Report No. 2058-BH

BahrainCurrent Economic Position and Prospects

June 28, 1978 FILE COPYEurope, Middle East and North Africa Region

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY UNIT

Bahrain Dinar (BD)

1 BD = 1,000 fils

CURRENCY EQUIVALENTS

1970 BD 1 = US$2.10US$1 = BD 0.48

1971-72 BD 1 = US$2.28US$1 = BD 0.44

1973-77 BD 1 = US$2.53US$1 = BD 0.395

Since January 28, 1978

BD 1 = US$2.579US$1 = BD 0.388

WEIGHT AND MEASURES

1 dunum = 1,000 square meters = 10,750 square feet

ABBREVIATIONS

ALBA - Aluminum BahrainASRY - Arab Shipping and Repair YardBANOCO - Bahrain National Oil CompanyBAPCO - Bahrain Petroleum CompanyBASREC - Bahrain Ship Repairing and Engineering CompanyBMA - Bahrain Monetary AgencyCFA - Consolidated Fund AccountOAPEC - Organization of Arab Petroleum Exporting CountriesOBUs - Offshore Banking UnitsOPEC - Organization of Petroelum Exporting CountriesRFA - Reserve Fund Account

FISCAL YEAR

Same as calendar year

FOR OYFCAL USE ONLY

BAHRAIN

CURRENT ECONOMIC POSITION AND PROSPECTS

TABLE OF CONTENTS

Page No.

BASIC DATAMAPSUMMARY AND CONCLUSIONS .............................- iv

I. INTRODUCTION ........................................ I

II. NATURAL RESOURCES ................................... 3

A. Oil and Gas .................................... 3B. Water Resources ................................ 5

III. HUMAN RESOURCES ..................................... 7

A. Population and Labor Force ..................... 7B. Education and Training ......................... 9C. The Labor Law .................................. 11D. Social Insurance Law ........................... 13E. Wages .......................................... 13

IV. MANUFACTURING AND CONSTRUCTION ...................... 14

A. Manufacturing .................................. 14B. Construction ................................... 16

V. AGRICULTURE AND FISHING .............. .. ............. 18

A. Agriculture .................................... 18B. Fishing ........................................ 19

VI. TRADE AND SERVICES ................ .. ................ 22

VII. PHYSICAL INFRASTRUCTURE .............. .. ............. 24

A. Transportation .................................. 24

1. Road Transport ............................ 242. The Saudi Causeway ........................ 253. Air Transport ............................. 254. Sea Transport ............................. 26

This report is based on the findings of an economic mission which visitedBahrain in February 1978. The Mission consisted of Messrs. Mehdi Ali (BankStaff), Orville J. McDiarmid and Jack Derrick (Consultants). The nationalaccounts shown in this report were compiled during a subsequent visit toBahrain in May 1978 by Messrs. Mehdi Ali and Vasilis Panoutsopoulos (NationalAccounts Specialist).

I This document has a rtricted distribution and may be used by recipients only in the performanceof their official duties. Its contents miay not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (Continued) Page No.

B. Telecommunications ............................. 27C. Electricity .................................... 28D. Urban Water Supply ............................. 29E. Housing ........................................ 30

VIII. DOMESTIC FINANCE ................. .. ................. 32

A. Public Finance ................................. 32

1. Public Sector Structure .... ............... 322. Revenues .................................. 323. Grants and Loans .......................... 344. Expenditures .............................. 35

B. Monetary Developments .......................... 38

1. Recent Monetary Developments .... .......... 382. Institutional Framework of the Monetary

System .................................... 393. Need for Specialized Banking .... .......... 41

IX. BALANCE OF PAYMENTS ................................. 43

A. Oil Revenues ................................... 43B. Other Exports .................................. 44C. Imports ........................................ 46D. Direction of Trade ............................. 46E. Other Current Account Items .... ................ 46F. Capital Items .................................. 47G. Reserves ....................................... 47

X. DEVELOPMENT PROSPECTS ............................... 48

A. Major Policy Issues ............................ 48B. Illustrative Projections ....................... 50C. External Assistance ............................ 52

ANNEX A: ALUMINUM SMELTER AND SHIP REPAIR FACILITIES

STATISTICAL APPENDIX

Page 1 of 2

COUNTRY DATA - BAhRAIN

AREA POPULATION DENSITY (1977)

674 km2

343,000 (1977) 1/ 510 per square kmRate of Crowth: 3.5% (from 1971-1977)- 5,650 per square km of arable land

POPULATION CHARACTERISTICS (1975) HEALTH (1976)

Crude Birth Rate (per 1,000) 46 Population per physician 1,600Crude Death Rate (per 1,000) 10 Population per hospital bed 350

ACCESS TO PIPED WATER (1977) ACCESS TO ELECTRICITY (1977)

Occupied dwellings without 2-5 % of population - total 98piped water (Z)

EDUCATION (1977)

Adult literacy rate % 47Primary school enrollment % 74

GNP PER CAPITA IN 1977-: US$3,795

GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWTH (% constant prices)

US $ Mln. % 1974-77 1977

GNP at Market Prices 1,387 100.0 5.3 1.1Gross Domestic InvestmentGross National SavingCurrent Account Balance -135 -9.7Exports of Goods, NFS 857 61.8Imports of Goods, NFS 1,126 81.2

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1976

Employment iJ V.A. Per WorkerValue Added-

US $ Mln. % No. _% US $ %

Agriculture 4/ 24.0 1.4 5,289 5.0 4,538 35Industry 5/ 948.0 57.2 42,503 40.0 22,304 173Services 6/ 686.0 41.4 58,406 55.0 11,745 91

Total/Average 1,658.0 100.0 106,198 100.0 12,862 0oo

GOVERNMENT FINANCE (1972-77)(BD million) Prov.

--------- Actual ------------------ Actual--1972 1973 1974 1975 1976 1977

Current Receipts 33.0 45.1 121.5 135.0 191.1 230.1Current Expenditure 24.4 34.5 44.4 67.8 88.3 115.1Current Deficit (surplus) 8.6 10.6 77.1 67.4 102.8 115.0Capital Expenditures 8.3 7.6 33.5 54.2 114.9 141.1

1/ For Bahraini population only.2/ The Per Capita GNP estimate is calculated by the same conversion technique as

the World Bank Atlas (1973-77 basis). See World Bank Atlas, 1976. All otherconversions to dollars in this table are at the average exchange rate prevailingduring the period covered. The Per Capita GNP estimate shown here is not com-parable with previous World Bank estimates as it is based on more up-to-datedata compiled by the mission. The estimate for 1977 GNP is preliminary (see Table 2.1 of Statistical Appendix).Preliminary estimate.

4/ Agriculture and fisheries._/ Mining, manufacturing, electricity and water, and construction.6/ The remaining sectors of the economy.7/ In view of the inadequacy of the employment data,the "unallocated" portion of

enployment is prorated over the three major sectors mentioned.

not availablenot applicable

Page 2 of 2

COUNTRY DATA - BAHRAIN

--------------------December 31 ----------------------

MONEY, CREDIT and PRICES 1972 1973 1974 1975 1976 1977(BD million outstanding end period)

Money and Quasi Money 87.9 99.7 145.8 184.2 303.8 353.3Bank Credit to Government Sector (net) -4.6 -8.4 -30.8 -50.9 -70.3 -44.4Bank Credit to Private Sector 44.0 73.5 120.7 160.8 267.9 310.6

(Percentage or Index Numbers)

Money and Quasi Money as % of GNP 75.0 31.0 42.2 56.0 64.4General Price Index (1970 = 100) 111.2 127.3 158.2 183.7 201.3 223.9

Annual percentage changes in:General Price Index 5.1 14.5 24.2 16.1 9.6 11.1Bank Credit to Government Sector -54.5 82.6 266.7 65.3 38.1 -36.8Bank Credit to Private Sector 23.2 67.0 64.2 33.2 66.6 15.9

BALANCE OF PAYMENTS 1974 1975 1976 1977 MERCHANDISE EXPORTS (AVERAGE 1974-77)

(Millions US$)

Exports of Goods, NFS 443.0 493.1 741.3 856.9 US$ Mln. %Imports of Goods, NFS 445.3 589.2 980.6 1126.4Resource Gap (deficit = -) -2.3 -96.1 -239.3 -269.5 Refined Oil 244.0 68.4

Others (includingre-exports) 112.5 31.6

Other Invisibles (net) 59.7 74.1 118.4 134.6Total 356.5 100.0

Balance on Current Account 57.4 -22.0 -120.9 -134.9Direct Investment 15.2 53.1 138.9 50.4 EXTERNAL DEBT, December 31, 1977

Loanis & Grants (net) 9.9 11.9 32.1 102.8Other Items1/ 29.3 82.2 3.5 -13.6 Total Outstanding and 153.6

Disbursed of whichIncrease in Reserves (+) 111.8 125.2 53.6 4.7 disbursed 65.0

Net Reserves (end year) 231.7 357.0 415.9 420.5 NET DEBT SERVICE RATIO FOR 19772/

RATE OF EXCHANGE

1971-72 BD1 = US$2.10 Total outstanding andUS$1 = BDO.48 Disbursed 0.78

1973-77 BD1 = US$2.53US$1 = BDO.395

Since January 28, 1978 BD1 = US$2.579US$1 = BDO.388

1/ Includes errors and omissions2/ Rates of Debt Service to Exports of goods and services

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SUMMARY AND CONCLUSIONS

Recent Developments

i. After achieving political independence in August 1971, Bahrain hasexperienced major changes in her economic structure and financial position.The quadrupling of international oil prices in 1974 and the consequent rapidexpansion of economic activity in the Gulf area resulted in an unprecedentedincrease of Bahrain's foreign exchange earnings from oil revenue and serviceactivities. Net earnings from oil rose from $68 million in 1972 to an esti-mated $528 million in 1977 while exports and re-exports increased from $105million to $399 million, respectively. These earnings were partly used bythe Government to launch an ambitious investment program aimed at strengthen-ing the country's physical infrastructure thus providing the base for adiversification of the economy. In its wake, public investment expendituresrose from $19 million in 1972 to $357 million in 1977. Most of these fundswere spent on electric power, water and sewage facilities, the expansion ofthe port, airport and road network, on public housing, schools and healthcentres. Along with the acceleration of public investment, the Governmentalso increased sharply the current expenditures for social services, espe-cially education and health, and introduced extensive subsidies for food andother consumption items. This together with fast rising increases in privatesector incomes led to a considerable growth in personal consumption and livingstandards.

ii. Stimulated by the expansion in public spending and by fast growingmarkets in the region, private sector activity grew rapidly. Foreign anddomestic trade, off-shore banking, hotel services, manufacturing and aboveall, construction, were major growth sectors. It is estimated that GDP inreal terms grew at 9.5 percent annually during 1974-77.

iii. More recently, however, some limitations to further economic growthhave become apparent. Gas, oil and water, Bahrain's principal naturalresources, are being depleted at i4creasing rates and are likely to losetheir past role as key engines of growth. Domestic oil production is expected

to decline at a rate of 6-1/2 percent a year and will cease to be an exportitem before the end of the century. Reserves of natural gas originally esti-mated at 20-25 billion cubic feet, are now thought to be less than half thatamount. Underground water which provided ample supplies in the past, isdeclining and will have to be supplemented increasingly by more expensive

desalinated water.

iv. The growing shortage of natural resources has been accompanied bysevere manpower limitations. This has led to a rapid inflow of foreign laborwho now represent approximately one-half of the labor force. Immigrant laborwhile providing urgently required skills, entails heavy economic and socialcost which in the longer run may be difficult to sustain in the face ofdeclining natural resources. The growing share of expatriates in Bahrain'spopulation is also raising political questions which will have to be addressedby the Government.

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v. The limits to growth originating from natural and human resourcesare reflected in Bahrain's financial position. 1977 may, in fact, have beena pivotal year in this respect. In that year both the country's internal andexternal accounts swung from a surplus to a deficit, and the pinch in finan-cial resources is beginning to make itself felt. Responding to this pressure,the Government has curtailed budgetary expenditures for the current year andis increasingly relying on foreign financing.

vi. Over-extension during the boom period has also led to a slow-downin private construction activity and brought land speculation to a halt.After increasing ten-fold from 1973 to 1976, housing cost have recently lostover 40 percent of their inflated values. Overall growth in the privatesector was apparently negligible during 1977.

Development Prospects

vii. The economic slow-down and the emergence of physical and human con-straints point to the need for a renewed effort to diversify Bahrain's eco-nomic structure. Instead of continuing to rely primarily on the exploitationof cheap natural resources the country will have to develop alternativesources of income. Given her favorable location in the Gulf there are goodprospects for Bahrain to strengthen her position as important service andentrepot centre for the region, and to develop her manufacturing capability.Substantial progress has already been made in these areas during recent years.Freedom from income taxation and simple government procedures for investorshave resulted in attracting a large number of foreign businesses, particularlybranches of international banks, to use Bahrain as a center for their activi-ties in the region and beyond. The construction of a causeway to Saudi Arabiawill provide additional incentives. The causeway will also facilitate theestablishment in Bahrain of ancillary industries to complement the petro-chemical and steel complex planned for Jubail in northeastern Saudi Arabia.Additional industries could be developed both for export and import substitu-tion, including the full utilization of Bahrain's new dry dock and its sup-porting workshops. A comprehensive study for agriculture could review pos-sibilities for productivity gains although the total volume of productionwill remain limited by the country's water resources. Fishing, on the otherhand, offers some scope for expansion as Bahrain's coastal water contain alarge variety of fish, particularly shrimp.

viii. Bahrain's potential for further economic development can, however,only be realized for the benefit of the local population if important ques-tions of national economic policy are being addressed. One of the most vitalissues appears to be rooted in the fact that Bahrain has not yet produced alabor force which can hold its own with expatriates in industrial pursuits.Greater efforts are therefore required to develop the technical skills of thelocal labor force and to accelerate the policy of substituting Bahrainis forexpatriates in technical and professional jobs. Otherwise, the country'seconomy will become increasingly dependent on foreign labor which throughremittances and the use of local facilities and services, constitutes agrowing drain on Bahrain's financial and real resources.

- iii -

ix. The authorities are well aware of this issue. Concerned about the

possible future difficulties of Bahraini general school graduates and dropoutsto find employment, the Government is giving considerable encouragement to

vocational training. There are now training centers at all major industrial

and service establishments such as BAPCO, ALBA, the Dry Dock, Gulf Air, theElectricity Department, major hotels, etc. A third technical secondary school

is to be opened in the fall, and a technical institute to be financed by SaudiArabia is under consideration. This emphasis on technical education should be

complemented by a policy of discouraging students to pursue only general edu-

cation courses.

x. The Government is also reviewing the possibility of reinstatingearlier restrictions on immigration. Relaxed during the 1974-76 boom period

the policy of allowing employment of expatriates only as and when no appro-

priate Bahraini manpower could be found, is now again being applied morestrictly. However, Bahrainization can only succeed to the extent that local

skills are being developed. This will take considerable time even if much

more emphasis is given in the future to technical and professional training.

Meanwhile, Bahrain will have to continue to rely on imported labor and skills.

xi. Another crucial area is development planning. There is a general

consensus among government departments and the business community regarding

the need for some form of planning so that the private sector would know wellin advance, the investment program of the public sector. At the present

time, there is insufficient coordination between the ministries and agenciesconcerned with the same sector or project.

xii. Planning of the type needed in Bahrain need not involve complexbureaucratic procedures although the Government should calculate the amount

of public investment required in the various sectors to achieve reasonable and

balanced economic growth. The Directorate of Planning in the Ministry ofFinance needs to strengthen its ability to perform cost-benefit and internal

rate of return analyses on the projects submitted by the Ministries. Completereliance on outside consultants, as seems to be the case at present, may notachieve the best use of resources, which in the case of Bahrain are likely to

become increasingly scarce.

xiii. Another important issue concerns Bahrain's international competi-

tiveness. Surrounded by much affluence, the country has to some extent

followed the path of its neighbors. Import prices have been subsidized evenwhile the exchange rate is favorable to imports and unfavorable to exports

of domestic value added. In recent years, energy intensive products haveaccounted for most of the export gains.' Given the growing shortage in the

supply of oil and gas, this cannot be repeated. Care must therefore be taken

that Bahrain does not price herself out of the market by overvaluing the goods

and services offered.

xiv. A policy of effective demand management implies that Bahrain cannot

in the long run sustain an excessive level of personal and public consumption.

