Bahrain’s efforts to wean its economy off oil offer lessons for its neighbours
All six members of the Gulf Co-operation Council have lofty plans to wean their economies off oil. Bahrain is in many ways a forerunner of this effort. It built a financial sector back in the 1980s. More recently it passed a bankruptcy law, allowed 100% foreign ownership of firms and introduced flexible visas that allow some migrants to freelance. “Everything those guys are doing now, we tried already,” says Ausamah al-Absi, who heads the labour regulator.
Yet the fiscal picture is bleak. Oil provides about 70% of government revenue—and there is not enough of it. Last year’s deficit was a yawning 12% of. Wealthier Gulf countries had to offer a $10bn bail-out. Bahrain trimmed subsidies for power and water consumption in 2016. But more reforms planned for this year were postponed for fear they would trigger unrest.
State jobs still pay 70% more than those in the private sector, a figure that has grown over the past decade as the monarchy doled out increases and stipends to buy political calm. The gap fuels unrest in a country where the Shia majority is often frozen out of state jobs. Flexible work permits might slowly drive up wages in migrant-heavy sectors—but unhappy employers are trying to kill the programme.
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