Economic Vision 2030 for Bahrain

1. Economy: Robust economic growth that benefits the people 14

2. Government: An efficient and effective government 17

3. Society: A just, thriving society 20 From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 05 2008 2010 2012 2014 2016 Introduction Bahrain’s economy has prospered over the past decades. Our real The need for coordinated reforms: National, regional and gross domestic product (GDP) has grown more than 6 percent global developments compelling us to develop a per annum in the past five years, stimulated by resurgent oil coordinated Economic Vision. prices, a thriving financial sector and a regional economic boom. International confidence in our economy has also increased, with The guiding principles of our Economic Vision: The principles foreign direct investment inflows increasing from BHD 0.2 billion embedded in our aspirations for the future: competitiveness, in 2003 to BHD 1.1 billion in 2006. This economic progress has fairness and sustainability. improved living standards for Bahrainis. Over the last 20 years, life expectancy, for example, has increased from an average of 68 Aspirations: Bahrain’s aspirations for the economy, to 75; and infant mortality has dropped from 23 to fewer than 10 government and society; and the actions required to attain deaths per thousand. them. However, as one of the region’s pioneering nations, Bahrain can The ultimate aim is to ensure that every Bahraini household and needs to do even better. So far, the driving force behind has at least twice as much disposable income – in real progress has been our collective ambition for a prosperous, fair terms – by 2030. society. We could achieve much more if we shared a well-defined vision to steer our joint efforts and individual contributions. This reflects what we set out to achieve: the Bahraini people enjoying better living standards as a result of more attractive The Economic Vision 2030 serves to fulfil this role. It provides employment opportunities and higher wages. This aim will guidelines for Bahrain to become a global contender that can offer only be reached if the private sector, the government and our citizens even better living standards as a result of increased every member of Bahraini society all join together and work employment and higher wages in a safe and secure living hard to make it happen. environment. As such, this document assesses Bahrain’s current challenges and opportunities, identifies the principles that will guide our choices, and voices our aspirations. It is divided into the following corresponding sections: 06 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 The need for Bahrain’s economy can grow and prosper if we respond Even for those medium- to high-wage jobs created, Bahrainis coordinated effectively to the challenges and opportunities presented by are not the preferred choice for employers in the private sector, reforms the world around us. This section examines developments since the education system does not yet provide young people on the national, regional and international fronts that provide with the skills and knowledge needed to succeed in our labour impetus and direction to coordinated reforms. market. Nationally, our economy needs transformation For many years, Bahrain has been able to address these issues by redistributing oil revenues and offering citizens jobs in the Bahrain is facing a shortage of both quality employment and public sector. This has left us with an oversized public sector – a appropriate skills. situation that will be unsustainable in the future, considering the gradual decline of oil reserves. Over the next ten years, the size of Bahrain’s workforce will double. Currently, approximately 4,000 Bahrainis a year are The most sustainable way of resolving the imbalance and entering the job market with at least a college degree. If raising the quality of employment is a transformation to an present economic trends continue, the quality and number of economy driven by a thriving private sector –where productive jobs available will not satisfy the demand: enterprises, engaged in high-value-added activities, offer attractive career opportunities to suitably skilled Bahrainis. More low-wage jobs have been created over the past few years, leading to a stagnation of average wages of Bahrainis in the private sector. The private sector is creating on average only 1,100 jobs per annum with a monthly salary higher than BHD 500 for Bahrainis and about 2,700 jobs for non-Bahrainis. From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 07 2008 2010 2012 2014 2016 Regionally, the opportunity of unprecedented growth A progressive, stable government: calls for swift action In Bahrain, the strong rule of law provides stability and a safe investment environment. The political reforms our During the last few years, the Gulf Cooperation Council (GCC) nation has embraced have built the basis for an inclusive and has enjoyed high rates of economic growth. The GCC has cohesive society, supportive of ambitious programmes for become an emerging centre of finance, industry, and tourism. economic and social change. Our commitment to openness The region has seen significant inflows of capital due to high and democracy has invigorated economic development oil prices for several years. This growth is expected to continue while preserving the Kingdom’s traditional, one-family albeit at fluctuating rates given the recent volatility in the global spirit. economic climate. An ambitious, multicultural society: That said, Bahrain is well positioned to seize this opportunity. It The people of Bahrain have always been ambitious in offers investors a wealth of advantages their collective striving for a prosperous future. Bahrainis welcome foreigners into their country, integrating them into An exceedingly favourable business environment: their community in the true Islamic tradition of tolerance Bahrain is conveniently located at the heart of the GCC, and and hospitality. As a result, the population is diverse, living provides a gateway to Asia, Europe and Africa. In addition to and working together peacefully. the region’s standard economic incentives – zero taxation for private companies, few indirect taxes for private enterprises These are great qualities to build on, but Bahrain cannot afford and individuals, and free movement of capital – Bahrain to become complacent. In our region, decisions are made and offers one hundred percent foreign ownership of business implemented at an ever-accelerating pace. It is crucial to speed assets and real estate in most sectors of the economy. up reforms in order to capitalise on the opportunities that regional growth offers. 