Measures will have to be taken to reduce the amount of subsidization of

imports and to curtail the scope of some social programs, including housing.

- iv -

Higher taxes on alcoholic beverages and gasoline would be desirable. Othertaxes could be considered and tariffs for public utilities would have tobe brought closer to actual cost levels. This will allow the authoritiesto mobilize the resources needed to finance the operating expenditures ofBahrain's growing infrastructure, and to make an adequate contribution to thepublic investment program.

xv. At the same time, a proper balance will have to be maintained betweenwages and labor productivity. The authorities are fully aware of this require-ment and have already taken steps to dampen the further increase in wage cost.This policy needs to be maintained and possibly reinforced.

xvi. Provided prudent policies are pursued in these three crucial areas -manpower training, public sector planning and demand management - Bahrain'sprospects for sustained growth in the long run are quite favorable. Foreignexchange earnings from manufacturing exports and service activities could besubstantially increased thus providing additional employment opportunities andallowing further increases in imports and consumption. Assuming that over thelong run - i.e. the next 15-20 years - most expatriates can be replaced byBahrainis, the country's per capita income could conceivably grow at a rate of1-2 percent p.a. or even more.

External Assistance

xvii. In the medium run, however, Bahrain is likely to require substantialamounts of external aid to supplement her own financial resources. The coun-try's experience with official external assistance is recent. It is only in1976 that Bahrain began to receive grants and loans on a relatively largescale. In 1977 Saudi Arabia and Kuwait provided grants of about BD 30 million($76 million). The Ministry of Finance estimates the level of grants during1978-79 at BD 26 million annually and the same level for 1980.

xviii. Since 1972 Bahrain borrowed about $174.6 million from the KuwaitFund, the Saudi Fund, the Abu Dhabi Fund and the Arab Fund. The terms ofthese loans are soft in comparison with commercial or even World Bank loans.Their rate of interest is 3-6 percent with grace periods of 2-5 years, andrepayment period of 10-15 years. The softest terms are those of the SaudiFund, with an interest rate of 3 perent, a grace period of 5 years, and arepayment period of 15 years. The terms of the Arab Fund were relatively thehardest with an interest rate of 6 percent, a grace period of 5 years and arepayment period of 15 years.

xix. Bahrain's external public debt at the end of 1977 was estimated at$154 million, of which $65 million were disbursed. Debt service payments wererelatively small in 1977 - some $7 million - and the debt service ratio wasless than 1 percent in that year. Even assuming that Bahrain will borrow ona substantial scale in future years - say at a rate of $50-100 million p.a. -the debt service burden is unlikely to become heavy, and the debt serviceratio will probably ramain at relatively low levels.

I. INTRODUCTION

1. Located off Saudi Arabia between Kuwait and the Qatar peninsula,the State of Bahrain is an archipelago of 33 low-lying islands. Of the sixprincipal islands, three are of major economic importance: Bahrain, Muharraq,and Sitra. The largest is Bahrain, which is about 50 kilometers long and 16kilometers wide. Located there are the capital, Manama, the main port, MinaSulman, the oil fields, the oil refinery, the aluminum smelter and the busi-ness community. To the north-east of Bahrain lies Muharraq which is connectedwith Bahrain by a 2.4 kilometer causeway. Muharraq accommodates the inter-national airport, and the new drydock and ship repair facility which is con-nected to it by a 7 kilometer causeway. To the south of Muharraq lies Sitrawhich contains storage and port facilities for oil and a water desalinizationplant. Sitra is also connected to Bahrain from the south-east by a bridge,and from the north-west by a recently constructed 3 kilometer causeway (seemap). Through reclamation of shallow lands mostly around the capital andnorth of Sitra, the size of the State of Bahrain has increased by about 14square kilometers since 1970, bringing the total size of the country to about674 square kilometers.

2. After achieving political independence in August 1971, Bahrain hasexperienced major changes in her economic structure and financial position.The quadrupling of international oil prices in 1974 and the consequent rapidexpansion of economic activity in the Gulf area resulted in an unprecedentedincrease of Bahrain's foreign exchange earnings from oil revenue and serviceactivities. Net earnings from oil rose from $68 million in 1972 to an esti-mated $528 in 1977 while exports and re-exports increased from $105 million to$399 million, respectively (Table 3.1 of Statistical Appendix). These earningswere partly used by the Goverment to launch an ambitiuos investment programaimed at strengthening the country's physical infrastructure thus providingthe base for a diversification of the economy. In its wake, public investmentexpenditures rose from $19 million in 1972 to $357 million in 1977. Most ofthese funds were spent on electric power, water and sewage facilities, theexpansion of the port, airport and road network, on public housing, schoolsand health centres. Along with the acceleration of public investment, theGovernment also increased sharply the current expenditures for social services,especially education and health, and introduced extensive subsidies for foodand other consumption items. This together with fast rising increases in theprivate sector incomes led to a considerable growth in personal consumptionand living standards.

3. Stimulated by the expansion in public spending and by fast growingmarkets in the region, private sector activity grew rapidly. Foreign anddomestic trade, off-shore banking, hotel services, manufacturing and aboveall, construction were major growth sectors. It is estimated that GDP inreal terms grew at 9.5 percent annually during 1974-77.

4. More recently, however, some limitations to further economic growthhave become apparent. Gas, oil and water, Bahrain's principal naturalresources, are being depleted at increasing rates and are likely to lose theirpast role as key engines of growth. Domestic oil production is expected to

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decline at a rate of 6-1/2 percent a year and will cease to be an export itembefore the end of the century. Reserves of natural gas originally estimatedat 20-25 trillion cubic feet, are now thought to be less than half that amount.Underground water which provided ample supplies in the past, is declining andwill have to be supplemented increasingly by more expensive desalinated water.

5. The growing shortage of natural resources has been accompanied bysevere manpower limitations. This has led to a rapid inflow of foreign laborwho now represent approximately one half of the labor force. Immigrant laborwhile providing urgently required skills, entails heavy economic and socialcost which in the longer run may be difficult to sustain in the face of declin-ing natural resources. The growing share of expatriates in Bahrain's popula-tion is also raising political questions which will have to be addressed bythe Government.

6. The limits to growth originating from natural and human resourcesare now also reflected in Bahrain's financial position. 1977 may in fact havebeen a pivotal year in this respect. In that year both the country's internaland external accounts swung from a surplus to a deficit, and the pinch infinancial resources is beginning to make itself felt. Responding to this

pressure, the Government has curtailed budgetary expenditures for the currentyear and is increasingly relying on foreign financing.

7. Over-extension during the boom period has also led to a slow-downin private construction activity and brought land speculation to a halt. Afterincreasing ten-fold from 1973 to 1976, housing costs have recently lost over40 percent of their inflated values. Overall growth in the private sectorwas apparently negligible during 1977.

8. The economic slow-down and the emergence of physical and human con-straints point to the need for a renewed effort to diversify Bahrain's eco-nomic structure. Rather than continuing to rely primarily on the exploitationof cheap natural resources the country will have to develop alternative sourcesof income. Given her favorable location in the Gulf there are good prospectsfor Bahrain to strengthen her position as important service and entrepot centerfor the region, and to develop her manufacturing capability. Substantial prog-ress has already been made in these areas during recent years. Freedom fromincome taxation and simple government procedures for investors have resultedin attracting a large number of foreign businesses, particularly branches ofinternational banks, to use Bahrain as a center for their activities in theregion and beyond. Further successful pursuit of this strategy will require,above all, the upgrading of skill levels in the local labor force and prudentmanagement of the remaining natural resources. In addition, financial re-sources will have to be mobilized outside the oil and gas sector, and domesticlabor cost will have to be kept at competitive levels. These and relatedissues will be discussed in the following chapters.

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II. NATURAL RESOURCES

9. Bahrain's principal natural resources are oil, gas and undergroundwater. However, existing reserves of both oil and water are declining thuscreating serious constraints for the future.

A. Oil and Gas

10. Oil was found in 1932, making Bahrain the first oil producer in theSouthern Gulf. Commercial production started in 1935 and an oil refinery wasestablished in 1936 which has subsequently been enlarged. Standard Oil ofCalifornia held the concession which had been assigned to its then whollyowned subsidiary, the Bahrain Petroleum Company (Bapco). In 1936 Texaco pur-chased half the concession which is operated by Caltex, the subsidiary ofthe two American companies. In September, 1974 the Government bought 60 per-cent of Bapco's shares and it is presently negotiating the purchase of theremaining shares 1/. In 1977 oil production and refining accounted for34 percent of Bahrain's GDP.

11. In 1977 there were 229 wells producing in the Bahrain field andproduction was 21,236 thousand U.S. barrels or the equivalent of 2.8 millionmetric tons (Table 8.4 of Statistical Appendix). Thus production per day perwell averaged about 254 barrels, a comparatively modest yield. The Governmentestimates the proven reserves at 280 million barrels (37 million tons), whichif the 1977 level of production were sustained would last for only about 13years. However crude production has been declining at a rate of about 4 per-cent p.a. in recent years and is expected to fall further in the future.

12. In 1978 production is estimated to be 7.8 percent below 1977 andfor longer term projection purposes a decrease of 6.5 percent a year is beingused. If this decline continues to 1995 production in that year would beabout 6.8 million barrels. This would be about equal the crude requiredto make products for domestic needs. At that stage Bahrain's reserves wouldstill be about 50 million barrels. Thus Bahrain may remain self-sufficientin crude oil beyond the year 2000. The important point however is that oilrevenues from Bahrain's own crude are almost certain to end in the mid 1990's,unless new discoveries, now deemed improbable by geologists, are made.

13. However, since 1966 Bahrain also receives revenue from the Abu Saafafield located off-shore between Bahrain and Saudi Arabia. By an informalunderstanding between the ruling families of the two countries Bahrain isgiven half the net income from this field. This source of revenue has beengrowing rapidly and has more than compensated for the decline in productionfrom the Bahrain field.

1/ The historical background of the oil industry was discussed in theprevious Bank economic report (Current Economic Position and Prospectsof Bahrain, December 28, 1973 - Report No. 241a-BH).

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14. Supplies of natural gas are likely to last longer than those ofBahrain's own oil. Present estimates of proven reserves in the Khuff field(disassociated or dry gas) differ widely between 7 and 12 trillion cubic feet.If we take the usual estimate of 9 trillion and the present rate of consump-tion of 121,228 million cubic feet per annum, supplies would be adequate forabout 74 years (Table 8.8 of Statistical Appendix). About 31 percent of thepresent extraction is reinjected to pressurize the oil field. When the oilruns out this gas should be available for use in the economy, particularlyin the NGL plant now being planned. The requirements of that plant will bemet from oil field (associated) gas and therefore should not reduce the timespan of dry gas availability. However with two more large power stationsunder construction, and since water desalination is to increase four-foldin the next four years, the demand for natural gas is bound to accelerate.

15. Excluding reinjection, gas use has increased about 13 percent ayear since 1972. With no large new energy intensive industries contemplatedor likely (because of competition from other Gulf States and limited energyavailability in Bahrain), gas use may expand rapidly during the next fouryears and then flatten out. If power station demand rises to a plateau ofabout 40,000 million cubic feet by 1982, gas demand in that year of about150,000 million cubic feet seems reasonable. When the oil field peters outaround the turn of the century its absorption of natural gas will presumablyend. If natural gas use rises to about 150,000 million cubic feet by 1982,and reinjection is required in the amount of about one trillion cubic meetbefore the oil field is out of oil and, further if normal expansion of demandafter 1982 is about 6 percent a year (on a base of 150,000 million cubic feetin 1982), we might expect the dry gas supply to last for another 30 yearsor so. Due to the limited information available no estimate can be made ofhow long the oil-field gas may last thereafter.

16. On July 1, 1976 the Government established the Bahrain National OilCompany (BANOCO) capitalized at BD 100 million. Like other national oil com-panies, Banoco performs a number of functions for the Government includingthe management of the State's 60 percent interest in Bapco, the distributionof any natural gas discovered after January 1, 1974, and eventually the retail-ing of petroleum products in Bahrain. The Company will also hold a 75 percentequity interest in a new NGL plant 1/ estimated to cost $92 million and forwhich the construction contract has been let to a Japanese firm. In returnfor its management of the Government's interest in Bapco, Banoco is expectedto receive 15 percent of the net income from the Government's 60 percentshare in Bapco.

1/ The other shareholders are the Arab Petroleum Investment Company andCaltex each with 12.5 percent of equity. However, 80 percent of thecost of the NGL plant is being financed as a five year loan by Bahrainbanks.

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17. According to Banoco officials, although the Company is currently indeficit, it is more than breaking even on the natural gas operation. The gasis produced in collaboration with Bapco under a cost sharing arrangement.Gas is supplied free to the power plants and for reinjection into the oilwells. The other major user, Alba, pays much less than the value of the oilequivalent (in BTUs) of the gas supplied to it.

18. In respect of the domestic distribution of petroleum products, thisfunction is being progressively taken over from Caltex. After June 1978,Banoco will have 40 percent of the domestic distribution. It expects to makea margin of 12 percent on gasoline which sells in Bahrain at the equivalentof about 30 cents per US gallon.

19. The NGL plant which is to come on stream in 1980 is expected to pro-duce about 285,000 tons of propane, butane and naphtha a year, Associated(oil field) gas will be the feedstock for the plant so it will not depleteBahrain's dry gas reserves. If all the NGL is exported as intended, it shouldaugment Bahrain's foreign exchange income (at current prices) by over $46 mil-lion. The loan is expected to be paid off in three years.

B. Water Resources

20. Bahrain has little rainfall, averaging about 75 mm annually. Up to1977 it relied solely on groundwater for its irrigation and domestic use.Bahrain's groundwater is drawn from three main aquifers which extend to theeastern part of Saudi Arabia. These aquifers, believed to be from the Eoceneage (600 million years ago) may not be replenishable. They contain threelevels of water, known as the "A", "B", and "C" zones, with average salinities(1973) of 3,400 parts per million (p.p.m.) in "A" zone, the closest to thesurface, 2,000 p.p.m. in "B", the deeper zone, and 8,000 p.p.m. in "C", thedeepest zone. Since the "C" zone is contaminated, nearly all the water isnow drawn from the upper two zones ("A" and "B"). In some areas sea waterintrusion has produced a saline content of 15,000 p.p.m. of dissolved solids.Salinity in the "B" zone is rising in the eastern coast of Bahrain itselfwhere the level of the aquifers rise to the sea level.

21. Until 1970, water drilling was carried out without official super-vision leading to waste and contamination. Since water in the "B" zone wasmore plentiful than in the "A" zone, people concluded that the deeper theydrilled, the more water supply they would draw, resulting in their reachingthe "C" zone which contaminated the upper "B" zone.

22. As a result of these problems a Water Resources Board was estab-lished in 1970 and in 1972, it initiated a program to remedy the situation.The program which is still in progress includes controlling of all drillingby the Board, maintaining existing wells to stop sea water seepage and dis-connecting wells that reached the "C" zone. Moreover, in 1977 the Governmentcompleted its first (5 million gallons a day) desalination plant which by 1980will be expanded to 20 million gallons a day. Bahrain currently draws 200million gallons of groundwater a day (180 million gallons for irrigation and20 million gallons for domestic use).

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23. The Water Resources Board requested the inclusion of Bahrain in aSaudi financed groundwater study covering the Saudi Arabian peninsula. Thestudy, carried out by an Italian firm, concluded that by the year 2000, therewill be no groundwater in Bahrain even if water conservation is applied. ABritish study, on the other hand, concluded that if water conservation isused, Bahrain could continue to draw groundwater for an unlimited time. Bothstudies covered zones A and B only. However, a more comprehensive study,financed by Saudi Arabia, is currently underway covering the Saudi Arabianpeninsula and Bahrain. The study, which is to be completed by September 1980,will cover ground, spring, and sea waters, as well as soil. The water authori-ties are presently following a strategy based on conserving water to theextent possible and proceeding with the desalination program.

III. HUMAN RESOURCES

A. Population and Labor Force

24. Bahrain's population was estimated at 343,000 in 1977, giving a pop-

ulation density averaging about 510 persons per square kilometer, the highest

in the southern Gulf. In relation to the habitable area the density is evenmuch greater. The urbanization ratio is about 78 percent. Population growthis also high, about 3.5 percent annually for Bahrainis only. Nearly 33 per-cent of the population are expatriates, mostly Indians, Pakistanis, andBritish. In recent years their growth has been very rapid.

