BAHRAIN - The Challenge Of Globalisation - Part 3.

The emirate of Bahrain, having remained virtually without any notable reform efforts for a quarter century between 1975 and 2000, has launched a series of bold liberalisation measures in the political and economic spheres. This has been done by the new Emir, Shaikh Hamad Bin Isa Al Khalifa, who came to power in March 1999 after the death of his father Shaikh Isa Bin Salman Al Khalifa. If the momentum achieved by the February 2001 referendum on a National Action Charter (NAC) can be maintained, then the emirate would emerge as a trend-setting democracy in the Persian Gulf region in the coming decade.

The latest efforts at political reform, in some ways the most wideranging ever to be attempted in the Gulf Co-operation Council (GCC), includes turning Bahrain into an almost Western-style democracy. The NAC being put in place by the Shaikh Hamad is bold in that it envisages turning the emirate into a constitutional monarchy with a partially elected parliament and an independent judiciary. No other monarchy in the GCC has considered such wide-ranging reforms.

The success of the Bahraini political liberalisation moves would depend on both internal and external factors, with the latter perhaps being more important in view of the role of Saudi Arabia as a key benefactor of the emirate. Bahrain is a very close ally of Saudi Arabia, and heavily dependent economically on the kingdom's goodwill. It would be very careful before undertaking any venture that may be regarded as undermining the interests of the kingdom. On the other hand, some APS sources say, the democratic experiment launched in Bahrain would not have been launched without the quiet blessings of Riyadh, with Crown Prince Abdullah Ibn Abdel Aziz, the day-to-day ruler of Saudi Arabia, being a man who is well aware of the way the post cold war world is evolving (see News Service No. 9).

On the economic front, reform measures had begun from the mid-1990s. The former Emir, Shaikh Isa Bin Salman Al Khalifa, had recognised that socio-economic problems were the main cause behind riots in Manama which erupted in December 1994, just ahead of a GCC summit in the city. Indeed, Bahrain joined the WTO on Jan. 1, 1995 as one of the founding members. A comprehensive effort is underway to attract foreign investment. For instance, Bahrain offers investors the advantages of no personal or corporate taxation, no restriction on capital or profit repatriation, a modern infrastructure, and duty free access to GCC states (see following).

The new emir's policies aimed at tapping into the positive aspects of globalisation are formulated with a thorough understanding of Bahrain's position in the region and its strengths and weaknesses. Although Bahrain does not have any notable hydrocarbon reserves, the emirate's economy is still affected by the volatility of the oil price. In 1998 and early 1999, the country suffered an economic slowdown due to low oil prices. Oil and gas account for about 50% of total Bahraini export earnings.

Since late 1999, however, the economy has recovered along with oil prices. The regime is well aware of the need to diversify into various industries. It knows that, if this is not done, the socio-economic situation in the years ahead could get much worse, with serious implications for domestic stability. Particular focus is being put on creating new employment opportunities, with 70% of Bahrainis being under the age of 27.