If I have learnt anything from 2016, it is that it is impossible to predict exactly what will happen in the next 12 months.
That said, while many of the events of the last year were unexpected to say the least, we also saw the evolution of a number of trends that have been developing over recent years.
At a regional level, it seems likely that the oil price and the way the region’s economies are working to adapt to it will continue to be a dominant theme. I won’t begin to attempt to predict oil prices but I do think we will continue to see important changes taking place across the region as countries make the changes necessary to move away from an economic reliance on hydrocarbons.
We have already seen some examples of this as countries around the region reduce subsidies and begin to diversify sources of government revenue while also rationalising expenditure.
Clearly this has put some pressure on growth in the short term, although in Bahrain the economy’s resilience means that we expect non-oil growth to record more than 3 percent for 2016 and 2.4 percent in 2017.
But alongside the challenges, we also view this trend as an opportunity in disguise. At a macro level, it is likely to mean a long-term shift from extensive growth driven by increases in capital, land and people to productivity-driven growth.
To give an example of what this looks like in practice, take the BPO (business process outsourcing) sector in Bahrain. A few years ago, BPO was something nice to have. Now, companies find there is more pressure to reduce costs, increase efficiency and improve service for millennial customers used to communicating with businesses through digital channels in order to remain competitive. As a result, demand for BPO is thriving.
Looking at the Bahraini economy we expect to see two main themes continue.
First, the ongoing acceleration of the over $32bn of planned infrastructure projects is likely to continue to act as a counter-cyclical growth driver in the near-term. And in many cases — such as the modernisation and expansion projects at Alba, Bahrain International Airport and BAPCO — they will also underpin longer term productivity growth in the future.
Second, we continue to see opportunities across a range of sectors for investors who are looking to access the GCC from Bahrain.
For example, the past year’s reforms to processes at the King Fahd Causeway have significantly brought down the time for businesses looking to export goods from Bahrain to Saudi Arabia. It now takes less than 24 hours to get goods from Khalifa Bin Salman Port to Saudi Arabia. This has the potential to accelerate the growth in a number of manufacturing clusters in Bahrain, particularly FMCG, aluminium and petrochemicals as well as the logistics businesses that service them.
In financial services, we are particularly excited about the possibilities in fintech. We’ve just hosted the World Islamic Banking Conference and as part of that we saw a day devoted to fintech, attracting a range of prominent international speakers including Lawrence Wintermeyer from Innovate Finance.
There are real opportunities as the industry evolves and Bahrain’s expertise in Islamic finance and its culture of innovation mean we are well placed to play a central role in the next phase of the sector’s development.
Likewise, on the theme of technology, we’ve also seen the announcement of Amazon Web Services’ (AWS) first sales office in the Gulf in Bahrain. This comes on the back of the launch of the region’s first cloud accelerator, by C5 Accelerate, working with AWS and the EDB, and demonstrates the potential for cloud-based technology to support entrepreneurs in the region. This is something where we expect to see further developments in the coming 12 months.
Overall, while we recognise the challenges that the current environment poses, we look forward to 2017 with optimism. The GCC is at an exciting point in its development as we begin to see the economic transformations taking shape and we look forward to the opportunities it will present.
Khalid Al Rumaihi, Chief Executive at Bahrain Economic Development BoardFor all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.