25. The last population census for Bahrain was taken in April 1971 when

the recorded population numbered 216,078: 178,193 Bahrain citizens and 37,885expatriates. Owing to the relatively high proportion of expatriates whosupport or help to support their families elsewhere, the expatriate elementin the population was about 69 percent male. This meant that the whole popu-lation was nearly 54 percent male and 46 percent female. Of course a largerproportion of the expatriates were in the work force than their share ofthe total population. Whereas 82.4 percent of the population in 1971 wereBahrainis, only 62.9 percent of the work force classified by occupationalsector were citizens. The large expatriate element also produced a relatively

large ratio of those in the age groups from which the work force is normallydrawn (14 years and over). The working age group made up 58 percent of thepopulation and about 48 percent of that group were in the labor force (the

participation ratio). The difference between the Bahrainis and the non-Bahrainis was striking in respect to the participation ratio being 39 percent

for the former and 77 percent for the latter. Those not in the work forcewere apparently largely voluntarily inactive since those counted as unemployed(including those seeking work for the first time) only constituted 3 percentof the labor force and 1.4 percent of the working age population.

26. Unfortunately, hard data on the labor force end with the 1971 census.However, the Statistical Bureau made an estimate of population broken down bysex and citizenship for March 1977. The most striking result of the estimateis that while the Bahraini element increased at the more or less normal rateof 3.5 percent annually the expatriate population grew by over 12 percent a

year, more than doubling over the last six years. In March 1977 about 113,000expatriates were residing in Bahrain as compared with 230,000 Bahrainis (Table1.1 of Statistical Appendix). In May 1978, the number of expatriates wereestimated at 115,000. In short, nearly a third of the residents of the coun-try are now expatriates compared to 17 percent in 1971. The overall popula-tion growth during the six years was 52 percent or 7.2 percent a year. If theratio of working age to total population remained in March 1977 as it was inApril 1971 and the participation ratios for each group also were stable, onewould expect the following results. The working age population would still be58 percent of the population. However, the participation ratio would risefrom 48 to about 52 percent and, most striking, whereas in 1971 about 63percent of the working force were Bahrainis, this percentage would fall to 50

percent in 1977.

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27. No data are available to verify or refute these important changes inBahrain's work force and the proportions of those of working age who are inthe labor force. Since the working age portion of the expatriates is probablyconsiderably higher than for the Bahrainis these estimates probably understateboth the size of the work force and expatriate percentage of it. The Ministryof Labor estimated the gross number of work permits classified by sector anddivided between Bahraini and expatriates from the 1971 census to the beginningof 1976. No information is available on withdrawals from work or shifts amongsectors, points essential to a sound analysis of the growth, sector distribu-tion and mobility of the labor force. The inferences which may be drawn tendto support the assumption of the trend in the composition of the labor forcementioned above to about a 50:50 division between the two groups.

28. The following Table gives an indication of the change in the rela-tive participation of Bahrainis and expatriates in the different sectors. Allsectors were probably more dependent on expatriate labor in January 1976 thanin April 1971. This is particularly significant in manufacturing and con-struction, in terms of the numbers involved, and in public utilities inrespect of shift in the proportion of expatriates involved.

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Table A: COMPOSITION OF LABOR FORCE BY SECTORS

(1) (2) (3) (4)(1) + work permits Ratio Ratio

1971 Census issued 4/71-1/76 Col l(b)/ Col 2(b)/(b) (b) Col l(c) Col 2(c)

(a) Non- (a) Non- Expa- Expa-Bah- Bah- (c) Bah- Bah- (c) triates triates

rainis rainis Total rainis rainis Total % %

Agricultureand fishing 2,995 995 3,990 3,014 1,236 4,250 25 29

Manufactur-ing 5,614 2,850 6,464 6,950 8,620 15,570 44 55

Power andWater 1,480 225 1,705 1,790 1,482 3,272 13 45Construction 5,639 4,765 10,404 7,269 8,069 15,338 46 53Trade,restaurantsand hotels 4,851 2,855 7,706 4,898 3,044 7,942 37 38

Transport,storageand communi-cation 5,067 2,676 7,743 6,148 3,989 10,137 35 39

Finance,insurance &businessservices 740 344 1,084 2,754 2,521 5,275 32 48

Social andpersonnelservices 10,930 7,458 18,388 12,248 11,373 23,621 41 48

Other 634 163 797 5,356 9,416 14,772 20 64

Total 37,950 22,351 60,301 50,437 49,770 100,207 37 50

Source: Statistics of the Population Census 1971, and Ministry of Labor and

Social Affairs.

B. Education and Training

29. Modern education in Bahrain began in 1919, when the first boys'school was opened - the first State school in the lower Gulf. In 1929 agirls' school was started. The discovery of oil in 1932 led to rapid expan-sion in the education system. Since 1974, educational expenditures havebecome the second largest item in the recurrent expenditure budget, aftersecurity and defense. In 1977 about 15 percent of total current expenditureswere allocated for education (Table 5.3 of Statistical Appendix). In addi-tion, a large amount of expenditures from the capital budget and from neigh-boring countries in the form of grants not included in the budget have been

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invested in education facilities. This has resulted in raising the literacyrate which however is still only about 47 percent for those 10 years of ageand over. Attendance at school is not compulsory.

30. Public education is free. There are fee-charging private schoolssuch as kindergartens, and foreign private schools. The curricula of allprivate schools are supervised by the Ministry of Education.

31. Bahrain's state financed educational system consists of threestages: 6 years of primary, 2 years of preparatory (intermediate) and 3 yearsof secondary (i.e., 6-2-3). Effective this academic year (1977-78) however,the preparatory stage was increased by one year (i.e. 6-3-3).

32. Bahrain has no higher education facility at this point in time. Buta four-year University College for Arts, Science and Education is expected tostart in October 1978. The UNDP is assisting in this project. For universityeducation abroad, there are Government scholarships for the best graduatesfrom secondary schools, and fellowships are offered by foreign governments andinstitutions.

33. There are now 70 primary schools: 39 for boys and 31 for girls. In1975/76 the enrollment in primary schools was 73 percent of the population inthe age group 6-11. In the 1976/77 academic year, there were 26 preparatory(intermediate) schools, 14 for boys and 12 for girls. Four new schools wereopened in that year to cope with over-crowding. Enrollment in preparatoryschools in 1976/77 was 9,143, 54 percent boys and 46 percent girls. As forthe general secondary schools, there were 13 schools in 1976/77 with 6 forboys and 7 for girls. Enrollment in that year was 7,265 or about 24 percentof the respective age group. The distribution of students between scienceand liberal arts sections is imbalanced, with the majority of students concen-trated in the liberal arts section.

34. In addition to the general secondary schools, there are two indus-trial secondary schools. The first was established in 1936 and the second in1969. A third school with a capacity of 500 students is to be opened inOctober 1978. Enrollment in the existing two technical schools was 718 in1976/77. Graduates of these schools have been entering the job market with-out any difficulty. Commercial sections were attached to the general secondaryschools in 1952/53 for boys, and in 1970/71 for girls. There are now 4 sec-tions with total enrollment in 1976/77 of 1,042 students. Enrollment of girlsin these sections has recorded considerable growth rising from 38 in 1970/71to 497 in 1976/77. The rapid growth in enrollment of girls is due to the easyavailability of jobs for female graduates as secretaries.

35. The serious shortage in supply of technicians and skilled manpowerfaced by Bahrain and the neighboring countries led the Governments of Bahrainand Saudi Arabia to reach an agreement in 1975 to establish a technical insti-tute in Bahrain financed by Saudi Arabia. It will comprise two secondaryschools (one technical and one commercial) and vocational training centers forthe construction industries.

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36. Post-secondary education in Bahrain is confined to two teachertraining colleges, and to the Gulf Technical College, an institution estab-lished in 1968 through the cooperation of Bahrain, Abu Dhabi, and the BritishMinistry of Overseas Development (BMOD). The College is presently financed byBahrain, Abu Dhabi, and Qatar. BMOD provides only the cost of a few Britishstaff and this contribution is to end in 1979. The College is open for allthe Gulf countries. The courses cover a wide spectrum, ranging from threeyears for commercial and business administration to four years for technicaland engineering courses. In December 1977 UNESCO recommended upgrading theCollege's curricula and improving its financial planning.

37. As expansion of economic activities in Bahrain and neighboring coun-tries slows down, graduates of the general secondary schools in the future mayfind it more difficult to find employment. Consequently authorities are con-sidering ways of limiting entry to general secondary schools, and divertingmore students to technical secondary schools. This shift in educationalpolicy also stems from the Government's desire to reduce the need for foreignlabor.

38. To identify the needed skills and to suggest the means of traininga High Council for Vocational Training was established in December 1975. TheCouncil is chaired by the Minister of Labor and Social Affairs. Responsibili-ties of the Council include establishing vocational training policy.

39. Current development efforts to introduce modern industries toBahrain and make it a financial and business center will be strengthened bythe rise in literacy. Therefore, the Government may wish to consider intro-ducing compulsory primary education.

40. In 1972/73 the Government began a serious effort to eradicate illi-teracy among the adult population. For that purpose, it established 14literacy centers scattered throughout Bahrain. Enrollment in these centerswas 5,000 in 1976/77.

41. Along with the need of a literate population, the Government hasbeen making considerable efforts to increase the number of skilled Bahrainis.For this purpose, a number of vocational centers have been established.Facilities of the Gulf Technical College and the other technical schools havebeen made available for the night classes held by these centers. As a result,there are now training centers for the Dry Dock (ASRY), the ElectricityDepartment, Cable and Wireless, BAPCO, ALBA, the Gulf Air, and hotel andcatering.

C. The Labor Law

42. In 1976 the Government passed a comprehensive labor law regulatingthe conditions of work for local and foreign employees. This law concernssuch matters as work permits for Bahraini and expatriate workers, and priorityof employment first for Bahrainis and secondly for other Arab nationals. Italso stipulates vocational rehabilitation for injured employees, vocationaltraining and protective provisions relating to juvenile and female employees

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in hazardous employment and hours of labor. It applies to all private andpara-statal employees. Indemnity is provided in the case of premature termina-tion of employment without fault by the employee. However, the latter appearsto involve rather lengthy administrative and possibly legal procedures. TheMinister of Labor and Social Affairs is empowered to stipulate a minimum wagethough market wages in Bahrain are now about BD 2-3 per day for unskilledlabor and thus the minimum wage (BD 1.2 set in March 1974) is not meaningfulin the present state of the labor market. No form of collective bargaining ismentioned in the Labor Law though it refers to collective action by employeesin labor disputes.

43. The provisions of the law which apply to Bahraini workers alsogenerally apply to expatriates, with the exception that the latter cannot beemployed for a task for which qualified Bahrainis are available, and theirdefacto pension rights are limited by the frequently short period of theiremployment. Of course, the importance of priority of employment for Bahrainishas been reduced by the tight labor market that heretofore has prevailed.

44. Expatriates are required to produce a health certificate on entrycertifying that they are physically qualified for the job for which they havebeen engaged. The charge for this is BD 3 and has to be renewed annually.Both Bahraini and expatriate workers are required to obtain a work permit andregister at the Ministry of Labor and Social Affairs. The expatriates' workpermit may be cancelled if Bahraini workers become available to take overtheir jobs or if they become unemployed for a month or more. The expatriateworker may also lose his permit if he undertakes work for another employerwithin the two year period for which he is usually contractually engaged andbrought into Bahrain.

45. The minimum age for employment is 14 years but special permissionis required to engage juveniles under 16, and they are excluded from hazardousoccupations. The work week is 48 hours (36 during Ramadan) except during spe-cial periods such as stock taking etc. when it may not exceed 60. Time andone quarter (time and a half for night work) is paid for overtime work. Incase of injury on the job (not the employee's fault) the employer pays thecost of treatment and full wages during absence from work because of such dis-ability. Employers of more than 50 workers are expected to provide facilitiesfor the basic health care of their employees.

46. Establishments are required to report to the Ministry of Labor andSocial Affairs on such matters as the number of workers employed, vacancies,wages, the age and sex composition of the labor force. If enforced, thisshould provide the Ministry with much more useful data than is currently avail-able. Also, it is hoped that the present visit by a team from the Universityof Southern California to study the data situation in Bahrain will improvethe labor force data.

47. The Labor Law has quite elaborate provisions for mediation, con-ciliation and arbitration of labor disputes but the mission was told they arenot often used. If the workers present grievances against their employer, thematter is handled informally by the Ministry. The employer may be requestedto raise his wages to the level of similar plants.

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D. Social Insurance Law

48. This law was enacted together with the Labor Law and applies to allnon-Government workers regardless of nationality. But because work for 20years is required to qualify for old age pension (unless the worker hasreached age 60 for males or 55 for females), most beneficiaries are Bahrainis.The coverage for old age pension is now about 35,000 workers, which is prob-ably about 70 percent of the Bahraini work force. The pension is fundedwith 11 percent of the wage to be paid by the employer and 7 percent by theemployee. Ceteris paribus these charges tend to raise the cost of Bahrainilabor considerably above that for non-Bahrainis, though the health charges forexpatriates may be somewhat higher.

49. In addition to the old age pension, insurance is provided againstjob-related injuries, disability, death and unemployment (after qualifying fora pension). Three percent of the monthly wage is contributed for worker'scompensation type insurance, and other charges are set by the Minister ofLabor and Social Affairs following recommendations by the Directors of theGeneral Organization for Social Insurance. The system operates independentof the budget and is therefore assumed to be actuarially self-sufficient.

E. Wages

50. Litte information is available on wage rates in the private orparastatal sector. However, wages whether for Bahrainis or expatriates arehigh. Including the costs of securing them and bringing them in, expatriatesmay cost up to twice as much per head as Bahrainis for unskilled or semi-skilled construction labor.

51. Good information is available on the Government pay scale. Monthlywages by grade and step within grades are shown in Table 9.2 of StatisticalAppendix. A high school graduate starts with grade four (with a monthly wageof BD 113), a college graduate starts with grade seven (BD 195.5), and engi-neers and doctors with grade nine (BD 280). Therefore, with an average of 25days a month the lowest grade of Government employees are earning about BD 4.5per day. Private renumeration is usually higher than those of the Government,leading to a movement out of Government employment recently. To counter this,the Government has increased the salaries of its employees several times, thelatest increase was on July 1, 1977 (see para. 148). Beginning this year adecision was taken to restrict wage increases but "merit" increases will con-tinue to enable the Government to compete with the private sector for quali-fied people.

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IV. MANUFACTURING AND CONSTRUCTION

A. Manufacturing

52. Manufacturing is Bahrain's second most important production sectorafter oil extraction. Lacking both reliable national accounts and labor forcedata, the contribution of the manufacturing sector to the economy can only beestimated very roughly. As Table 8.1 of Statistical Appendix indicates, about13,000 were employed in the sector in 1977, representing about 14-15 percentof the labor force. In 1977 the manufacturing sector excluding oil contri-buted about 13 percent of GDP (Table 2.1 of Statistical Appendix).

53. The manufacturing sector may be divided into three principal sub-sectors. These are: (1) three major establishments namely the oil refinery,the aluminum smelter and the new dry dock and ship repair facility. To thesea fourth major plant for natural gas liquid (NGL) using associated gas isabout to be added. (2) Aluminum extrusion and powder as well as aluminumcable plants which are downstream adjuncts of the aluminum smelter. (3) Allother manufacturing and repair 1/ establishments which although collectivelya small part of the economy, are numerous and process or assemble a largevariety of imported materials and components. Table 8.1 of StatisticalAppendix shows the breakdown of the manufacturing sector by categories ofproducts and the growth from 1973 to 1977 in terms of number of establish-ments and employees. The dominance of the first category mentioned above isapparent. The refinery, the smelter, and the ship repair facilities employabout two-thirds of the manufacturing labor force of Bahrain. The oilrefinery is owned by Caltex and apart from supplying the domestic requirementsof petroleum products and employing about 30 percent of the sector's laborforce, it can be considered as outside the Bahrain economy as will be done inour balance of payments analysis. Additional information about the aluminumsmelter and the ship repairing facilities is given in Annex A.