08 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 Globally, increased competition demands greater Countries worldwide have on average raised their labour productivity and innovation productivity by 21 percent over the past 25 years, while Bahrain’s improvement has been just 17 percent. Globalisation and increasing competition make the country’s current reliance on cheap expatriate labour unsustainable as On a global scale, Bahrain’s innovation output is currently a national competitive advantage as emerging global centres negligible. of low-cost manufacturing are gradually eroding this edge. We now need to rethink our place in the global value chain and Without increased productivity and innovation, Bahraini companies identify new sources of future economic strength. will not be able to remain competitive in the long run. In an ever-accelerating world economy, companies are learning Bahrain finds itself at a defining moment in time: our future faster about new trends, products and production methods, prosperity depends on whether we can change significantly and are becoming more productive as they learn. As a result, on multiple levels to keep pace with the world around us. innovation and productivity have become critical sources of We need to swiftly transform our economy, acquire the right competitive advantage. Bahrain has to step up its performance skills, and boost productivity and innovation. in the following two areas: From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 09 2008 2010 2012 2014 2016 The guiding A Vision unites people and voices their consensus on Sustainability principles of our the direction in which they wish to grow. A country’s Economic Vision A considerable share of the country’s growth over the last 2030 economic Vision should be based on sound knowledge two decades was driven by the public sector. This model is running out of steam, as government finances become tighter of factors that determine prosperity, be they in the area and competition increases in a global economy. By 2030, the of economy, government or society. private sector should be able to drive economic growth in Bahrain independently. Consequently, the process of developing the Economic Our Vision sees our economic prosperity built on a firm Vision 2030 for Bahrain was a comprehensive one foundation. Government finances will adhere to the principle of sustainability, upholding a system that is stable and forward- where Bahrainis from all walks of life contributed. looking. Bahrain will use its resources to invest for the future, International best practices were also evaluated to find improving its human capital through education and training, particularly in the field of applied sciences. those best suited to our context. In a world where modern technology and new competitors from across the globe are constantly shortening product lifetimes, Three interrelated principles emerged, which guide our entrepreneurship and innovation will ensure the sustainability ambitions: sustainability, competitiveness, and fairness. of a vibrant private sector. But economic growth must never come at the expense of the environment and the long-term Our success in championing any one of our principles well-being of our people: no effort will be spared to protect our will affect our success in upholding all of them. environment and preserve our cultural heritage. 10 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 Competitiveness Fairness Our Vision is that Bahrain attains a high level of competitiveness Our Vision is that the country’s future economic success will in a global economy. Increased productivity comes about much impact society more widely, creating a broad base of prosperity. more naturally in a competitive environment, driving economic Every individual can make a worth-while contribution to society growth, profitability and wages. Only high and continuously given the means and presented with the opportunity. improving productivity will enable businesses to increase their employees’ wages. For fairness to be nurtured, all transactions made by both the public and private sectors must be transparent. Free and fair Higher productivity requires people with the right skills for each competition should prevail, with private and public activities position. Competitive countries go to great lengths to educate taking place in the open, whether they concern employment, their people, retain qualified staff and attract foreign workers land for public auction or the outcome of a tender. The role with the skills that are lacking. The key is to make Bahrain a of the government is to provide the legal and regulatory great place to do business for both local and foreign companies. framework that ensures protection of consumers and fair Many factors combined make a country attractive for investors treatment for business owners – including foreign investors. in high-value-added industries: a high-quality public service, a This means stamping out corruption and seeing that laws are cutting-edge infrastructure and an appealing living environment justly enforced. are among the vital ingredients. Bahrain will need to offer them all. Fairness in society means that all are treated equally under the law, in accordance to international human rights; and that everyone has equal access to services, namely education and health care, and that the needy are supported via adequate job training and a targeted social safety net. From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 11 2008 2010 2012 2014 2016 2020 2020 2022 2022 2024 2024 2026 2026 2028 2028 Aspirations for Economy, Government and Society The principles that guide our Economic Vision 2030 need to be translated into action. The first step is to specify our aspirations for each dimension of the Vision: economy, government and society. This means asking ourselves: What kind of society do we want to live in? How can the private sector develop the economy? What should the role of the government be? This section outlines the aspirations for Bahrain’s future that will shape a bold policy agenda for the coming years. It also specifies how we will measure our progress in achieving our aspirations. 2008 2010 2012 2014 2016

