Since the discovery of crude oil on the main island in 1932, oil production and refining have dominated Bahrainís economy. Natural gas occurs along with the crude oil and comes out of the same wells. For a long time, the gas from the wells was allowed to escape into the air. In 1979 the government set up a company to collect and process the natural gas into propane, butane, and naphtha. Depletion of Bahrainís limited oil reserves has prompted efforts to develop other industries. For example, in the 1970s the government established Aluminum Bahrain (ALBA); aluminum smelting remains an important industry. In a further effort at diversification, the government has promoted tourism.
The government controls the oil and gas industry, most heavy manufacturing, and the bulk of the transportation and communications sectors, but it has undertaken efforts to privatize the economy. Banking, light manufacturing, and commerce are in private hands.
Bahrainís gross domestic product (GDP) was $8 billion in 2000, or $11,540 per capita. Services, including public administration, banking, and tourism, accounted for 59 percent of the GDP. Industry accounted for 40 percent, with manufacturing responsible for 19 percent and oil and gas extraction for most of the remainder. Agriculture contributed 1 percent of the GDP.
Of Bahrainís labor force of 312,401 people in 2000, 54 percent worked in industry, 43 percent in services, and 1 percent in agriculture. Almost 60 percent of the labor force was foreign-born, because native Bahrainis generally lacked the skills required for employment in many fields and many foreign workers were willing to work for low wages. Unemployment, estimated at 15 percent in 1996, remains a serious problem. Since the mid-1990s, unemployment has contributed to widespread, sometimes violent, political discontent among Shias, who are traditionally less advantaged and more prone to unemployment than the Sunnis.
Like its Gulf Arab neighbors, Bahrain has aimed for agricultural self-sufficiency, and it now produces about 75 percent of the fruits and vegetables that its population consumes. The main crops are dates, tomatoes, onions, and melons. The country also produces a large part of its milk, poultry, and egg requirements.
Beginning in the mid-1960s the government encouraged the growth of small-scale manufacturing. To this end, it offered tax incentives and low-interest loans to entrepreneurs. Factories in Bahrain produce plastics, ceramic tiles, paper products, and carbonated beverages.
After 1975, when the Lebanese Civil War began, Bahrain took over much of Lebanonís financial services industry, especially in the form of offshore banking units (OBUs). These OBUs are units of large multinational banking companies that operate in small (usually island) countries and dependencies where regulation is not as strict as in their home countries. Although declining oil revenues and fears aroused by civil unrest have hurt the banking sector, Bahrain remains a significant regional financial center. In 1989 the government established a small stock exchange, which it linked to Kuwaitís stock exchange in 1997.
Bahrain is a major air transportation hub, and together with the governments of Qatar, Oman, and United Arab Emirates member Abu Dhabi it operates an international airline called Gulf Air. The airport at Al Mu?arraq is a large international facility. Manama has a major port that serves as the home port for the Fifth Fleet of the United States Navy. In addition, nearby Minaí Salman serves as the major commercial port, while Sitrah contains the oil port. A well-developed road network, consisting of 3,261 km (2,026 mi) of roads, links the countryís population centers. Causeways link the island of Bahrain to the islands of Al Mu?arraq and Sitrah. In addition, the King Fahd Causeway, opened in 1986, links Bahrain to Saudi Arabia. A national bus company operates throughout the country. There are no railroads. Many Bahrainis rely largely on walking to get around, especially in rural areas, although the heat of summer limits physical activity.
Bahrain has an extensive and sophisticated communications network, including two AM radio stations, three FM stations, and two television stations. There are two daily newspapers in Arabic and one in English, seven weeklies covering various subject areas, and a number of other periodicals. The government exercises censorship over reports and commentary on domestic affairs. Bahrainis generally stay well informed about international events through foreign publications and satellite television links. In 1995 Bahrain gained access to the Internet, the worldwide computer-based information network.
Bahrainís currency is the Bahraini dinar (0.38 dinars equal U.S.$1; 2000), issued by the Bahrain Monetary Agency. In rural areas many transactions are made by bartering and trade rather than by using cash.
Imports of crude petroleum from Saudi Arabia for processing at Bahrainís oil refinery account for more than one-third of Bahrainís imports. Other imports include machinery and transportation equipment, food, and chemicals. Exports include petroleum and petroleum products, aluminum, and manufactured goods. Bahrainís major trading partners are Saudi Arabia, India, Japan, the United States, and the United Kingdom.
Bahrain belongs to a wide range of international and regional economic organizations. Because of its slight oil production, Bahrain is not a member of the Organization of Petroleum Exporting Countries (OPEC), but it is a member of the Organization of Arab Petroleum Exporting Countries (OAPEC), which seeks to coordinate Arab oil policy. Bahrain is a founding member of the Gulf Cooperation Council (GCC) and has participated in various council initiatives aimed at promoting economic cooperation among its members. Following independence in 1971, Bahrain became a member of the World Bank and the International Monetary Fund (IMF).