54. Manufacturing activity has expanded rapidly in recent years. Between1973 and 1977 employment in manufacturing establishments increased by some 50percent. Excluding the refinery which virtually did not change its labor forceduring this period, industrial employment rose by almost 150 percent. Most ofthe additional jobs were created by the aluminum plant, the ship yards and avariety of smaller firms in mechanical engineering, food processing, buildingmaterials, electrical equipment and wood processing.

55. There are a number of factors which favor manufacturing in Bahrain,and others which constrain it. One important constraint is the small size ofthe country. However this is partly compensated for by the relative affluenceof the population which consumes a wide variety of products that could be madeor assembled in Bahrain. This is particularly true of products for whichtransportation costs are high in the finished state but comparatively low inrespect of their components and material contents. The low import duties

1/ Garages and very small repair shops are not included in the manufacturingsector.

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(usually 10 percent) affords very little protection for import substitutionand labor is costly, if not by the standard of Gulf countries, then by that of

the countries supplying most of Bahrain's imports. The construction industry,which has been booming in recent years, has been a strong competitor with

manufacturing for labor.

56. On the positive side, however, Bahrain has a number of strongpoints. Power is abundant and is supplied relatively cheaply. Although wages

are relatively high, the work permits issued to expatriate labor since 1971

indicate a fairly liberal entry policy. Bahrain is very well supplied with

financial institutions which lend at rates of interest comparable to those

in Western countries and for periods up to 7-8 years and sometimes longer.

Lastly, there is the almost complete freedom from taxation, direct and in-

direct. As far as the mission could observe Bahraini management is good and

is not reluctant to engage outside expertise where needed.

57. The Government has played an active role in the industrializationprocess. It has acquired a large equity participation in the aluminum smelter(nearly 80 percent), owns outright the aluminum extrusion plant, and has

participation in the shares of the proposed NGL plant and the Dry Dock, and

has set up a public corporation for producing poultry products. There does

not appear to be any particular set of guidelines for Government investmentexcept a willingness to come in when private equity capital is reluctant to do

so.

58. The non-financial role of the Government, apart from participation

in the management of ALBA and other major projects, is to regulate the entryof new firms. This seems to be done with considerable dispatch and freedom

from onerous levies. It does reserve and sometimes exercise the right to

withhold a permit to enter if it considers the field already well covered.

59. The Government has not established either a specialized industrial

bank or a development corporation which, inter alia, would be useful in themanagement of facilities provided by the industrial estate, now in being,and the new ones planned. The mission does not consider that a specialized

bank is needed but it does favor a development corporation for the following

purposes:

(a) To set up industrial estates and plan the services -- roads,electricity, water, sewerage, etc.

(b) To promote the setting up of industries on industrial estatesincluding assistance in obtaining financing.

(c) To administer the estates.

(d) To give advice on managerial and technical matters to small

industries.

The Corporation should become self-financing, drawing income from renting or

selling industrial sites, and should not engage in setting up industriesitself.

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60. Due to the limitations in energy resources and to large energy con-suming plants being constructed elsewhere in the region, the Government doesnot intend to establish very large petrochemical or energy-based industries onthe island. However, there is considerable potential for expansion of medium-and small-scale manufacturing. The output of the extrusion plant, for example,could be used for high quality production of doors, windows and the like andfor buildings throughout the Gulf. Truck bodies are another important use foraluminum. The causeway to Saudi Arabia will link Bahrain with all the Gulfcountries as well as Europe. Truck chassis could be imported and equippedwith Bahrain-built bodies. The U.A.E. now has this work done in Lebanon.Electrical fittings are another category that should be investigated.

61. The construction of the causeway to Saudi Arabia will also helpin the integration of Bahrain manufacturing with the development of the Saudieast coast. Products could range from welding electrodes to traffic signsconcentrating on those items where the demand is not large enough to interestlarge scale enterprise. Consumer goods such as food products, paper goods,medicinal products and car accessories should find a market both at home andin the Gulf area. Service facilities for the repair and renovation of durablegoods such as airconditioning equipment, typewriters and electric motorsshould be feasible.

B. Construction

62. The economic boom in Bahrain and neighboring OPEC countries, follow-ing the 1974 increase in oil prices, was led by the construction industry.Foreign business has avidly sought business in the area which resulted in asharp rise in demand for office space and accommodation for employees. Thiswas accentuated by the easy access to construction money from the governmentsand banks. Between 1973 and 1977 the cost of construction more than tripled.As a result, during 1973-77 the construction sector recorded an annual growthrate of about 55 percent in current prices compared to an annual growth rateof only 15 percent in real terms recorded during the same period.

63. No reliable statistics are available on the number and type of con-struction permits issued during the boom years. However, it is estimated thatabout 2,000 houses were constructed during 1975 and 4,000 annually during1976-77. Also, bank credit for construction rose from BD 12.4 million in 1973to BD 130.6 million in 1977, or from about 16.9 percent to 41.4 percent oftotal bank credit in these years (Table 6.7 of Statistical Appendix). Inaddition to these banks, other large sources of finance became involved inconstruction such as the Government, local and foreign investment companiesfrom Kuwait and other neighboring countries, and wealthy private individuals.These were responsible for the rapid growth in the construction sector whichamounted to about 16 percent p.a. in real terms during the period 1974-77.

64. One of the consequences of the construction boom was the emergenceof a number of local construction industries, and local contractors. Therewas also an increase in the sophistication of private investors who insteadof investing individually began to pool their capital and form investmentcompanies able to obtaining larger loans and undertaking larger construction

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projects. However, the construction boom added to inflationary pressures andbecame a considerable threat to the urban environment raising serious ques-tions about the adequacy of the existing zoning regulations, constructioncodes, and the capability of the municipalities to keep the country tidy.The desire for Bahrain to become an attractive center for internationalbusiness and finance, and her massive investment in infrastructure projectsfor this purpose calls for a clear urbanization policy and physical and cityplanning to preserve the country's beautiful natural environment and ensurea healthy urban surrounding. Assistance on urbanization issues particularlyon zoning apd city planning is strongly recommended.

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V. AGRICULTURE AND FISHING

A. Agriculture

65. Bahrain's agriculture has continued to be of minor importance in theeconomy, although it is still a source of employment for about 4-5 percent ofthe economically active population. After deducting subsidies its contribu-tion to the country's GDP is negligible accounting for only 1 percent. Withthe increase in groundwater salinity the future of the industry is not bright.Some date palms are dying for lack of suitable water. Out of 890,000 datepalms only 417,000 are producing and dates are imported.

66. Arable land is confined to the north and northwest of Bahrain, andto north Sitra. It is estimated at 15,000 acres, of which only 8,800 acres(59 percent) are cultivated. The total number of holdings under cultivationis about 855, giving an average holding of 10.4 acres. About 38 percent ofthe cultivated land is owned by holders, while the rest is rented.

67. About two thirds of the agricultural land in Bahrain is plantedto date palms, and the remainder to about 40 types of fodder and vegetablecrops. There are also a few types of fruit trees. Alfalfa is a major cashcrop, followed by tomatoes which is the leading vegetable crop in terms oftotal acreage. Alfalfa and other fodders are in keen demand.

68. Bahrain's agriculture is facing a dwindling labor force caused byhigher income in other activities, and the declining social status of farming.The land tenure system is complex. Sixty-two percent of the land is leasedfor a short period averaging 3 years. Agricultural practices are primitive;there is lack of agricultural credit. Marketing arrangements are inadequateand urban development is making some encroachment on agricultural land.

69. The Agricultural Department maintains four experimental farms. Ithas been making serious efforts to encourage agricultural production throughextensive subsidy programs such as free services for pest control, veterinarytreatment, and medicine for all animals except poultry which receive a 50 per-cent discount on the cost of medicine. It also provides discounts on itemsacquired from the Department such as shrubs, seeds, fertilizers, and spray forpest control. Discount for the latter two items reaches 50 percent. In addi-tion, subsidies are provided for mechanization and reclamation. Over the pasttwo years, the Department initiated a program for increasing onion production.Farmers participating in the program were provided with seeds, fertilizer,spraying and tractor services free of charge. Those farmers also receivedprice support for their output.

70. Statistics on livestock are not adequate. The last estimate madeby the FAO was for 1975. It reported about 6,000 head of cattle, 4,900 sheep,14,500 goats and 850 camels. The number of chickens was estimated at about176,000 (73,600 were laying hens) but this number has increased substantially(para. 72). In 1974, the Agriculture Department began a program for improv-ing the quality of local sheep through the importation of the Awasi type(Kenyan) and selling the males to the farmers. The Department also importedabout 100 Australian Friesian cattle for producing milk for the local market.

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Losses among calves are considerable due to the heat. In 1976 the Department

began a research program to find the best way to cope with the heat on the

chicken farms. There are now about ten commercial farms in Bahrain selling

meat and dairy products but live animals and frozen meat have to be imported

from New Zealand and Australia. The Bahrain Government and New Zealand

recently formed a company "Bahrain and New Zealand Trading and Storage Com-

pany" for the importation of meat to meet Bahrain's demand as well as that

of neighboring countries. The company will construct a $20 million warehouse

and cold storage with a capacity of 8,100 tons at the free zone of the Mina

Sulman port.

71. Despite adverse climatic conditions, the volume of poultry produc-

tion and eggs is rising rapidly. This is due to the considerable government

backing in the form of participation in projects as well as in subsidies and

import protection given to the private sector. In order to encourage local

egg production, the Government first began to import feed to sell to egg

producers at reasonable prices which occasionally resulted in loss to the

Government. Later the Government constructed its own feed mill and is now

selling the feed at cost. As a result, there has been a sharp increase in

privately owned chicken farms which now number about 20. A private company

for producing chicks has been established.

72. Production of eggs is hampered by the adverse climatic conditions

and consequently is being avoided by private investors. However, the Govern-

ment established its own poultry farm in 1975. The farm, which is run by the

General Poultry Company, was equipped by West Germany at a cost of $1.8 mil-

lion. It is to produce about 66,000 eggs a day at full capacity. Current

production is about 22,000 eggs a day. Since Bahrain's annual consumption of

eggs is estimated at about 45 million, the Government is considering expand-

ing the facilities of the General Poultry Company, and has approached the Abu

Dhabi Fund for financing. Also, another project, jointly owned by the Govern-

ment and the private sector, is under construction for producing 15 million

eggs a year at full capacity. The adverse climatic conditions and the apparent

need for heavy subsidies, call into question the economic feasibility of egg

production in Bahrain.

73. Bahrain is to have a study to determine what categories of agricul-

ture are feasible without heavy subsidy and to advise the authorities on the

level of resources needed and the most efficient way of deploying them.

Authorities are aware of the importance of this study and the Ministry of

Commerce and Agriculture has approached the Kuwait Fund for financing it.

Based on this study, the Government will formulate a long-term development

strategy for the agricultural sector.

B. Fishing

74. Fishing was Bahrain's major economic activity prior to the discovery

of oil in the 1930s. Currently fishing boats of the Gulf countries and others

are fishing in Bahrain's waters. However, with the exception of shrimp fish-

ing, fishing has diminished substantially in recent years. As a result, the

share of the fishing sector in the GDP dropped from 0.6 percent in 1973 to 0.4percent in 1977 (Table 2.1 of Statistical Appendix).

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75. A combination of factors has led to the decline of local non-shrimpcommercial fishing. Uncertainty of income, and the rise of incomes from other

economic activities since the discovery of oil have led fishermen to seek other

jobs. Other factors include the lack of interest by the young people who caneasily earn high incomes in other relatively easier and more prestigious jobs.

The last strong blow received by the local fishing activity came from the landreclamation program that was begun along the coast of Bahrain in the early1970s. Land reclamation has substantially reduced the areas for traditionalfishing.

76. The remnant of the Bahrain fishing industry today constitutes a

small number of fishermen using traditional fishing methods. Total output isfar below domestic consumption. Also, marketing methods are rudimentary lead-

ing to large price fluctuations of the catch in the local markets.

77. In order to provide an adequate supply of fish, the Government

established its own fishing operation in April 1975. The Fishing Project uses

modern fishing and processing methods and is now supplying 40-50 percent ofthe local market. The present fleet of the Project consists of five boatswith a capacity of about 1.5 tons each. The catch is sold directly to theconsumer through the project's eight shops scattered throughout the country,with three more shops to be opened soon.

78. This fishing operation is heavily subsidized (see Table B below)since fish is sold at about 50 percent below the market price.

Table B: Fishing Project Operations

BudgetedCatch Revenue Budgeted Cost Subsidy

Year (tons) (BD) (BD) (BD)

1975 115 n.a. n.a. n.a.1976 247 59,806 450,000 390,1941777 388 150,488 400,000 249,512

The Project's management argues that the subsidy will decline gradually since

the low prices are temporary and designed to enable the Project to enter themarket, and because the undesired fish are being increasingly sold to for-eigners through restaurants, hotels, BAPCO and other companies. It is doubt-ful, however, if this operation can become a viable commercial operation.

The Project employs about 50 people.

79. As was mentioned above, Bahrain has been successful in using modernmethods in exploiting her shrimp resources. Since 1967 the Bahrain FishingCompany has been exploiting the country's shrimp resources using modern methodsin fishing and processing. The company, which is owned by the Ross Group of

the UK (35 percent) and the Bahraini public (65 percent) operates 15 trawlerswith an average length of 70 feet. It operates in Bahrain and Saudi waters.The Company is well managed and fully integrated in its operations, and as a

result it has been realizing growing profits. No figures are available on the

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company's catch, but it is believed to be 600 tons annually from Bahrain. In1977, the company's gross sales amounted to BD 2.9 million. The shrimp catchis exported, largely to the US, Europe and Japan, making shrimp the largestnon-oil export item after aluminum.

80. It is believed that the sustainable potential of shrimp is about1,000 tons which is not fully exploited, although there are about 1,000 dhowsfrom Bahrain and neighboring countries exploiting shrimp in addition to theBahrain Fishing Company. The dhows' operations should be regulated in orderto allow orderly exploitation of shrimp resources without ecological harm.The UNDP/FAO are carrying out a study to determine, among others, the fishpotential in the Gulf area and the Gulf of Oman. The study is expected to becompleted by 1979.

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VI. TRADE AND SERVICES

81. Bahrain's geographical location and her sweet groundwater enabledher to become a major center for entrepot trade. Trade and ancillary servicesare the second largest source of income after oil. In 1977 their share in theGDP amounted to about 16 percent. The country's re-exports, particularly toSaudi Arabia, are estimated to account for 25-30 percent of Bahrain's imports,some $120-130 million in 1977 (Table 3.5 of Statistical Appendix).

82. IA the mid-1970's, when it was learned that Bahrain's naturalresources were not as plentiful as originally assumed, the Government renewedits efforts to make the country a viable center for international business,finance and trade, exploiting her excellent location on the international airroutes, her advanced communication system, and her modern way of life. Free-dom from income taxation and simple government procedures for investors haveresulted in attracting a large number of foreign businesses, particularlybranches of international banks, to use Bahrain as a center for their activi-ties in the region and beyond.

83. As a result, there has been a rapid expansion in the number ofhotels, restaurants, transport and banking activity since 1974. The growthwas particularly fast in international banking following a decision of theGovernment to license Offshore Banking Units (OBUs) in 1975; by December 1977there were 33 OBUs operating in Bahrain with 7 more to begin operation soon.In addition, there are now 16 foreign banks registered as Full CommercialBanking (FCB) units, of which 8 have an offshore banking branch. Among allthe sectors of the economy, the banking sector recorded the fastest growthduring the boom years (95 percent annually in real terms during 1974-77).There has also been a rapid growth in communication and transport to servicethese activities. The number of aircraft utilizing Bahrain airport rose from26,000 in 1973 to 36,000 in 1977 (8.5 percent per annum) and telex paidminutes increased from 413,000 to 2.9 million during the same years. In theperiod 1974-77 the transport sector grew by about 13 percent annually in realterms.

84. Bahrain is becoming an increasingly important spot for tourism andstopover for businessmen in the Gulf area. Her foreign exchange earnings fromtravel nearly quadrupled between 1972 and 1977 rising from US$9 million toabout US$32 million.

85. She caters to two types of tourism: local from neighboring coun-tries, and international from other parts of the world. Bahrian also providesattractions for two types of business visitors: those stopping over for shortperiods while conducting business in the Middle East and those staying for alonger time some with businesses and families in Bahrain.