1. Economy Robust economic growth that benefits the people 1.1 Bahrain stimulates growth by enhancing productivity and skills Bahrainis have the following interrelated aspirations for their economy, all of which will empower the private sector to drive Bahrain’s economic growth will be driven by increased economic growth: productivity in the private sector and by Bahrainis becoming the employee of choice for high-value-adding companies. 1.1 Bahrain stimulates growth by enhancing By 2030, businesses in Bahrain will have caught up with the productivity and skills world’s leaders in productivity. Our private sector will no longer equate competitiveness with low-cost expatriate labour, but 1.2 Bahrain diversifies and builds the economy instead will create productive, high-wage employment for by focusing on existing high-potential sectors Bahrainis. The productivity and proportion of high-wage jobs in our financial sector will be a benchmark for other sectors. 1.3 Bahrain transforms the economy in the longer-term by capturing emerging The ways in which the Government will support productivity in opportunities the private sector include: The sections below elaborate on each aspiration: Serving as a role model by continuing efforts via holding companies to improve governance and management of state-owned enterprises Providing incentives to motivate productivity gains in the private sector Opening up Bahrain’s markets ever more fully to expose our companies to process innovation and best practices 14 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 Continuing to attract foreign investment, which is one of the 1.2 Bahrain diversifies and builds the economy by key drivers of process innovation and best-practice transfer focusing on existing high-potential sectors Moreover, economic growth will create the foundation for Bahrain will strengthen the non-oil GDP growth of recent years. continuously increasing employment opportunities. The growing This growth will come from diversified economic activity. Our economy will create new jobs to employ Bahrainis entering the financial sector will remain our economic engine, but will be job market, while those Bahrainis already in the workforce will increasingly complemented by growth in other high-potential be able to move to better-qualified jobs and raise their income. sectors. This will nurture an expanding middle class with an improved quality of life. The Kingdom will create economic opportunities that are independent of oil by: The Government will ensure that economic growth benefits all Bahrainis fairly by: Encouraging investment in selected sectors beyond the financial sector to diversify non-oil economic growth such Ensuring that economic growth creates medium- to high- as tourism, business services, manufacturing and logistics wage jobs and raises incomes in all segments of society Promoting our export-oriented sectors to ensure that Creating a level playing field in the job market for Bahrainis Bahraini companies embrace the world markets for through immigration reform and the revision of labour products and services laws Potential measures of success: Real Gross Domestic Product Helping Bahrainis attain medium-to high-wage jobs through (GDP) growth and job contribution of high-potential sectors support programmes and lifelong training Potential measures of success: Real Gross Domestic Product (GDP) per capita; amount of foreign direct investments; productivity rate; Bahraini workforce participation rate; number of new medium-to high-wage jobs held by Bahrainis From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 15 2008 2010 2012 2014 2016 1.3 Bahrain transforms the economy in the longer- term by capturing emerging opportunities Bahrain’s economy will attain increasing levels of sophistication and innovation, enabling the country to claim an attractive position in the global value chain. As a result, we will capture emerging opportunities, particularly by expanding to knowledge-based sectors and by increasing our output of high- value-added goods and services. This will mean greater wealth for companies, employees and society. The Government and private sector will act as partners in this by: Creating an environment highly conducive to entrepreneurship and innovation Improving access to capital for SMEs, and access to venture capital for business in general Establishing a platform for advancing innovations to market readiness, which will help Bahrain tap into the global knowledge economy Potential measures of success: Real Gross Domestic Product (GDP) and job contribution of new emerging sectors 16 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028

2. Government An efficient and effective government 2.1 The Government focuses on developing high- quality policies Bahrainis have the following aspirations for their government: The Government of Bahrain will gradually move away from 2.1 The Government focuses on developing high- mere service provision. It will shift its focus to generating quality policies and enforcing sound, forward-looking policies in critical areas, such as economy and finance, health care, education, the environment, security and social justice. 