Saudi Arabia is Bahrain's top trade partner, and the two countries are tightly connected through longstanding business relationships and networks. How do you see this relationship evolving in the next five years?
According to our Economic Vision 2030, Bahrain's economy can grow and prosper if we respond effectively to the challenges and opportunities presented by the world around us. We aspire to shift from an economy built on oil wealth to a productive, globally competitive economy, shaped by the government and driven by a pioneering private sector. Beside its bright history and skilled productive population, Bahrain is privileged by its unique geo-business location. Being the only island state in the MENA region and in the middle of the GCC, with a causeway connection and near future railway bridge to Saudi Arabia gives it a great advantage to be the financial, trading, and investment hub for the GCC region. Alongside traditional political, business, human, and cultural relationships, the Kingdom of Saudi Arabia stands out as Bahrain's first trading partner and closest investment and services transactions counterpart. Recent trading transactions between the two countries are witnessing notable growth by making 250% progress between 2009 and 2014.
A more revealing reality about the mounting role of Bahrain as a regional trading and logistics hub for Saudi Arabia and the region at large is the fact that the rate of re-exports within Bahrain's exports to Saudi Arabia has more than doubled between 2009 and 2014 and rose from 23% to 61%. Given the emphasis laid by Bahrain upon its logistics, transportation, telecommunication operations, and infrastructure, and the vast potential of the planned King Hamad Bridge, such a role is bound to gain greater importance and rewards for both countries. Moreover, the investment landscape and business transactions between the two countries are also impressive. There are more than 1,000 registered and operating companies in Bahrain with Saudi ownership. There are also over 110 Saudi companies operating in Bahrain through branches or commercial agencies covering investment, finance, construction, transportation, telecommunications, tourism, aviation and other business and industrial sectors.
Economic diversification away from oil and gas and strong industrial growth is a strategy shared by Bahrain and Saudi Arabia, as well as the rest of the GCC. How are Bahrain and Saudi Arabia working together to achieve these goals?
Bahrain's Economic Vision 2030 development strategy, launched in 2008, aims to reduce the country's high dependence on oil and gas. The strategy has helped diversification efforts. The manufacturing sector continued to grow and constitutes the third largest contributor to Bahrain's economy after hydrocarbons and financial services. Bahrain's services sector has continued to grow, which represented around 58% of GDP. Furthermore, the telecommunications market was liberalized back in 2003. Bahrain's transportation sector has been streamlined toward the development and modernization of Bahrain's logistic infrastructure including air, port and maritime, and land transportation. The tourism sector not only draws on Bahrain's cultural and historical heritage, but also on its sports and business tourism potential. Such a performance has been in line with the ambitious diversification strides made by the Kingdom of Saudi Arabia and the rest of the GCC. Supported by Bahrain's traditional liberal economy, diligent regulatory system and friendly business environment, the Bahraini modern investment infrastructure has attracted the highest share of Intra-GCC investment flows. The GCC Center for Strategic Studies reporting that intra-GCC investment flows showed that Bahrain has attracted the highest percentage of these intra- GCC investments since its establishment in 1981. According to the study, Bahrain's share of such investments until 2010 amounted to $53 billion, representing about 36% of the total ($147billion). A vivid indicator of the advanced level of industrial diversification in Bahrain and Saudi Arabia is the components of trade exchanged between the two countries in 2014. The export list of Saudi products to Bahrain comprised the following manufactures: Sulfate resistant cement, refined sugar crystals, dairy products, soda lye or liquid soda, beverages, Portland cement, cans for aerating beverages, conductors, polyethylene, soap in the form of powder, and diapers for children. Meanwhile, the Bahraini exports to the Saudi market comprised the following manufactured items: aluminum alloys bars and rods, agglomerated iron ores and concentrates, dairy products, soft drinks, air conditioning, other aluminum wire and cable, handkerchiefs, tissues and towels, aluminum electric wire with steel core, and hollow profiles of aluminum alloys. Moreover, all GCC countries, including Bahrain and Saudi Arabia, are prioritizing economic diversification in general and to manufacturing and SMEs in particular. There is also a common GCC concern about industrial development related issues, such as the development of standards, intellectual property rights, enhanced market access to WTO MFN, and duty free for goods and services through free trade agreements (FTAs) and R&D, all of which impact on the competitiveness of GCC goods and services on the global platform.