86. For local tourism Bahrain has considerable potential. In sharpcontrast with neighboring countries, Bahrain is known for her green naturalsurroundings, modern and well run hotels and restaurants, and modern life.

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These provide a holiday spot for visitors from neighboring countries. Fortourists from further afield, Bahrain offers some conventional touristattractions such as her excellent location on international air routes, goodhotels, local artifacts, camel and horse racing, and even falconing, and avariety of archaeological remains. However, a major factor impeding thedevelopment of international tourism in Bahrain is the high prices of hotelsand subsistence (up to $120 a day).

87. Bahrain's location on international air routes, and advanced tele-communications and good hotels enable her to attract considerable numbers ofbusinessmen staying in Bahrain while conducting business in the area. Also,primarily because of her location and living amenities, Bahrain has beenchosen by many international airlines as a crew change point for their longdistance international flights between the Far East and Europe.

88. At the end of 1977, there were 15 hotels with about 1,285 rooms and81 suites. Prior to 1973 there was only one first class hotel (the GulfHotel). Only 50 percent of the present hotel rooms meet international stand-ards. During the boom years (1973-77), hotels in Bahrain were fully occupied,and obtaining a room was not possible without booking several weeks and some-times months in advance. The demand for hotel rooms during these years canbe ascertained from the number of passengers in transit which increased from98,000 in 1970 to nearly 800,000 in 1977.

89. Despite the slow-down of economic activities in the area, hotel con-struction will continue. Bahrain's hotel rooms are expected to be increasedto 1,500 by the end of 1978 and to 2,500 in 1982. Hotel investors areoptimistic about the possible sharp increase in local tourism following thecompletion of the causeway, and the increase in the international businessoperations in Bahrain.

90. Exploitation of Bahrain's tourism potential should be left for theprivate sector, which has responded very well in the construction of hotelsand restaurants and related services, including organizing tourist tours toplaces of interest. The role of the Tourism Department in the Ministry ofInformation has been and should remain promotional.

91. Trade and services activities are expected to grow further in thecoming years following the construction of the causeway between Bahrain andSaudi Arabia. The causeway is expected to attract a large number of localtourists visiting Bahrain for business and vacation. It is also likely toincrease the volume of entrepot trade as cargo destined to Saudi Arabia canbe unloaded in Bahrain and transported across the causeway to Saudi Arabia,thus saving considerable time and reducing shipping risks. For this purposework is underway to double the number of berths in Bahrain port and expandits airport facilities. Finally, Bahrain is hoping for the development ofancillary services to meet the demand of the large industrial complex cur-rently under construction at the eastern part of Saudi Arabia.

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VII. PHYSICAL INFRASTRUCTURE

A. Transportation

(1) Road Transport

92. As noted in Chapter I Bahrain's three major islands are linked bycauseways. They are also well served by roads nearly all of which are sur-faced (see Map). The new ones are in excellent condition but the older roadsare unsuited for heavy fast traffic. Many are showing signs of structuralfailure. A large proportion of the highways and urban arterial roads are dualcarriage ways.

93. The number of vehicles in Bahrain has been growing rapidly risingfrom about 20,000 in 1972 to about 50,000 in 1977. As a result, there is traf-fic congestion within the city. Extensive delays are now occurring at peakperiods, and accidents are increasing. Projects are underway to ease thesituation including land reclamation north and north-east of the capital toprovide ringroads. The northern section of a ringroad was completed in late1966 and by April 1978 the north-east section linking with the Muharraq cause-way and extending south was opened to traffic. There are also localizedimprovement schemes and replacement of the roundabouts and other uncontrolledjunction by traffic signal installations.

94. As part of the Government efforts to reduce traffic congestion aswell as to provide reliable transport to the public, the Government introducedpublic transport in mid 1971. However, the quality is not adequate and itscoverage is limited. Delays and breakdowns are frequent since both the busesand their maintenance are poor. Out of a fleet of 120 buses only 55 wereoperational in March 1978. Public transport is subsidized by the Government.There is a private bus company complementing the public transport with a fleetof about 110 buses.

95. With the small size of Bahrain and the increasing traffic congestion,public bus transport could play an important role. This, however, is not yetthe case. On the contrary the role of the public transport is insignificantbecause of its poor quality, the affluence of the economy, and hence the nega-tive attitude of the population towards using public transport. The majorityof the population have access to private cars. Nevertheless attention shouldbe given to improving the public transport to encourage its use. There areplans for placing public transport in an autonomous organization independentof the Ministry of Transport.

96. Responsibility for road construction in Bahrain is seriously frag-mented among various authorities without adequate coordination. The Ministryof Works is responsible for construction of major highways, while the munci-palities are responsible for construction of city roads. The Ministry ofHousing is responsible for construction of roads in its housing developmentareas. BAPCO is also responsible for the construction of roads in the areasof its operations. Road construction is carried out by contractors who are

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mostly local. Investment in roads planned by the Ministry of Works for the

years 1979-82 is estimated at BD 32.6 million. No information on investmentplanned by the other authorities is available.

97. With the exception of BAPCO, the authorities responsible for roadconstruction do not maintain their roads. Roads are usually resurfaced whendeterioration becomes apparent. Also, roads, particularly those of the munic-

ipalities, are often resurfaced prematurely causing a great deal of waste. A

high priority should be given to the establishment of a central authority to

undertake maintenance of all the roads in the country.

(2) The Saudi Causeway

98. The proposed Saudi causeway will be about 22 kilometers long linkingBahrain island to the Saudi mainland. Tenders for the construction of the

causeway are expected to be called in November 1978. Its estimated cost is

about $800 million, which will be financed by Saudi Arabia. The causeway will

have 4 lanes and a number of navigational openings to allow the passage of

ships. The construction period is estimated at 4-5 years. Technical and

economic feasibility studies for this project began early in 1975 with some

World Bank assistance.

99. The causeway is expected to induce the development of road trans-port between Bahrain and the neighboring Gulf countries, and will link Bahrainwith the rest of the Arab world and Europe. This is expected to give a boost

to the entrepot and transit trade, Bahrain's main traditional activities.

100. The causeway includes adequate approach road systems at each end

which were coordinated with road development plans.

(3) Air Transport

101. Bahrain's geographical location in the Gulf combined with her tradi-

tional position as a trade and service center, her relatively pleasant culturalenvironment, and well developed telecommunication made Manama a convenientstop-over station for air services between the Far East (including Australia)

and the Middle East and Europe. The international airport on Maharraq islandbegan as a staging post for aircraft enroute to India as early as the 1930s.

Today the airport is one of the largest and most modern in the Middle East,

serving about 26 international airlines. The airport is handling large jumbo

jets and is the only airport in the area to receive weekly visits from the

Anglo-French supersonic Concorde.

102. Activities in the airport have been growing at a rapid pace. The

number of civil aircraft calling increased from about 16,000 in 1970 to about

36,000 in 1977, and the number of passengers in transit increased from about

98,000 to about 800,000 during the same period (Table 8.17 of StatisticalAppendix). Also, during the same period incoming and outgoing passengersincreased fourfold, reaching about 400,000 for each category.

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103. This rapid growth in traffic has led to the expansion of the airportfacilities a number of times. One completed in 1971, enabled the airport tohandle at one time three 747's, plus six conventional jets. Also, the transitlounge, the departure lounge, and the terminal catering facilities wereexpanded. Another completed in December 1976, added capacity for two morelarge aircraft, the transit area was expanded by 80 percent, and the airportwas reorganized to improve its services.

104. The airport is also a major focal point for the local air travel inthe Gulf since it is the headquarters of the local airline, Gulf Air. Thisline is owned by the four Gulf Governments (Bahrain, Abu Dhabi, Qatar andOman) with 25 percent each. Although it was established to provide air ser-vices within the Gulf region, it has expanded its services to Europe, theMiddle East, and the Far East. It also operates shuttle services betweenBahrain and Saudi Arabia. The company has now extensive local-routes whichmake travel within the Gulf extremely convenient. The company has beengrowing vigorously resulting in modernizing its fleet and acquiring largeaircraft for its fast growing international routes.

105. Bahrain's airport is in serious need of a cargo terminal since pres-ent facilities are extremely poor resulting in damage to cargo. Moreover,priority for a cargo terminal will be considerably enhanced by the construc-tion of the Saudi causeway, which is expected to generate more demand forcargo needed in the eastern part of Saudi Arabia.

(4) Sea Transport

106. Bahrain's main port is Mina Sulman, which was built in 1961. Theport provided berth facilities for six ocean going vessels up to 30 footdraught, with modern tugs, cargo handling and bunkering facilities. There aretwo small specialized ports, namely the Sitra jetty which is the oil terminalfor the oil refinery and the Alba jetty which serves the aluminum smelter.The Sitra jetty can accommodate six small tankers (35,000 tons) for refinedproducts; and the Alba jetty can berth three ships of 35,000 tons each.

107. Ships calling at Mina Sulman increased from about 600 in 1971 toabout 900 in 1977, and cargo handled increased by two and a half times duringthe same period (Tables 8.15 and 8.16 of Statistical Appendix). This increasein traffic particularly of the large ships led the Government in 1972 todecide to expand the port. This decision was reinforced by the economic boomfollowing 1973. During the boom years, the sharp rise in traffic resulted inconsiderable pressure on the port facilities, leading to severe traffic andcargo congestion. The waiting time for ships during 1976 varied from 55 to60 days. The Government took a number of temporary measures to reduce thecongestion and at the same time proceeded with its expansion project for theaddition of six more berths.

108. The temporary measures included hiring a Korean firm capable of un-loading merchandise at twice the previous speed, constructing four temporaryberths, increasing storage fees, and limiting the storage time. As a result,

by 1977 there was no waiting time, and the port surcharge was eliminated.

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109. Expansion of the port by six more berths and dredging it to a depthof 36 feet are estimated to cost BD 60 million. Also, the port will have acontainer terminal capable of handling first and second generation containers.Completion of all the six berths is expected by early 1979. Two berths havealready been completed.

110. Although full cost recovery of the six new berths may not be achievedfor some time, authorities believe that the new berths will eventually befully utilized. Port authorities contend that, despite the rapid expansion ofport facilities in the neighboring ports, particularly in Saudi Arabia wherethe neighboring Dammam port is five times larger, ships still prefer to dis-charge their Saudi cargo in Bahrain because of the simple regulations and goodmanagement of Mina Sulman. They also believe that the competitiveness of MinaSulman with the Saudi ports will increase when the causeway is completed sinceit will be more convenient and faster to transship goods destined for SaudiArabia via the causeway. Finally, the establishment of a joint venturebetween Bahrain and New Zealand for warehouse and cold storage for meat andagricultural products in the free zone of Mina Sulman is expected to addsubstantial demand for container facilities at the port. The cold storagewill have a capacity of 8,100 tons and may lead to cargo of 200,000 tons ayear. The bulk of the stored products will be transported by trucks acrossthe causeway and sold in the Saudi markets.

B. Telecommunications

111. A major asset in achieving Bahrain's objective to become a businessand financial center is her well developed internal and external telecommuni-cations. Operated by the British Company, Cable and Wireless Limited, Bahrainenjoys the most efficient telecommunication system in the Middle East.1/ Thishas been one of the incentives for international businesses and banks to openoffices in Bahrain.

112. The establishment of the earth satellite station in 1969 was a majorstep in introducing advanced international communication in Bahrain to meetthe rising demand. The station provided quick telephone, telex and cablecommunication with the rest of the world.

113. The influx of banking units and finance institutions have resultedin the introduction of more advanced international communication systems inBahrain. Through a voice-grade circuit supplied by Cable and Wireless Ltd.,these banking and finance houses can now obtain instant quotes on the worldmoney and commodity markets. Further improvements in international communi-cation are expected. Cable and Wireless is planning to spend about US$95million (40 percent) of its investment during 1978-82, on international com-munication. The Arab countries decided in January 1978 to make Bahrain by

1/ Bahrain is the only country in the Gulf that has direct dialling to theeastern part of Saudi Arabia, Qatar, the UAE, Kuwait, and Iran. In 1977direct dialling began with London. Direct dialling to the rest ofWestern Europe and the US is to be introduced this year.

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1980 a computerized reservation center for Arab airlines. This project willcost about US$40 million.

114. The rapid installation of advanced telecommunication facilities isin response to the rapid growth in demand. Between 1970 and 1977, telex (paidminutes) increased about 35 times. For the same years, radio telephone (paidminutes) increased about 54 times and the number of calls by radio telephoneincreased by about 4 times (Table 8.19 of Statistical Appendix).

115. Along with the international telecommunications, Bahrain also hasa relatively well developed internal telephone system. It is operated byBahrain Telephone Company, a subsidiary of Cable and Wireless. In 1977 therewere about 19,400 telephone lines, giving about 6 telephones for every 100 ofthe population, which is one of the highest in the Arab world. There areplans for improving the service and increase the number of telephone linesto about 54,000 by 1982. Investment allocated for this purpose is aboutUS$143 million. The Government is planning to take over the Bahrain TelephoneCompany, although no date has been set.

C. Electricity

116 Electricity was introduced in Bahrain in 1929 when the dieselgenerators in Ras Rumman power station were inaugurated. Electric power inBahrain today is generated by stations owned by three separate organizations:the Government, BAPCO, and ALBA, with installed capacity of 290 MW, 60 MW, and300 MW respectively. It is, therefore, clear that ALBA's capacity is a littlemore than that available for the domestic use of the whole country. Access toelectricity in Bahrain is very high amounting to about 98 percent of the totalpopulation. The rising standard of living and the consequent rise in the useof airconditioning coupled with the increase in the number of industries haveresulted in a rapidly rising demand. For example between 1970 and 1977, unitsconsumed increased at 25 percent annually. This had led to severe pressure ongeneration capacities particularly during the peak months of summer to meetthe airconditioning requirements (Table 8.20 of Statistical Appendix). Duringthe years 1973-77 the demand for electricity was so high that the ElectricityDirectorate had to resort to borrowing electricity from ALBA.

117 To meet this rapidly rising demand, the Government has acceleratedits expansion of the power generation capacity. Between 1965 and 1975 instal-led capacity of Manama power more than tripled rising from 41 MW to 133 MW.Also, in 1972 work began on the construction of a new large steam turbinepower station at Sitra with a capacity of 120 MW and a cost of BD 30 million.This station also included a water desalination plant for 5 million gallonsof water a day. Initial schedule was for the completion of project in fourstages by 1985, but implementation was accelerated rapidly and the projectwas completed in 1977. In addition, a second gas turbine power station inMuharraq with installed capacity of 40 MW was completed in 1977, bring thetotal installed capacity in that year to 290 MW.

118. Moreover, to ensure the availability of adequate power supply in thefuture, the Government is now constructing a fourth power station at Rifa with

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a capacity of 200 MW. The first phase of 100 MW is due for completion inAugust 1978 and the second stage in 1979. Cost of this project is estimatedat BD 30 million (Table 5.6 of Statistical Appendix). Total investment inelectricity (including water desalination) amount to BD 127 million over the

past five years (1974-78) and is projected at BD 117 million over the nextfive years (1979-83). The Arab Funds have been the main source of fundsfor these projects. To assess future power needs, the Government recentlyappointed consultants. It is also contemplating importing power from SaudiArabia across the causeway during 1985-90.

119. In addition to ensuring the availability of power, the Directorateof Electricity is making serious efforts to economize its use. Power inBahrain is heavily subsidized. The rates are too low which is encouragingwaste. As a first step, the Directorate changed the rate structure from aflat rate of 5 fils per KWh to 5 fils per KWh for the first 1,000 KWh, and 12fils per KWh for the additional units consumed. The next step will be todifferentiate rates between commercial and home users. The Directorate isalso intending to base its rate structure on the real cost of electricity byshadow costing the gas used instead of the present practice of assuming zerocost.

120. Implementation of these objectives would be made easier if the Elec-tricity Directorate is granted autonomy. This will also enable the Directorateto recruit the needed qualified technical staff which hitherto has not beenable to do because it could not recruit at higher than the Government scalewhich resulted in the loss of many of its qualified staff to the higher payingprivate enteprise and neighboring governments. Finally, to enable the Direc-torate to function more effectively, there should be planning and coordinationbetween it and the other Government agencies who undertake projects thatrequire electricity. This will avoid the present situation of having projectscompleted without the prior knowledge of the Directorate which is blamed fornot being able to provide the electricity on time.