2.2 The public sector becomes more productive and is accountable for delivering better- Bahrain will follow international experience, which shows that quality services via leaner organisations and governments significantly reduce costs and increase the quality operations of public services by outsourcing certain non-core government tasks and by fostering competitive dynamics in the provision of 2.3 A predictable, transparent and fairly enforced public services. regulatory system facilitates economic growth Some of the steps the Government needs to take include: 2.4 The sustainability of government finances is strengthened by reducing dependence on oil Building strong strategic, forward-looking as well as revenues to fund current expenditure operational, implementation-focused capabilities in all government institutions 2.5 A world-class infrastructure links Bahrain to Carefully selecting the services to be outsourced and the global economy actively seeking partnerships with the private sector These aspirations are explained in greater detail below: Establishing effective and efficient regulation before and rigorous supervision after privatisation. Potential measures of success: Quality of administration index and public-sector accountability index, part of the World Bank’s MENA Economic Developments and Prospects Report. From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 17 2008 2010 2012 2014 2016 2.2 The public-sector becomes more productive 2.3 A predictable, transparent and fairly enforced and is accountable for delivering better quality regulatory system facilitates economic growth services via leaner organisations and operations A predictable, transparent and fairly enforced regulatory The public sector will increase its productivity by becoming more system is a critical prerequisite for economic growth. Bahraini efficient and effective. businesses and individuals will reap the benefits of sound regulations, which will facilitate economic growth by keeping Bahrain will outperform its peers in reducing the size and cost competition free and fair. Our judicial system will ensure that of government. Its efficiency gains will come from leaner disputes in the business world are efficiently resolved in line organisations and operations. We will stamp out inefficiency and with a fair interpretation of the existing laws and regulations. eliminate duplicate process steps in those services that remain within public administration. The strong regulatory framework, combined with a track Government institutions will enjoy a strong performance culture record of fair enforcement, will strengthen investor trust and that puts customer interests and delivery of results at the centre of confidence in our free market economy. all its activities. As a result, it will design effective public policies Examples of actions to be taken include: and deliver high-quality services. Amongst other things, the Government will: Striving for maximum quality and consistency of regulation Transform public sector human resource management Improving enforcement through increased inspection and Strengthen civil service governance stronger consequence management Review and adjust government organization and processes to Continue Bahrain’s zero tolerance policy towards corruption streamline them and increase transparency and favouritism Establish a performance-management system that sets clear Upgrading the judicial system to ensure fair and speedy targets, measuring and linking the results of employees and resolution of disputes institutions with comparable rewards Potential measures of success: Public sector wage bill as a share Potential measure of success: Regulatory quality ranking, part of GDP; World Bank ranking for government effectiveness and of the World Bank’s Worldwide Governance Indicators accountability. 18 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 2.4 The sustainability of government finances is 2.5 A world-class infrastructure links Bahrain to the strengthened by reducing dependence on oil global economy revenues to fund current expenditures Bahrain will be fully linked to the global trade and information To ensure lasting fiscal stability, the Government will highways by 2030. To achieve this, the Government will attract increasingly reduce its dependence on oil revenues for funding public and private funds to create and maintain the required recurrent expenditure. It will achieve this by generating infrastructure and services. additional sources of revenue and cutting inefficient spending. Subsidies for water, electricity, gasoline and food, for instance, The country will have outstanding road, sea and air connections will exclusively target the needy to reduce costs and avoid to global markets. Utilities (electricity, water and gas) and overconsumption of scarce resources. services (logistics, public transport and telecommunications) will be readily accessible and competitively priced, providing a By funding the majority of its day-to-day expenditure from stable base for businesses. recurrent revenue independent of oil, the government will be able to apply oil revenues for the benefit of future generations, Examples of initiatives to advance Bahrain’s infrastructure e.g., strengthening its education and health care and building include: an attractive living and business environment. Improving overall planning processes for land utilisation, To plan for a future without oil, we must lose no time in taking transportation networks, electricity supplies and other aspects the following actions: of infrastructure including safety and security measures Identifying potential sources of recurrent government Accelerating private-sector involvement in the provision of revenues public infrastructure services Reducing inefficient spending Potential measure of success: World Economic Forum’s Infrastructure ranking Deciding how to invest oil revenues in ways that ensure the future prosperity of all Bahrainis Potential measure of success: Share of recurrent expenditure financed by recurrent revenues From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 19 2008 2010 2012 2014 2016

