terms of overall passengers carried, operating...
announcing on 14 March 2006 that it would schedule three flights a week to Manama from Frankfurt.
As part of its efforts to build a modern economy, Bahrain has initiated a series of labour reforms under Minister of Labour Majeed Al Alawi
Majeed Al Alawi
Dr Majeed Mohsen Al Alawi is Bahrain’s former Minister of Labour Affairs. For a short time, he was also Minister of Housing. Under his leadership, the country carried out wide-ranging labour reforms with potentially profound implications for its economy and society. The reforms were not without...
in order to bring the labour market in to line with international standards.Bahrain intends to expand its high tech industries, invest in research and development, and strengthen its competitive edge within a global economy. In 2006,it was announced that the Bahrain Science and Technology Park,a Kuwait Finance House Bahrain initiative would be a reflection of this effort to create a diversified economy, provide high quality jobs for locals and international workforce, providing a place for innovative and inventive thinking that will have direct benefits to the island nation.
In 2009 it was announced that the Bahraini Government would be developing land next door to the Bahrain International Circuit
Bahrain International Circuit
The Bahrain International Circuit is a motorsport venue opened in 2004 and used for drag racing, GP2 and the annual Bahrain Grand Prix. The 2004 Grand Prix was the first held in the Middle East. Since 2006, Australian V8 Supercar has been raced at the BIC and the V8 races are named as the Desert 400...
. The project being managed by @bahrain is a world-class mix of facilities including a state-of-the-art exhibition and convention facility, a choice of hotel accommodations ranging from mid-market to luxury, a multi-purpose indoor arena, an automotive club and engineering facility, retail and leisure establishments, a tech-tainment (technology interacting with entertainment) centre, a research institute, a technology park and a focus on education and training. @bahrain is part of the Mumtalakat group of companies and will dedicate more than 1 million square meters of business, entertainment and educational space with a value in excess of $2bn (BD 850 million), making it one of the largest investment projects to take place in Bahrain in the past five years.
Investment
The stock market capitalisation of listed companies in Bahrain was valued at $21,176 million in 2008 by the World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html
Bahrain is generally a country which is open to creating a unique economy which is fast growing and open for all to create business opporturnities.
Hydrocarbon industry
PetroleumPetroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, the only significant natural resources in Bahrain, dominate the economy and provide about 60% of budget revenues. Bahrain was the first Gulf state to discover crude oil. Because of limited reserves, Bahrain has worked to diversify its economy over the past decade. Bahrain has stabilized its oil production at about 40,000 barrels (6,400 m³) per day, and reserves are expected to last 10 to 15 years. The Bahrain Oil Company refinery was built in 1935, has a capacity of about 250,000 barrels (40,000 m³) per day, and was the first in the Persian Gulf. After selling 60% of the refinery to the state-owned Bahrain National Oil Company in 1980, Caltex
Caltex
Caltex is a petroleum brand name of Chevron Corporation used in more than 60 countries in the Asia-Pacific region, the Middle East, and southern Africa.-History:...
, a U.S. company, now owns 40%. Saudi Arabia provides most of the crude for refinery operation via pipeline. Bahrain also receives a large portion of the net output and revenues from Saudi Arabia's Abu Saafa offshore oilfield.
The Bahrain National Gas Company operates a gas liquefaction plant that utilizes gas piped directly from Bahrain's oilfields. Gas reserves should last about 50 years at present rates of consumption.
The Gulf Petrochemical Industries Company is a joint venture of the petrochemical industries of Kuwait, the Saudi Basic Industries Corporation, and the Government of Bahrain. The plant, completed in 1985, produces ammonia
Ammonia
Ammonia is a compound of nitrogen and hydrogen with the formula . It is a colourless gas with a characteristic pungent odour. Ammonia contributes significantly to the nutritional needs of terrestrial organisms by serving as a precursor to food and fertilizers. Ammonia, either directly or...
and methanol
Methanol
Methanol, also known as methyl alcohol, wood alcohol, wood naphtha or wood spirits, is a chemical with the formula CH3OH . It is the simplest alcohol, and is a light, volatile, colorless, flammable liquid with a distinctive odor very similar to, but slightly sweeter than, ethanol...
for export.