D. Urban Water Supply

121. Bahrain has been relying wholly on groundwater for her water supply.For a long time water in Bahrain was drawn from wells and springs, which wereoccasionally contaminated and unhygenic. Access to piped water began in 1948in Manama and ten years later was available in other cities and major villages.Presently about 95 to 98 percent of the occupied dwellings have access to

piped water.

122. Bahrain groundwater, however, has been declining and its salinityis increasing. Also, the distribution system is aging and suffering from

leakages and technical deficiencies. This led the Government to initiate aprogram for conserving water use and improving its quality and quantitythrough maintenance of existing wells and construction of a desalination plant

which by 1980 will produce 20 million gallons a day. In 1977 the first phaseof the desalination plant was completed with production of 5 million gallonsof desalinated water which is being mixed with groundwater on the easterncoast where water quality and quantity are worsening. Bahrain currently draws

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200 million gallons of groundwater for domestic use. The remaining phases ofthe desalination project is estimated to cost BD 18 million (Table 5.8 ofStatistical Appendix).

123. Along with the poor water supply situation is the poor seweragesystem which is also aging and extremely inadequate for present requirements.It is a major health hazard. To remedy the situation, the Government iscurrently undertaking a major sewerage scheme for the islands. The cost ofthe scheme is estimated at BD 77 million, and will be completed by 1981.

E. Housing

124. The Government provides low cost houses at prices which can beafforded by the lower income groups. Also, for the sake of reducing crowdedconditions in Manama, the Government has been dispersing its public housingand construction projects over the islands, and adopting modern planning forthe new emerging communities. The best example of these modern public housingschemes is Isa Town, about 4.5 miles outside Manama. The first stage of thetown with about 1,700 houses and the needed social services, was completed in1968. Since then the town has expanded in all directions.

125. The boom of 1973 and its consequent sharp demand for houses byforeign companies has led to a rapid rise in rent and construction costs. Itis reported that the cost of construction per square foot increased from BD 6in 1973 to BD 20 in 1977, and for the same years the monthly rent for an aver-age sized apartment increased from BD 50 to BD 500 and for an averaged house(villa) from BD 80 to BD 800. This made it impossible for the lower incomegroups to obtain decent housing.

126. In July 1974, a national housing study was commissioned, and in July1975 was submitted to the Government. The study concluded that Bahrain wouldbe facing a serious shortage of houses over the coming decade, and needs 2,500houses a year to tackle the housing problem. The study also suggested the es-tablishment of a public body for that purpose. As a result, the Ministry ofHousing was established in August 1975 to carry out the government policy ofproviding low cost housing for the low income group.

127. Motivated by the considerable profit opportunities, the privatesector has responded well to the sharply rising demand for more expensivehousing. A large number of all types of houses have been constructed. Infact when economic activities in 1977 slowed down, the supply of houses andapartments was higher than demand, resulting in a drop in rent. One estimateis that there are 1,000 surplus high cost housing units now in Bahrain.

128. The public housing program consists of two parts: construction andloan programs. The construction program involves the construction by theMinistry of Housing of 2,000 housing units a year. These houses, which areconstructed largely by local contractors, are then sold by the Ministry ofHousing to low-income people at prices calculated on the basis of the indivi-dual's ability to pay. This usually means 50 to 75 percent of the cost. Thebeneficiary pays by installments over 20 years. Houses constructed in 1976

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were 2,291 (1,089 system; 1,028 traditional, and 174 apartments) and in 19771,478 (300 system; 776 traditional, and 402 apartments).

129. The loan program involves providing construction loans for up toBD 20,000. These loans are given to citizens who can afford to construct ahouse on their own property. Land is usually provided free by the State. Theloan is for 25 years and it is interest free. About 80-90 percent of theloans have been for home construction and the remainder for home improvementand extension. In 1977, the Ministry approved 1,000 applications for housingloans, of which 57 percent went to government employees and the rest to pri-vate citizens. Total loans made during 1976-77 were BD 17.5 million.

130. The current target of the Ministry of Housing is to construct 2,000housing units a year by 1982. The estimated cost per unit for 1978 is BD13,500. Capital expenditure estimated by the Ministry is BD 47.3 millionfor 1978 and 1979; and BD 30 million a year for 1980-82 (see Table 5.7 ofStatistical Appendix). The Ministry's long-term plan is completion of itshousing construction program by 1985. Occupancy per room is to be reducedfrom 2.67 to 1.5. This is to be followed by a large renovation program inthe old Arab sectors of the city to preserve the traditional old houses andbuilding.

131. The fact that the Government is currently providing heavily subsi-dized houses has resulted in the scrambling of people to get on the eligibil-ity list. As the annual supply of public houses is very limited in relationto demand, frustration and resentment is present among many applicants. As aresult, authorities are now revising their housing policy in order to reducehousing subsidies to the well-to-do recipients, and decided to establish ahousing bank which will reimburse the Ministry for the selling price of thehouse and collect the installments from the recipients. The bank will thenbe able to vary the interest rate according to the payment ability of therecipient. With the housing bank, authorities hope that people may begin tofeel that the house they receive is financed by a loan that has to be repaidto the bank concerned. The long-term objective of the bank is to provideloans directly to eligible individuals who will undertake the responsibilityof construction themselves. This is a step in the right direction. No datehas yet been set for establishing the proposed housing bank but 1978 is apossibility.

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VIII. DOMESTIC FINANCE

A. Public Finance

(1) Public Sector Structure

132. Bahrain's public sector consists of the Central Government, includ-ing the Port, Electricity and Water, and Utilities Directorates, and eightmunicipalities. The financial operations of all these agencies and muni-cipalities are controlled by the Central Government. The Central Governmentalso has equity participation in most of the major commercial enterprises inBahrain such as BAPCO, ALBA, ASRY, Gulf Air, the National Bank of Bahrain,and the Bahrain Flour Mill. The Central Government also controls the pensionfund, established in September 1975, and the Social Insurance Fund, estab-lished in June 1976.

133. The Central Government financial operations are reflected in theConsolidated Fund Account (CFA). There is also the Reserve Fund Account(RFA), an extra budgetary account which receives the balances of the CFA,and the interest from the Government deposits with local and foreign banks.Part of these receipts have been used for financing Government developmentprojects. Information is available on the CFA, but not on the RFA. Thisprevents consolidation of the overall government financial operations.

134. Since 1973, considerable improvement has been made in reforming theGovernment's financial practices. For example, accounts of the Head of Stateand part of the transfers in the form of loans, grants and equity have beenshifted from the RFA to the CFA. Following the financial law of March 1975,all ad hoc instructions by the Ministry of Finance on financial matters havebeen codefied, all ministries have been made responsible for preparing prelim-inary budgets on the basis of instructions by the Council of Ministers, anytransfer of expenditure between categories has been prohibited without legalauthority, and the responsibility for preparation, implementation, and controlof the budget have become the sole responsibility of the Ministry of Finance.

135. These improvements have enabled the Ministry of Finance to performan effective role in exercising fiscal discipline. The Ministry of Financewas also able, for the first time, to introduce some form of financial plan-ning and establish priorities in capital expenditure. This year it introduceda two-year budget covering 1978 and 1979, and it is hoping to expand theperiod to three and even to five years. In fact, a five-year plan for capitalexpenditures and revenues covering 1978-82 is being finalized by the Ministry.

(2) Revenues

136. Bahrain's overall budgetary position began to worsen in 1970 fol-lowing the stagnation of her oil production two years earlier. Minor budget-ary deficits were recorded in 1970 and 1971 averaging about BD 0.6 millionannually, and a small current account surplus of BD 9.6 million in 1972 wasachieved thanks to the increase in oil revenues from the Abu Saafa field.The sharp increase in international oil prices in 1974 resulted in a substan-tial improvement in Bahrain's overall budgetary position. The small current

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account surplus of BD 10.6 million in 1973 jumped to BD 79.3 million in 1974and to a provisional estimate of BD 115 million in 1977. A clear picture ofthe budgetary situation may be discerned from the following Table C:

Table C: SUMMARY OF GOVERNMENT FINANCE, 1972-79(In Million Bahrain Dinars)

Prov.Actual Budget Budget

1972 1973 1974 1975 1976 1977 1978 1979

RevenuesOil 26.0 29.4 103.4 110.9 156.4 180.7 161.2 160.2

Bahrain Field 16.6 17.7 63.4 73.1 88.1 89.1 79.2 78.3Abu Saafa 9.4 11.7 40.0 37.8 68.3 91.6 82.0 81.9

Non-Oil 7.0 15.7 18.1 24.1 34.7 49.4 57.6 68.7

(1) Sub-Total 33.0 45.1 121.5 135.0 191.1 230.1 218.8 228.9

CurrentExpendituresHead of State 5.5 5.9 6.0 6.1 6.0 6.0 6.0 6.0Defense 4.9 5.8 8.5 13.3 19.9 26.1 34.3 37.5Education 4.6 5.4 6.9 9.6 11.3 17.2 19.4 20.8Health 3.2 3.6 4.9 6.7 8.6 12.5 15.4 17.4Others 6.2 13.8 18.1 31.9 42.5 53.3 59.9 68.3

(2) Sub-Total 24.4 34.5 44.4 67.6 88.3 115.1 135.0 150.0

(3) Balance onCurrentAccount(1)-(2) 8.6 10.6 77.1 67.4 102.8 115.0 83.8 78.9

CapitalExpendituresElectricity &Water 0.7 5.0 10.6 17.0 25.6 34.3 39.5 46.0Housing 0.4 0.7 2.2 3.0 27.9 43.6 36.7 10.6Port & Dry Dock 0.6 0.1 5.6 8.2 18.1 16.8 17.4 6.3Others 6.6 1.8- 17.1 26.0 43.3 46.4 51.4 69.1

(4) Sub-Total 8.3 7.6 33.5 54.2 114.9 141.1 145.0 130.0

(5) OverallBalance(3)-(4) 0.3 3.0 43.6 13.2 -12.1 -26.1 -61.2 -51.1

Grants and Loans 1.0 - 2.2 - 10.9 32.0 61.2 /1 51.1 /2

Change In Balances 1.3 3.0 45.8 13.2 -1.2 5.9 - -

/1 Including BD 20 million of develooment bonds./2 Including BD 10 million of development bonds.

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137. A balanced overall budget is projected for the fiscal years 1978 and1979 after net capital imports averaging about BD 56 million in the two years.The Ministry of Finance is also committed to a balanced budget for the yearsahead. Without tapping new resources and reducing some expenditures, partic-ularly subsidies, this may be difficult to achieve.

138. Oil revenues began to increase rapidly following the rise in oilprices in 1973. They increased from BD 26 million in 1972 to about BD 181million in L977, or about seven times. Total resources are estimated at BD280 million each for 1978 and 1979 (Table 5.2 of Statistical Appendix) afterthe net capital imports cited in para 137.

139. Between 1972 and 1977, oil revenues from Bahrain field increased byabout 5.5 times compared to Abu Saafa's revenues of about 10 times for thesame period. In 1977, revenues from Abu Saafa began to exceed-those fromBahrain. In that year, oil revenues from Abu Saafa were about BD 92 millioncompared to BD 89 million from Bahrain fields.

140. Non-oil revenues in Bahrain are largely customs receipts and consti-tute only about 20 percent of total current revenues. There are no directtaxes in Bahrain except on the oil sector. Non-tax revenues constitute mostlyfees and charges on licenses and registrations of companies and other businesstransactions. Reflecting the growing role of Bahrain as a business centernon-tax revenues from fees and charges have grown rapidly in recent years.Between 1972 and 1977, they increased about nine fold, compared to an increasein tax revenues of about six fold during the same period. Again the year 1977marks the beginning of a period in which non-tax revenues from fees andcharges will be exceeding the traditional tax revenues from customs receipts(Table 5.2 of Statistical Appendix).

(3) Grants and Loans

141. A fundamental recent development in the Government efforts tomobilize external resources has been the rapid increase in grants. Again thisbegan in 1977 which recorded grants of BD 29.9 million, compared to only BD2.2 million in 1974, the year of the largest grant received previously. Theseare cash grants received from Saudi Arabia. They are estimated to be about BD26 million annually during 1978-79. There are grants in kind not recorded inthe budget, given for specific projects such as schools or hospitals. Theyare largely given by Kuwait. Their level was about BD 10 million annuallyduring 1976-77.

142. The Government has also accelerated its borrowing abroad since 1976.The loans obtained are mostly from the Arab development funds for financinginfrastructure projects (largely power). Borrowing in 1978 and 1979 is esti-mated at BD 15 million a year.

143. In its efforts to mobilize more domestic resources, the Governmentfor the first time issued development bonds in 1977. The bonds are redeem-able in 5 years and bear interest at 8 percent paid semi annually. Thefirst tranch issued in October 1977 was for BD 10 million but since it was

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over-subscribed, it was increased to BD 13 million. The remaining BD 7 mil-lion of the total BD 20 million is to be issued this year. Another issue ofBD 10 million is planned for 1979 (Table 5.2 of Statistical Appendix). Thefirst tranch was restricted to national institutions (pension funds, insur-ance, etc.) with minimum subscription of BD 50,000. In addition to mobilizingdomestic resources, the purpose of the bonds was to absorb liquidity. Theauthorities hope to develop a secondary market for these bonds.

144. Unless new sources of revenues are tapped, prospects for Governmentrevenues in Bahrain are not encouraging. Overall fiscal resources are pro-jected by Government to rise from BD 280 million in 1979 to BD 306 million in1982, i.e., at 3 percent annually. These projections are expressed in currentprices. It is clear, therefore, that either new domestic revenues will haveto be tapped or much greater reliance will have to be placed on capitalinflow. Which course the Government elects to follow is mainly a politicaldecision. Fortunately, many untapped revenue sources are available. Onepossibility is an increase in the gasoline tax which is currently one ofthe lowest in the Gulf, equivalent to about 30 cents per US gallon. Otherpossible areas are increase in taxation on alcoholic beverages which areprobably relatively price inelastic. Also, there is considerable scope forintroducing new taxes on some imported luxury goods to reduce some undesirableconsumption existing today.

(4) Expenditures

145. The sharp increase in oil revenues in 1974 induced an even sharperrise in Government expenditures. While oil revenues increased by about seventimes between 1972 and 1977, total expenditures increased by about eight timesduring these years rising from BD 33 million in 1972 to BD 256 million in1977. In addition to the sharp increase, there has been a structural changein the composition of expenditures with capital expenditures in 1976 and 1977exceeding the previuosly dominating current expenditures.

146. Current expenditures, consisting largely of wages and salaries, havealso had a considerable change since 1973. With the exception of the dominantposition of defense expenditures, education since 1974 became the secondlargest item and since 1975, health climbed to the third highest position.Also in that year current expenditure on public utilities became almost equalto the expenditure on the Head of State, and it surpassed it later in 1976.Therefore, in 1977 current expenditure of the Head of State which until 1974was the second highest after defense dropped to the fourth position (2.3 per-cent), preceeded by defense (10.2 percent), education (6.7 percent), andhealth (4.9 percent). This pattern is projected to remain unchanged through1979 (Table 5.3 of Statistical Appendix).

147. Bahrain's defense expenditure is the smallest among countries in anarea characterized by high defense spending in recent years. The annual growthrate of education expenditure in the post 1973 years did not differ from thatof the previous years reflecting the normal growth in the educational needs.Education expenditure was about BD 17.2 million in 1977 and is estimated toincrease to BD 19.4 million in 1978. Health expenditure, on the other hand,

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has began to show a higher growth rate since 1975, reflecting the expansionarypolicy of the Government in health services. Health expenditures were aboutBD 12.5 million in 1977 and is estimated to rise to BD 15.4 million. The risein expenditures on public utilities is related to the increase in subsidiesresulting from the expansion in the facilities of this sector to meet therising demand.

