MANAMA: With $80 billion of projects either underway or planned, Bahrain’s economy is set to be powered by large-scale infrastructure projects in the years to come, bucking global and regional headwinds, according to the chief economic adviser to the Economic Development Board (EDB).
Dr Jarmo Kotilaine told a media roundtable yesterday that the active infrastructure pipeline continues to provide momentum in the near term, with $3.2bn worth of projects having already broken ground.
Delivering a presentation that shared insights from the EDB’s Bahrain Economic Quarterly report for the first quarter this year, he said the value of the projects in total amounts to more than double the country’s GDP.
They include the $5bn Bapco modernisation programme, the $3bn Alba Line 6 project – which is set to create the world’s largest single-site aluminium smelter, the $1.1bn airport modernisation programme; Bahrain’s first liquefied natural gas (LNG) terminal costing $990 million and $335m earmarked for a new Banagas gas plant.
He said the GCC Development Programme is set to further enhance its role as a key driver of economic activity this year as it sees sharp increase in the volume of active projects.
Expressions of interest have been solicited for the construction of the King Hamad Causeway which will add to the existing King Fahad Causeway, connecting Bahrain to Saudi Arabia and serving as a platform for the GCC railway.
Active projects that are part of the GCC Development Fund also saw a further increase in their aggregate value.
Dr Kotilaine said the fund alone is likely to see the fastest acceleration in its annual cashflow this year since its inception.
The cumulative total worth of GCC Development Fund projects that had broken ground by end-June reached around $3.2bn, marking a 20.2 per cent year-on-year (YoY) increase but was in fact a 111.3pc increase on the active pipeline as of early last year.
“As the latest batch of often multi-year projects makes headway, we can expect a substantial build-up of construction and related activity,” he added.
Moreover, the total value of awarded projects is expected to increase by nearly another $1.3bn by the end of the year, which would mark the most rapid increase in the history of the programme to date. So far, the cumulative cash flow of the programme is still slightly short of $1bn.
“As the region continues its transition in a low oil price environment, Bahrain offers further encouraging indications both of its resilience and the progress of diversification,” said Dr Kotilaine.
“The growth figures are very encouraging and underscore the impact both of the government’s reform agenda and the powerful countercyclical impact of the unprecedented infrastructure project pipeline.”
Another indicator of the industrial and manufacturing sector turning into the engine of growth said he was the fact the industrial index on the Bahrain Bourse improved by 40.8pc during the first half this year in a sharp reversal from a decline of 19.7pc in 2016.
Another boost to the country’s prospects is the fact that in spite of challenging global and regional trends, foreign direct invetsment (FDI) has continued to increase in 2015–2016.
Inward FDI into Bahrain totalled $282mn in 2016 and foreign investors created 1,600 new jobs in the country while the total achieved during the first six months of this year was an almost comparable 1,500.
The EDB, a semi-autonomous agency formulating Bahrain’s future economic development strategy, said it supported $280m worth of investment projects in the kingdom last year and it was likely to be exceeded this year.
“We are confident that recent initiatives such as the creation of a regulatory sandbox for fintech will continue to support growth and to make Bahrain an attractive destination for businesses looking to access the opportunities in the region,” said Dr Kotilaine.
An economic analysis of all the available United Nations Conference on Trade and Development data on Bahrain showed that the statistically significant drivers of inflows are very closely linked to the kingdom’s value proposition.
They tend to reflect the importance of regulation and human capital, said the EDB’s chief economic adviser.