Bahrain's other industries include Aluminum Bahrain, which operates an aluminum smelter—the largest in the world with an annual production of about 525,000 metric tons—and related factories, such as the Aluminum Extrusion Company and the Gulf Aluminum Rolling Mill Company (GARMCO)http://www.garmco.com. Other plants include the Arab Iron and Steel Company's iron ore pelletizing plant (4 million tons annually) and a shipbuilding and repair yard.
Bahrain's development as a major financial center has been the most widely heralded aspect of its diversification effort. International financial institutions operate in Bahrain, both offshore and onshore, without impediments. In 2001, Bahrain's central bank issued 15 new licenses. More than 100 offshore banking units and representative offices are located in Bahrain, as well as 65 American firms. Bahrain's international airport
Bahrain International Airport
Bahrain International Airport is an international airport located in Muharraq, an island on the northern tip of Bahrain, about northeast of the capital Manama...
is one of busiest in the Persian Gulf, serving 22 carriers. A modern, busy port offers direct and frequent cargo shipping connections to the U.S., Europe, and the Far East. Internationally recognised Bahraini companies include Investcorp
Investcorp
Investcorp is a manager of alternative investment products, serving high-net-worth private and institutional clients. Its principal client base is in the six countries of the Gulf Co-operation Council, but it also has institutional clients in North America and Europe...
, the venture capital firm credited with turning around the fortunes of Gucci
Gucci
The House of Gucci, better known simply as Gucci , is an Italian fashion and leather goods label, part of the Gucci Group, which is owned by French company PPR...
.
Economy - overview
In BahrainBahrain
' , officially the Kingdom of Bahrain , is a small island state near the western shores of the Persian Gulf. It is ruled by the Al Khalifa royal family. The population in 2010 stood at 1,214,705, including 235,108 non-nationals. Formerly an emirate, Bahrain was declared a kingdom in 2002.Bahrain is...
, petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
production and processing account for about 60% of export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
receipts, 60% of government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
revenues, and 30% of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. Economic conditions have fluctuated with the changing fortunes of oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
since 1985, for example, during and following the Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
of 1990-91. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Persian Gulf
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...
. A large share of exports consists of petroleum products made from imported crude
Crude
Crude can refer to:* Petroleum in its unprocessed form , including:** Brent crude oil** Heavy crude oil** Light crude oil** Sweet crude oil*** Pennsylvania Grade Crude Oil, a type of sweet crude** Synthetic crude oil**Crude jokes...
. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of both oil and underground water resources are major long-term economic problems.
Taxation
Taxation and import laws apply equally to Bahraini and foreign-owned companies, and foreign investors must comply with the same requirements and legislation as local firms.Oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
and gas companies are taxed 46 percent on income derived from the sale of hydrocarbons and derivative products.
There is no personal income tax in Bahrain.
Employers and workers must pay social insurance contributions as follows:
(1) for old-age, disability and survivor protection: for Bahraini employees, employers pay 10% of salary plus constant allowances, workers pay 5% plus constant allowances; for non-Bahraini employees, employers pay 3% of salary plus constant allowances (then being entitled only to employment injury benefits).
(2) for unemployment insurance: since June 1, 2007, all wages are subject to a 2% tax, paid for equally by the employer and the employee, applicable both to nationals and non-citizens and supplemented by a government contribution of 1%. This makes Bahrain the first of the GCC
Cooperation Council for the Arab States of the Gulf
The Cooperation Council for the Arab States of the Gulf , also known as the Gulf Cooperation Council , is a political and economic union of the Arab states bordering the Persian Gulf and constituting the Arabian Peninsula, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates...
countries to implement a UI scheme.