148. Apart from the real expansion in a number of specific sectors, therise in current expenditures has been largely due to the considerable rise inwages and salaries of the Government employees over the past few years, and tothe introduction of food and other subsidies in 1973. As discussed below theeconomic boom in Bahrain and the Gulf area since 1973 has been accompanied bya high rate of inflation and increase in wages and salaries in the privatesector. In order to avoid erosion in the standard of living of its employeesand to be able to compete with the private sector and with the Governments ofthe neighboring countries for well qualified staff, the Government on severaloccasions raised the salaries and wages of its employees. In March 1974, theminimum daily wage was increased from BD 0.9 to BD 1.2 and a monthly salarysupplement of BD 10 was given to all government employees, equivalent to anaverage increase of 15 percent for all workers and to an increase of about 37percent for the lowest paid employees; social security benefits were alsoexpanded. Substantial increases also occurred in 1974 and 1975. In 1976 gov-ernment wages were raised by 15-25 percent. Effective July 1, 1977 there wasa selective salary increase. This was a merit increase. The cost of thisincrease in 1977 was about BD 6 million, and its full cost in 1978 is esti-mated at BD 9 million (including the merit increase for 1978). Beginning thisyear, however, the Government has begun to discourage wage increase in boththe private and the public sectors.

149. Another major source of rising current Government expenditures hasbeen the introduction of food and other subsidies since 1973. These wereintroduced as counter-inflation measures. Since then the list of direct foodsubsidies has grown to include mainly meat, rice, sugar, flour, eggs, shrimpand fish. The cost of direct food subsidies to the budget was about BD 6million in 1975 and about BD 4 million annually during 1976-78. The subsidiesare either given to the private importers or producers to compensate for thedifferential between their cost and the selling price fixed by the Government,or are borne by the Government enterprise that undertakes production or impor-tation of the commodity. This is the procedure in the production of fish bythe Government owned Fishing Project, flour by the Flour Mill (with 54 percentgovernment ownership), sugar, vegetable, oil and rice by the National Export-Import Company (10 percent Government ownership). In addition to these directsubsidies, the Government is involved in massive indirect and hidden subsidiesincluding gasoline, electricity, water, public transport, housing, animalfeed, inputs and fuel to industries, services to agriculture, health, educa-tion and others. The list is so extensive that the financial authoritiescannot quantify their total cost. The Ministry of Finance intends to carryout a study to obtain a better idea of the amount of all these subsidies. Thestudy will be useful in guiding the authorities to determine the subsidiesthat could immediately or gradually be phased out without adversely affectingthe real income of the lower income groups. It will also show the public the

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extent of the additional income they are getting probably without theirknowledge.

150. As is the case of other countries, Government involvement in subsi-dies could get larger with the passage of time, and a way out of them couldlater become a costly political and social venture. Also extensive subsidiesare causing serious misallocation of resources in the economy through thedistortion of the price system. Authorities are well aware of these problemsand there are plans for substantial reduction or even elimination of subsidieswithin five years.

151. Since the implementation of the financial law of March 1975, proce-dure for the construction of the capital expenditures budget has become clear.It begins with the Ministry of Finance who requests the ministries and agen-cies concerned to submit their projects for the capital budget (multi-annualbeginning in 1977). The submissions differentiate between on-going and newprojects. On-going projects are usually those approved by the MinisterialCommittee for evaluating and approving projects in which the Ministry ofFinance is a member. The Ministry of Finance then undertakes the process ofestablishing priorities among the programs of the various ministries and with-in the program of each ministry, giving a high priority to on-going projects.No investment criteria or any other analytical tools for establishing priori-ties are used by the Ministry of Finance as its Planning Department stilllacks this expertise. The Ministry of Finance then produces a revised program,which is discussed with the ministry concerned before it is submitted (alongwith the current budget) to the Council of Ministers for approval. Theapproved budget is then announced by an Amiri decree.

152. As is the case with current expenditures, capital expendituresincreased sharply following the increase in oil revenues in 1974. In fact,the increase in capital expenditures was much faster than that of oil revenuesor current expenditures. For example, between 1972 and 1977, capital expendi-tures increased about 17 fold, rising from BD 8.3 million to BD 141.1 million.This compares with an increase of about seven fold in oil revenues and fivefold in current expenditures. This rapid growth in capital expenditures ledthem, for the first time, to exceed the level of current expenditures in 1976.

153. The most urgently needed facilities to be financed have been powerand water, which claimed about 25 percent of capital expenditures during1974-77. These include completing the remaining phases of Sitra power anddesalination plant, and constructing a new power station at Rifaa. Othermajor infrastructure projects include public housing which claimed about 22percent of capital expenditures during the same years, and the expansion ofport facilities which accounted for 14 percent of the capital expenditures.Other main projects include construction of new roads, improving the airportfacilities, and a major sewerage project for Manama. Most of these majorprojects, particularly the power, water and sewerage, will not be completeduntil mid 1980s.

154. A look at the composition of the Government development program(1977-82) suggests that it is reflecting the Government development priorities

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fairly well, and, therefore, any possible curtailment may be difficult. Thequestion which will remain unanswered is whether the size of every individualproject is appropriate (e.g., expansion of existing facilities, or construc-tion of a new one). Also, in view of the virtual lack of investment criteriain selecting and analyzing development projects, it is strongly recommendedthat rigorous criteria and methodology should be used in project analysis.

155. The acceleration of development spending coupled with the lack ofrigorous investment criteria caused apprehension among concerned policy makersabout the possibility of committing a major error in selecting individualprojects, as well as the possibility of overcommitment for the whole program.Accordingly, the Ministry of Finance called for a halt on all new capitalprojects for the year 1978. This will give the Ministry the time needed toevaluate the country's development progress since 1973.

B. Monetary Developments

(1) Recent Monetary Developments

156. Bahrain's money supply (M2) increased 2.64 times (from BD 99.7 toBD 353.3 million) during the years 1974-77. This is an average annual rate ofincrease of about 37 percent. Since prices rose about 1.76 times, the realincrease in the stock of money was about 50 percent or about 11 percent a year.Besides the scale of monetary expansion, the erratic changes from year to yearand variations in their component elements were striking. Growth varied from13 percent in 1973 to nearly 69 percent in 1976. The two main factors werebank credit to the private sector and the increase in net foreign assets.Table 6.1 of Statistical Appendix shows the former increased by BD 237 millionor about 43 percent per annum over the four years and the latter by about BD95 million or 32 percent annually.

157. As implied above, these general data obscure the important year toyear changes in the magnitude and importance of the three basic variables.This is apparent in Table 6.2 of Statistical Appendix which shows the changesin the factors affecting the monetary stock. In 1974 and 1975 the creditexpansion to the private sector was about equal to the liquidity creationthrough accumulation of foreign assets. 1976 is a somewhat different case.In that year bank credit to the private sector was allowed to increase by BD107 million, while net foreign reserves grew only by BD 21 million.

158. Given the openness of the Bahraini economy, the Bahrain MonetaryAgency (BMA) felt that direct credit restrictions would be ineffective. Bankscould easily borrow abroad if domestic liquidity was tightened. Morover, theBMA did not wish to restrict construction, where the absorption of creditdoubled in 1976 (Table 6.7 of Statistical Appendix) because of the shortageof housing, though the business community now acknowledges that the construc-tion of high cost housing was overdone, and a good deal of housing and othercredits went into real estate speculation. However, early in 1976 the BMAsucceeded in using moral suasion to reduce speculative uses for credit partic-ularly in real estate. However, the banks apparently found it difficult toeffect a quick turn around in their overdraft lending operations.

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159. 1977 presents a quite different picture. Both the overall balanceof payments and fiscal operations were nearly in balance. The expansion ofthe money supply was reduced by nearly 57 percent as compared with 1976 andcredit to the private sector fell by about 60 percent. One might haveexpected this sharp deceleration of monetary expansion to produce recessionbut there are few signs of it. Land speculation and higher priced housinghave been curtailed and a number of banks stopped lending on real estatebusiness. Nevertheless, the need to complete the unfinished constructionprojects resulted in a level of construction credits in 1977 almost equalto that of 1976 (Table 6.7 of Statistical Appendix).

(2) Institutional Framework of the Monetary System

160. The Bahrain Monetary Agency replaced the Currency Board on December5, 1973.1/ The BMA has the usual powers of a central bank but has introducedcontrols rather slowly. This was in accordance with the intent of the law.The lack of outstanding public debt (until very recently) ruled out openmarket operations.

161. Effective January 1, 1975 all sections of the BMA Law were put intoeffect. In August 1975 legal reserve requirements of 5 percent for domesticand 1 percent for foreign currency deposits in commercial banks were insti-tuted. As of December 31, 1977 commercial bank deposits with the agencyslightly exceeded these requirements. The BMA does not have authority to setmandatory interest rates for the commercial banks but it has given advice asto limits on interest paid on deposits which apparently are being followed. 2/In order to stabilize interest rates in Bahrain and also protect againstexchange risk, the BMA has made swap arrangements with the banks under whichBMA will buy foreign exchange spot and sell it forward against dinars. Theforward selling price for the foreign exchange is fixed (as compared with thespot rate) by the usual interest arbitrage, i.e., the difference betweeninterest rates abroad and those which BMA wants to prevail in Bahrain.

162. In March 1975 the BMA arranged for the issue of a 3-month obliga-tions of Alba which were sold at auction thus taking a tentative step towardsopening a capital market in Bahrain. In October 1977, the BMA also acted asan agent for the Government's issue of development bonds (see para 143). Itis apparent that these bonds have a ready market. They are to be sold throughfinancial intermediaries in Bahrain. The commercial banks, particularly the

1/ A relic of the former system remains. The currency cover must at leastequal currency in circulation. This is hardly likely to be a constraintsince at the end of 1973 the net foreign assets of the banking systemwere 3.4 times the currency circulating outside the banks.

2/ At present these rates are 6 percent on deposits up to one month, 6 1/2percent for 3 months, 7 percent for six months, 7 1/2 percent for 12months and 8 percent for 15 months or longer. The BMA has encouraged thebanks to issue certificates of deposits but so far this has not beendone.

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National Bank of Bahrain, act as transfer agents for the shares of moneyenterprises. There are some 10 brokers who handle most of the trading inshares in an over-the-counter market. The Bahrain Investment Company is amutual fund type of enterprise. 1/.

163. Bahrain is singularly well supplied with banking services althoughonly four are strictly Bahraini banks. They are The National Bank of Bahrain,and Al-Ahli Commercial Bank (100 percent Bahraini owned and incorporated inBahrain), Bank of Bahrain and Kuwait (50 percent Bahraini owned and incor-porated in Bahrain) and the Continental Bank Ltd (50 percent Bahraini owned,but incorporated outside Bahrain). The National Bank of Bahrain does abouthalf the domestic commercial banking business in Bahrain. There are also 16foreign banks registered to do a Full Commercial Banking (FCB) function inBahrain, 8 of which also have an offstore banking business (OBUS). In addi-tion there are 33 international banking institutions which have opened officesas OBUS and 7 more were licensed recently but have not yet begun operation.Thus in all there are now 53 institutions carrying on some form of bankingfunction in Bahrain.

164. The OBUs are similar to international banks set up in such centersas Singapore and the Bahamas. They are subject to regulations by the BMA, butare not required to maintain primary reserves with the agency. They arerequired to submit balance sheet and income information to BMA. They arerequired to be full branches of the parent bank and have fully staffed offi-ces, "brass plate" operations being ruled out. They may not be residents ofBahrain or offer banking services to residents except to the Government andits agencies, and to the fully licensed banks. By special permission theymay, however, participate in financing domestic development projects that areconsidered of vital importance to the Bahraini economy. Over $20 million hasbeen so far invested by them, mostly for hotels. As the enumeration in theprevious paragraph indicates, fully licensed banks (FCBs) may apply for anOBU license which costs BD 10,000 a year. The freedom from other taxes inBahrain, her location close to the oil-rich Gulf countries and the fact thatBahrain time is 3 hours ahead of European and 8 hours ahead of New York makethe location desirable for handling foreign accounts. Perhaps most importantis the political stability and economic freedom of the community. The OBUsperform a safe haven function for depositors as well as organize syndicate andother financing for projects even outside the Gulf. Aside from paying theannual fee and undertaking the investment required for an office, the contri-bution of the OBUs to the Bahrian economy is the employment provided and theskills imparted to local staff.

1/ It is an investment banking institution established in July 1977 with apaid-up capital of BD 2.5 million subscribed by leading Bahraini merchantsand entrepreneurs, and the General Organization of Social Insurance. Thecompany was granted an investment banking license by the BMA in October1977. Its main objectives is to undertake private investment in Bahrainand abroad in the fields of corporate finance; equity participation; realestate, international finance; portfolio management; project evaluation;international trading; and development finance.

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165. As of December 1977 the OBU's had assets of over $15.7 billion

(Table 6.8 of Statistical Appendix), an increase of over 2 1/2 times duringthe year. It is important to note that 40 percent of these assets wereoriginated from and were invested in Arab countries, thus contradicting the

widely held belief that the OBU's are in Bahrain simply for recycling the Oilmoney back to the United States and Western Europe. Also the assets of the

OBUs are about 8.75 times those of the FCB's. As of December 1977, 73 percent

of the assets and 75 percent of the liabilities of the OBUs where interbankfunds including transactions with other OBUs. However, the OBUs offer afacility for the international transfer of funds in the gulf area.l/ Lessthan 1 percent of this concerned commercial banks in Bahrain. Those insti-tutions that do both an OBU and FCB business seem to be at an advantage inparticipating in Bahraini projects such as the LPG plant which is attractingsubstantial interest from the foreign banks interviewed by the mission.

166. The Government has just enacted a ministerial regulation permittingnon-banking institutions to establish themselves on an offshore basis and thuswin exemption from the rule that at least a 51 majority of the equity be held

by Bahrainis, that applies to companies operating in Bahrain. Its successwill probably depend on whether commercial concerns which, on locating in

Bahrain, find the lack of red tape there which they encounter elsewhere suffi-cient incentive.

(3) Need for Specialized Banking

167. There is a near-concensus among the business community and the Gov-

ernment agencies that Bahrain is not in need of specialized development bank-ing institutions at the present time. There is no lack of funds for financingindustrial and other ventures. Bahraini entrepreneurs, who are mostly traders,

are financially affluent, and credit to private investment in all sectors isreadily available from the commercial banks. Bahrain banks offers comprehen-sive financial services including medium term credit up to ten years. Duringthe boom years of 1973-77, Bahrain commercial banks' advances to the tradesector accounted for an annual average of only 36.4 percent of their totaladvances, while the rest went to construction (27.8 percent), manufacturing(14.3 percent), transport (8.4 percent) and others (13.1 percent)--Table 6.7of Statistical Appendix. Moreover, the small size of Bahrain and its narrowdomestic market and limited industrial opportunities makes it difficult tojustify the establishment of a viable development bank.

168. It was mentioned before (para 131), that the Government decided to

establish a housing bank. This, however, is not a development bank in thestrict sense. It will merely act as an agency for collecting the loans madeby the Government for the construction of houses, and for increasing the

1/ As of December 1977, about 72 percent of the assets and liabilitiesof the OBUs were in US dollars and their lending terms correspondedclosely to those of the Eurodollar market. Regional currenciesconstituted 23 percent, and European currencies 5 percent.

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share of the recepient in the cost of the house (i.e. reducing the Govern-

ment's subsidies).

169. The BMA has announced plans to license more merchant banks. These

would be expected to play a useful role in organizing new private ventures in

commerce and industry.

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IX. BALANCE OF PAYMENTS

A. Oil Revenues

170. The second largest oil refinery in the Middle East is located in

Bahrain. It is owned by Caltex. About 22.3 percent of the input of the

refinery comes from the Bahrain field, and the rest from Saudi Arabia via an

under water pipeline. The Bahrain field's input to the refinery has beendeclining slowly but steadily, by a total of about 17 percent between 1972-77.

Meanwhile the Saudi input has risen by over 21.4 percent over the same period.

The input from the Bahrain field is expected to continue to decline, perhaps

at a somewhat accelerated rate, but input of crude from Saudi Arbia will

probably increase proportionately. Because of the blending of Bahrain and

Saudi crude in the refining, for balance of payments purposes it is convenient

to consider the refinery as non-resident, and the Bahrain oil as exported when

it reaches the refinery. Thus the various types of government oil revenue and

the expenditures in the economy of Caltex are export receipts.

171. Oil revenue accruing to the economy consists of six different cate-

gories. They are:

(a) Abu Saafa field. This is now the largest source of oil

revenue. The proceeds of the field are shared equally

between Saudi Arabia and Bahrain.

(b) Bahrain field. This source consists of three categories:

(1) Revenues from the 60 percent share in Bahrain field

owned by Bahrain. The Government sells this crude

to BAPCO at 93 percent of the posted price, 7 percent

being the assumed cost of production.

