London, Asharq Al-Awsat—Kamal bin Ahmed is the Bahraini minister of transportation and acting chief executive of the Economic Development Board. While visiting London, he spoke with Asharq Al-Awsat about recent economic developments in the country, among other issues such as this year’s Bahraini Formula 1 Grand Prix. He also discussed the latest restructuring of Gulf Air, which involved dismissing staff.
Like many oil-producing countries in the Gulf, much of Bahrain’s economic activity is focused on exporting oil and its derivatives, but Kamal bin Ahmed also talked about investments in non-oil sectors and their importance to the national economy, such as the country’s large aluminum industry.
Asharq Al-Awsat: What kind of growth are you expecting in non-oil sectors of the Bahraini economy?
Kamal bin Ahmed: According to the figures, 15% of GDP comes from non-oil sectors, making Bahrain’s economy the most diverse in the region. Also, the non-oil sector employs more people than the oil sector.
Diversification is continuing in order to create employment opportunities. The unemployment rate in Bahrain is no more than 3.8%. Nonetheless, we are working very hard to create valuable positions—not employment for employment’s sake, but for the benefit of the citizens and to improve the standard of living, as well as serving the national economy.
Creating low-paying jobs does not benefit the economy or Bahraini society. We believe that we must first develop the individual citizen. We are currently focusing on improving education and professional and technical training. We are likewise committed to investing in infrastructure and maintaining low competitive prices to attract investment.
Q: At the beginning of the year, you expected a 6% GDP growth rate. Does this expectation remain?
We expect the 2013 GDP to grow by more than 5%. The figure was reduced because oil production at the Abu Safah oil field was temporarily halted so that its production capacity could be increased.
Q: What are the most important non-oil sectors in Bahrain?
The banking sector remains one of the most important investment sectors in Bahrain, amounting to 17% of the GDP. There are more than 400 banks and financial institutions in Bahrain from all over the world, which serve all the countries in the region. The financial sector provides excellent employment opportunities for the people of Bahrain; roughly 67% percent of those working in this sector are Bahraini nationals and 38% are women.
Q: What about regional competitiveness in that sector?
I think that competition is beneficial, and that the market can absorb a lot of investments. Furthermore, the integration of the Gulf market supports economic growth as a whole and helps develop legislative frameworks and infrastructure. The Gulf is one of the most important economic powers in the world, and each county’s expansion plays a key part in the region succeeding as a whole. By 2020, USD 1.4 trillion will have grown into USD 2 trillion—nearly the size of the entire economy of India. Bahrain is a main investment gateway to the region, and there are many rich opportunities available.
Q: Formula 1 has had some tough times in the past—can you comment on the Bahraini Grand Prix this year and in the future?
By all standards, the Grand Prix this year was a success. I personally made sure that the delegations arrived and left in an orderly fashion. There can be no doubt about the economic benefits of the international grand prix that has put Bahrain on the map. The event creates roughly 3,000 jobs locally and brings in USD 330 million. I can say that all information released by the regulatory body indicates that there is a lot of confidence in Bahrain. We are confident that the license will be renewed in 2017 after the current contract for Formula 1 racing in Bahrain expires.
Q: There has been a lot of development in important sectors of the Bahraini economy, like insurance and aluminum. Why have these sectors become so prominent?
Laws and regulations set by the central bank over the years have made these sectors stable. They operate in a safe business and investment environment that attracts the likes of Allianz and Islamic Takaful to Bahrain.
Logistical, legal and consulting services distinguish Bahrain. The country’s economy is growing at a reasonable rate; the cost of establishing and building new businesses here is low; the price of land, offices and services is low. We cannot say that the investment environment in Bahrain is appropriate for all kinds of companies. For example, companies that require large volumes of gas do not suit Bahrain, given our inability to provide large quantities of gas. However, this may not be the case for other nations in the Gulf. Establishing a skilled workforce is one of the most important things that can be done.
Q: You have sought to add 6000 new jobs in Bahrain every year. Have you achieved this?
The Bahraini economy does indeed create more than 6000 jobs, but we need job creation that is appropriate for the Bahraini citizen. We need to change the types of jobs being offered.
Q: Gulf Air has experienced two very tough years. What progress has restructuring brought?
Like many airlines, Gulf Air has had some problems, but in January 2103 we launched a sweeping restructuring plan for the company. The first quarter has shown positive developments and all goals have been met. Among the most important steps was realigning its network, its fleet, and the number of employees needed by the company. We were forced to let go of some of the employees that were no longer necessary. Perhaps those steps should have been taken earlier, but we will make sure that every one of those workers is treated fairly, as stipulated in the labor laws.
Q: What about the first quarter results for the company?
The results from the first quarter have come out, and they indicate that the company’s performance is improving. Losses are down nearly 50% compared with where they stood prior to implementing the plan and taking bold steps to restructure the company.
Q: What are the most important aspects of the restructuring?
Redrawing the airlines’ network while maintaining profitable routes, especially those that benefit the Bahraini economy in the Gulf and surrounding regions. The fleet was reduced to 26 Airbus A330 planes and 20 A320 and A321 planes. Most of these aircraft are modern, reducing the average age of the fleet to 3.8 years—the younger the fleet, the better.
By the end of this month, the number of employees will have decreased by 770, more than half of whom will be foreigners. This was an important step in the plan, which was reflected in the company’s improved performance.
The economic model that the company had used since it started serving the Gulf market as one of four competitors was no longer appropriate, and restructuring has been necessary to prevent losses for some time.
Q: Regarding the investments in education and training for Bahraini youth, how substantial is the program for scholarships abroad?
We believe that information can come from anywhere in the world, so many government institutions are working to train and prepare students through courses both in Bahrain and abroad. An enabling institution could give scholarships to educate and train students or citizens, thus enhancing the Bahraini workforce. Last year saw a marked increase in accreditation, at a rate of 87%, while government support for these programs reached BHD 46 million that year. More than 75,000 people benefited from these programs. A further 4,700 Bahrainis benefited from the programs supporting professional degrees in different fields through 24 new projects. More than 15,000 have registered for training and professional development programs, bringing the total number of beneficiaries to 56,000; an increase of 32%. This is all being done to meet the demands of business owners, who need more than a thousand trained and qualified Bahraini workers every year.