High levels of infrastructure investment are not unusual in demographically dynamic emerging markets which inevitably have growing demand for real estate, social infrastructure, and transportation solutions. But infrastructure investment has arguably been even more important in the GCC region where it is an important aspect of the strategically anchored process of economic diversification as well as a central precondition of these economies being able to fully leverage their location-specific advantages. After all, the Gulf countries are highly open economies endowed with an exceptional strategic geographic position at the crossroads of the world’s two most populous continents, Asia and Africa. Good connective infrastructure is a way of making the region a key conduit for many of the flows passing between these geographies. In this particular area, visionary infrastructure investment over the past two decades has been one of the great, historic success stories of the GCC region.
What’s more, in the case of Bahrain, infrastructure investment has been a key growth driver in recent years. Indeed, the Kingdom is currently going through a period of unprecedented infrastructure build-up. worth of Strategically significant projects currently under various stages of execution have an aggregate value of some USD $32.5bn, which is comparable to the country’s annual GDP. In practice, the total project pipeline is more than twice this figure, highlighting broad-based commitment to long-term investment projects. This in turn is clearly underpinned by confidence in the country’s – and the broader region’s – longer-term growth prospects.
This project pipeline has delivered – and continues to provide – benefits at multiple levels. Perhaps most immediately, it has been an important source of continuity for the economy during a period of oil price volatility and regionwide fiscal consolidation, which in turn has brought non-oil growth across the region below its historical norm. In Bahrain, growth has held up quite well and been entirely led by the momentum of the non-oil economy. The average annual rate of headline real GDP growth in Bahrain in 2015-2017 was some 3.3% whereas the region as a whole saw growth decelerate to just below zero in 2017 from 3.8% in 2015. While this was led by the OPEC oil output cuts, non-oil growth momentum has also weakened markedly over this period. In Bahrain, however, the increased infrastructure activity has directly lifted the non-oil economy through faster construction sector growth which in turn has pushed up the momentum in other sectors through strong linkages.
But infrastructure investments have transformed the economy far beyond the short-term growth impetus. They have been important in boosting the long-term growth potential of the economy thanks to strategically anchored capital allocation in many areas. Some of the largest infrastructure investments during this period have been in the manufacturing sector where Alba’s sixth pot line is now nearing completion to create the largest single-site smelter in the world. Work is starting on the Bapco Modernization Program which will result in one of the most complex refineries in the region. These landmark investments will transition Bahrain’s manufacturing sector to the next generation through more efficient technology and operations. But they will also boost exports and open up a range of new downstream and trading activities. Simultaneously, energy security is being enhanced by a new LNG terminal, the development of newly discovered hydrocarbon deposits, and an unprecedented push for renewable energy.
Investments in connective infrastructure are another key plank. They are boosting capacity at key facility and expanding Bahrain’s ability to serve as a regional and global conduit for trade and travel. The expansion of the Bahrain International Airport is a key project but so is the planned new King Hamad Causeway to Saudi Arabia, as well as a national light rail network. In the area of infrastructure there have been substantial investments in telecommunications infrastructure but also new ICT solutions adopted such as cloud computing and Industry 4.0, which are part of a broader digitization drive. The new Amazon Web Services are the single largest foreign direct investment project in Bahrain’s history.
Real estate inevitably remains an important element of the investment landscape. Entire new districts are springing up to accommodate the needs of the growing population as well as investors. But some of the real property is productive and transformative. The education and healthcare sectors are continuing to attract substantial investment and one of the key strategic projects is the new King Abdullah Medical City in the south of the island. Real estate, similarly, remains a key plank of the tourism development strategy with some important beach resorts and other facilities under development to further capitalize on Bahrain’s exceptional potential in this area.
Overall, the infrastructure story remains an important element of the current phase of Bahrain’s development journey. It has been an effective source of continuity in growth but is also reshaping this island’s economy in a way that further builds on Bahrain’s pioneering status as the region’s most diverse economy.