3. Society A just, thriving society 3.1 A high standard of social assistance gives all Bahrainis an equal start Bahrainis have the following aspirations for their society: Bahraini society in 2030 will be a meritocracy where hard 3.1 A high standard of social assistance gives all work and talent are rewarded with success. Basic care will be Bahrainis an equal start available irrespective of abilities, and all Bahrainis will enjoy equal opportunities. 3.2 All Bahraini nationals and residents have access to quality health care Some examples of initiatives essential for achieving this are: 3.3 A first-rate education system enables all Targeting housing support and subsidies at those most Bahrainis to fulfil their ambitions in need 3.4 A safe and secure environment Supporting and developing talented youths throughout the course of their education 3.5 Bahraini nationals and residents enjoy a sustainable and attractive living environment Encouraging private philanthropy and other support to charitable causes Let us look at what these aspirations entail: Potential measure of success: Share of households earning above the national minimum income 20 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 3.2 All Bahraini nationals and residents have access 3.3 A first-rate education system enables all to quality healthcare Bahrainis to fulfil their ambitions Bahrain will be a leading centre for modern medicine, offering Education empowers people to reach their full potential in high-quality and financially sustainable health care in the region. business, government and society. It will shape and develop Patients will have the choice of public and private providers the successive generations of leaders that our country needs that meet international standards for health-care provision. and will provide Bahrainis with the skills, knowledge and values that they need to become the employees of choice for Our health system will cater for the health-care needs of its high-valued added positions. rapidly growing and aging population and will address the key risk factors. The government will play a vital role in improving Because education is essential for making this Vision a reality, the health system along the following levers: we need to develop an education system that provides every citizen with educational opportunities appropriate to their Promoting and encouraging a healthy lifestyle individual needs, aspirations and abilities. Education and training need to be relevant to the requirements of Bahrain and its Providing quick, easy and equitable access to high-quality economy, delivered to the highest possible quality standards, health care and accessible based on ability and merit. Ensuring regulation of the health-care system by an To do this, we will develop a clear strategy for raising standards independent health regulator and performance in our schools, vocational institutions and universities. The strategy will need to: Developing, attracting and retaining health-care talent and fostering a high-performance ethic among all health- Focus on developing our most important educational care employees resource, our teachers, by improving their recruitment and training, enhancing the management of their performance, Potential measures of success: Life expectancy and improvements improving their image in society, and increasing the in provider performance according to health-care regulatory attractiveness of careers in teaching standards From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 21 2008 2010 2012 2014 2016 Provide quality training to our people in the applied and Adopting the latest technologies, and modernisation of advanced skills required for global competitiveness and police services and community policing programmes attract new industries to Bahrain Promoting a culture of awareness for crime prevention Set standards for quality across the education sector, regularly review the performance of our educational and Potential measures of success: Falling crime rates and developing training institutions and compare them with those of our joint disaster contingency plans competitors 3.5 Bahraini nationals and residents enjoy a Encourage research and development in universities to sustainable and attractive living environment create the platform for a knowledge-based economy Bahrain will continue to be home to a rich and ancient culture Potential measures of success: Improvement of educational and a sustainable natural environment. Various initiatives will be institutions in independent quality reviews and national taken to promote and protect both. examinations; scores in international tests of school performance (for instance, TIMSS, PISA and PIRLS) Protecting our natural environment will include: 3.4 A safe and secure environment Conserving our natural spaces for future generations to enjoy Bahrain will achieve safety and security through the provision of an integrated strategy to mitigate all risks and threats. Much Implementing energy-efficiency regulations (e.g., for is being done to reduce crime and violence and to reduce the buildings and electrical appliances) vulnerabiliy to other risks. Directing investments to technologies that reduce carbon Some examples of initatives include: emissions, minimize pollution and promote the sourcing of more sustainable energy 22 | From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain 2020 2022 2024 2026 2028 Ensuring an attractive living environment will include: Offering more – and more attractive – public spaces for families Providing more modern facilities that promote regular cultural and sports activities Enforcing laws on cultural preservation Making archaeological and Islamic sites a more prominent part of our cultural landscape Encouraging new generations of Bahrainis to gain experience and in-depth knowledge of our cultural heritage. Potential measures of success: Culture and Environment Index of the Economist Intelligence Unit Liveability Index: and concentration of air and water pollutants From Regional Pioneer to Global Contender: The Economic Vision 2030 for Bahrain | 23 Our country has come a long way in the short span of a few decades. However, we must step up the pace of our efforts to stay ahead in a globalising world. The current economic boom in our region provides the ideal opportunity to embark on fundamental changes that will accelerate our country’s growth. Having defined our goals and aspirations for the Kingdom, we will start developing the strategies and plans to make our Vision come true. Success will require the coordinated participation of all segments of society. As we work towards achieving our Economic Vision 2030, we should be mindful that this endeavour will require our collective efforts. Together, we can master the challenges so that we can share the fruits of today’s reforms with our children and the generations to come.