(2) On the remaining 40 percent of the field which isowned by Caltex, the Government imposes a royalty

which is 20 percent of the posted price on crude usedto produce products for export, and 12.5 percent on

the crude producing products for the domestic market.

(3) Also on the 40 percent owned by Caltex, the Government

imposes an income tax equivalent to 85 percent of thenet profit from this portion of the Bahrain crude.The cost to the company includes the royalty mentioned

in (2). 1/

(c) The Government receives 55 percent of the net profit of the

refinery on products for export and the same percent tax on

1/ b(2) and b(3) will presumably merge with b(l) when the 100 percent take

over is effective. See paragraph 173.

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the price of products sold in the domestic market. For taxpurposes, the net profit to the refinery is assumed to be11 J per barrel of throughput.

(d) The local expenditures of BAPCO. This is the local expendi-ture of the company for its production and refining operations.

172. Bahrain's major source of oil revenues is the Abu Saafa field. Thissource is estimated to provide Bahrain in 1977 about BD 91.6 million ($237million), or about 45 percent of total income from the oil sector. Thissource has been growing rapidly and has more than compensated for the declinein production from the Bahrain field. According to 1978 and 1979 budget pro-jections, Abu Saafa revenues are expected to be lower in those years than in1977 but this may simply reflect conservative budgeting. Crude production inthat field has fluctuated during the last five years as shown in Table 8.5 ofthe Statistical Appendix. The second most important source of revenue is thesale of crude from the 60 percent portion of the Bahrain field owned by theGovernment. After crude production costs, this is expected to yield about$124 million in 1978 or about 24 percent of total oil revenues. The thirdimportant source is the 85 percent tax imposed on the net profit from the 40percent of the Bahrain field still owned by Caltex. This is likely to beabout 16 percent of Bahrain's 1978 oil receipts. The remaining oil revenuesaccrue from the 55 percent tax on the refinery's net profit and on domesticsales of product.

173. The Government is contemplating acquiring the remaining 40 percentof the Bahrain field but since the present take per barrel on this portion isonly about 60 J per barrel less than that from Bahrain's own 60 percent shareof the Bahrain field, the complete takeover of the field is not likely to havemuch effect on oil revenues. This takeover is in the final stage, and couldbe announced soon.

174. There are obviously many imponderables in trying to forecastBahrain's oil revenues. The most uncertain factors are the performance ofthe Abu Saafa field and changes, if any, in the posted price. The declinein Bahrain production, now estimated at about 6.5 percent a year, seems fairlycertain despite the continuing reinjection of natural gas. Future finds arenot regarded as likely though one source suggested more exploration off theeast coast would be warranted.

B. Other Exports

175. With diminishing oil receipts, the ability of Bahrain to generateother exports (or substitute domestic production for imports) is a matter ofgreat importance. Unfortunately, available statistics do not distinguishbetween exports and re-exports originating in Bahrain, nor give any indicationof the value-added in Bahrain which is exported. Port authorities estimatere-exports at 25 percent of the volume of imports. Since foreign trade inalumina and aluminum is handled outside of the jurisdication of the port

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authorities, we will subtract 40 percent of imports from Australia, 1/ thesource of alumina for Bahrain, from total imports, and also subtract exportsof aluminum from total exports in making our calculation of the trend inexports of Bahrain origin. It would be very hazardous to draw any conclusionsfrom such a rough exercise as far as year to year data are concerned. However,the difference between 25 percent 2/ of imports, and exports (both excludingoil products and aluminum) appears to be declining in real terms. In otherwords re-exports are declining as a percentage of total exports. However,another estimate is that about half of exports (other than POL and aluminum)consist of re-exports. On this basis exports of Bahraini origin (other thanoil and aluminum) have increased in real terms by over 13 percent a year since1972.

Table D: BALANCE OF PAYMENTS(US$ millions)

19771972 1973 1974 1975 1976 (est.)

Oil sector 68.4 101.2 293.7 325.6 456.4 527.7Foreign trade -138.9 -174.3 -263.9 -376.7 -635.0 -727.2Investment income /a 4.6 2.8 7.6 8.1 28.6 30.4Travel /b 8.0 10.1 14.4 21.0 27.8 31.7Government transfers 2.3 - 5.6 - 1.3 2.5

Current Account Balance -55.6 -60.2 57.4 -22.0 -120.9 -135.4

Direct investment 35.3 4.3 15.2 53.1 138.9 50.4Loans and grants (net) 3.0 6.6 9.9 11.9 52.1 102.8All other items (including

net errors and omissions) 5.7 26.0 29.3 82.2 3.5 -13.6

Net Capital Inflow 44.0 36.9 54.4 147.2 194.5 139.6

Change in Reserves -11.6 -23.3 111.8 125.3 73.6 4.7

/a Government and Bahrain Monetary Agency only.7b Rough estimate based on hotel occupancy and air passenger arrivals.

Source: Table 3.1 of Statistical Appendix.

1/ Middle East Economic Digest, March 1978, p. 29 of supplement on Bahrain.

2/ Using this percentage assumes of course that the composition of retainedand of total imports were the same. This is likely to be less than fora single year than over a term of years.

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176. The total value of non-oil exports from 1972 through 1977 was $1,360million of which about $500 million was aluminum and about $28 million shrimp.Substracting them from the total we have $832 million of other non-oil exports,most of which can be assumed to be re-exports.

177. In 1977 alone the value of aluminum exports was $125 million. Otherexports amounted to $30 million. Re-exports can be estimated at $265 million.

C. Imports

17;3. The sharp rise in oil revenues coupled with the economic boom wit-nessed by the Gulf area led to dramatic growth in Bahrain's imports duringrecent years. They increased from $324 million in 1973 to $1,126 in 1977,that is at a rate of 37 percent p.a. The increase was to meet Bahrain'sdomestic needs as well as that of her neighboring countries particularlySaudi Arabia since Bahrain imports includes a substantial portion which islater re-exported. Reflecting the heavy investments in the area imports ofmachinery and equipment increased their share in total imports from 28 per-cent to 36 percent during the period. Imports of other manufactured productsalso rose at a faster rate than total imports while the share of food andbeverages declined from 18 percent to 12 percent, respectively.

D. Direction of Trade

179. The relative stability of the Bahrain trading relationships is shownin Tables 3.5 and 3.6 of the Statistical Appendix. The United Kingdom hasremained her most important supplier though Japan, the United States, Germanyand Australia (for alumina and beef) have increased their share. The exportside is not very meaningful because of re-exports which no doubt account forSaudi Arabia's absorption of about half Bahrain's non-oil exports. Japan isapparently the largest importer of value added produced in Bahrain since shepurchases nearly all of Alba's output.

E. Other Current Account Items

180. The only identifiable item among the invisible receipts is incomefrom travel. This was estimated very roughly from the rate of hotel occu-pancy. Income from this source may increase substantially when the Saudicauseway is completed. Now travel income is mostly from business or officialtravel rather than tourism per se. It is likely to remain so. The "invest-ment" income does not include income earned on private Bahrain investmentabroad. This, to the extent it is repatriated, would help to explain therather large errors and omissions item. Fees and staff payments by theseinstitutions total several million dollars a year.

F. Capital Items

181. The official loans and grants to the Government, which are discussedin the next chapter, amounted to about 13 percent of net capital inflow in1976 and 1977. This item is expected to increase substantially in 1978 and

- 47 -

1979. Up to now the predominant capital inflow has been in the form of directinvestment probably mostly in the construction industry.

G. Reserves

182. Since the major hike in the price of oil the Bahrain balance of pay-ments has obviously been a healthy one and an increase in foreign exchangereserves of nearly $300 million have been accumulated. This accumulationamounts to about 70 percent of her present net foreign assets of $426 million.

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X. DEVELOPMENT PROSPECTS

18:3. The decline of natural resources - oil, gas and water - both abso-lutely and in relation to Bahrain's growing population, makes it imperativefo-r the Government to pursue its strategy of economic diversification,adopted after independence, with renewed vigor. As was discussed in thepreceding chapters, there are promising opportunities for the continued expan-sion of services and manufacturing. Favored by her geographical location, herproximity to major markets, especially in Saudi Arabia, and her superior ser-vicing and communication facilities, Bahrain should be able to attract addi-tional foreign firms operating in the region. Income from travel and tourismcan also be developed further, especially when the causeway to Saudi Arabia iscompleted in four or five years. The causeway will also facilitate the estab-lishment in Bahrain of ancillary industries to complement the petrochemicaland steel complex planned for Jubail in northeastern Saudi Arabia. As wasexplained in Chapter IV, additional industries could be developed both forexport and import substitution, including the full utilization of Bahrain'snew dry dock and its supporting workshops. A comprehensive study for agricul-ture could review possibilities for productivity gains although the totalvoLume of production will remain limited by the country's water resources.Fishing, on the other hand, offers some scope for expansion as Bahrain'scoastal waters contain a large variety of fish, particularly shrimp.

A. Major Policy Issues

184. Bahrain's undeniable potential for further economic development can,however, only be realized for the benefit of the local population if importantquestions of national economic policy are being addressed. One of the mostvital issues appears to be rooted in the fact that Bahrain has not yet pro-duced a labor force which can hold its own with expatriates in industrialpursuits. Greater efforts are therefore required to develop the technicalskills of the local labor force and to accelerate the policy of substitutingBahrainis for expatriates in technical and professional jobs. Otherwise, thecountry's economy will become increasingly dependent on foreign labor whichthrough remittances and the use of local facilities and services, constitutesa growing drain on Bahrain's financial and real resources.

185. The authorities are well aware of this issue. Concerned about thepossible future difficulties of Bahraini general school graduates and drop-outs to find employment, the Government is giving considerable encouragementto vocational training. There are now.training centers at all major indus-trial and service establishments such as BAPCO, ALBA, and Dry Dock, Gulf Air,the Electricity Department, major hotels, etc. A third technical secondaryschool is to be opened in the fall, and a technical institute to be financedby Saudi Arabia is under consideration. This emphasis on technical educationshould be complemented by a policy of discouraging students to pursue onlygeneral education courses.

186. The Government is also reviewing the possiblity of reinstatingearlier restrictions on immigration. Relaxed during the 1974-76 boom period

- 49 -

the policy of allowing employment of expatriates only as and when no appro-priate Bahraini manpower could be found, is now again being applied morestrictly. However, Bahrainization can only succeed to the extent that localskills are being developed. This will take considerable time even if muchmore emphasis is given in the future to technical and professional training.Meanwhile, Bahrain will have to continue to rely on imported labor and skills.

187. Another crucial area is development planning. There is a generalconsensus among government departments and the business community regardingthe need for some form of planning so that the private sector would know wellin advance, the investment program of the public sector. At the present time,there is insufficient coordination between the ministries and agencies con-cerned with the same sector or project.

188. Planning of the type needed in Bahrain need not involve complexbureaucratic procedures although the Government should calculate the amountof public investment required in the various sectors to achieve reasonable andbalanced economic growth. The planning agency of course needs the ability toperform cost-benefit and internal rate of return analyses on the projectssubmitted by the Ministries. Complete reliance on outside consultants, asseems to be the case at present, may not achieve the best use of resources,which in the case of Bahrain are likely to become increasingly scarce.

189. The history of public sector planning in Bahrain is very brief asis the period of large scale capital expenditures by the public sector. InJune 1976 the Ministry of Finance established the Directorate of Planningand Economic Affairs, which since then has been acting informally as thesecretariat for the Ministerial Economic and Financial Committee for theEvaluation and Recommendation for Approval of public projects.

190. The Ministerial Committee consists of the Ministers of ForeignAffairs (chairman), Finance, Information, Development and Industry, andCommerce and Agriculture. The Committee lacks a technical secretariat, and,therefore, is unable to evaluate the priority of the project presented to it.The Directorate of Planning in the Ministry of Finance has been acting onan informal basis as a secretariat for the Committee, but the Planning Direc-torate is not only heavily burdened by other responsibilities, but also lacksthe necessary variety of expertise.

191. In 1977, the Directorate issued a five-year public investment pro-gram (1977-82). This was not a plan but rather a list of projects submittedby the ministries concerned. Its lack of a well-thought-out basis involvingthe matching of project plans with resources was indicated when the Governmentdecided for 1978 to suspend for a year all new project starts. This wasprobably a necessary measure so that project preparation could catch up, butsuch indiscrimate action hardly denotes a proper husbandry of resourcesfor priority projects. The failure to start even small but much neededprojects in that year has caused difficulties in the utilization of priorinvestments.

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192. One serious problem of the Planning Directorate is that it is spreadmuch too thinly. Its main official functions are: macro-economic planning,forecasting, compilation of national accounts, guiding ministries in the prepa-ration of their financial plans, analyzing and supervising public investment,negotiating and implementing bilateral economic agreements, negotiating andfollowing up on loans to Bahrain, reviewing and appraising projects, and con-trolling project expenditures.

193. Present staffing of the Directorate is inadequate for carrying outall these functions effectively. Only eight of its thirteen staff areuniversity graduates. Moreover, the majority of the staff with universitydegrees are new graduates with no experience. The Bank has agreed to providethe staff of the Directorate with training on economic management and projectevalution through courses in its Economic Development Institute and throughon-the-job training.

194. A third important issue concerns Bahrain's international competi-tiveness. Surrounded by much affluence, the country has to some extent fol-lowed the path of its neighbors. Import prices have been subsidized evenwhile the exchange rate is favorable to imports and unfavorable to exportsof domestic value added. In recent years, energy intensive products haveaccounted for most of the export gains. Given the growing shortage in thesupply of oil and gas, this cannot be repeated. Care must therefore be takenthat Bahrain does not price herself out of the market by overvaluing the goodsand services offered.

195. A policy of effective demand management implies that Bahrain cannotin the long run sustain an excessive level of personal and public consumption.Measures will have to be taken to reduce the amount of subsidization ofimports and to curtail the scope of some social programs, including housing.Higher taxes on alcoholic beverages and gasoline would be desirable. Othertaxes could be considered and tariffs for public utilities would have to bebrought closer to actual cost levels. This will allow the authorities tomobilize the resources needed to finance the operating expenditures ofBahrain's growing infrastructure, and to make an adequate contribution tothe public investment program.

196. At the same time, a proper balance will have to be maintainedbetween wages and labor productivity. The authorities are fully aware of thisrequirement and have already taken steps to dampen the further increase inwage cost. This policy needs to be maintained and possibly reinforced.

B. Illustrative Projections

197. Provided prudent policies are pursued in these three crucial areas -manpower training, public sector planning and demand management - Bahrain'sprospects for sustained growth in the long run are quite favorable. Thefollowing table gives an illustration of this potential. In the absence ofdetailed national accounts it is restricted to key balance of payments data.Given the fact that exports from the Bahrain oil field are expected to ceasein 1995, that year has been taken as the end of our projection period. We

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Table E: ILLUSTRATIVE PROJECTION OF BALANCE OF PAYMENTS(US$ million; 1977 prices)

1977 1985 1995

1. Oil sector, total 528 510 500

Bahrain field 226 135 -Abu Saafa 232 305 430Local Expenditures 70 70 70

2. Exports and re-exports 420 680 1,170

Exports 155 260 420

Aluminum (125) (160) (160)Others (30) (100) /a (260)

Re-exports 265 420 750

3. Services 272 520 730

Offshore firms 30 100 150Travel and tourism 32 120 150Investment income 30 30 30Other Services 180 270 400

4. Gross exchange earnings 1,220 1,710 2,400(1 + 2 + 3)

5. Exchange requirements 1,366 1,940 2,400

Imports 1,126 1,700 2,400of which: retained imports (870) (1,240) (1,600)

Remittances 240 240 -

/a Including $46 million from the NGL plant.

have also taken a look at one intermediate year, 1985, which denotes the endof the period during which presently ongoing or firmly planned projects will

come into operation.

198. The projections are expressed in constant 1977 prices. Foreignexchange earnings from the oil sector are assumed to decline slightly over theperiod under consideration, with rising revenue from the Abu Saafa field com-pensating largely for the gradual exhaustion of the Bahrain field. Localexpenditures of the oil industry and the refinery are taken to be constantover time.

199. Exports of aluminum are expected to increase by about 28 percent,reflecting the planned expansion of Alba. Other exports of locally manufac-tured or assembled products could more than triple within the first 8-year

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period; this assumption includes the NGL plant to be completed by 1980, whichis expected to export about 270,000 tons of propane, butane and naphta a year.At 1977 prices this would be worth close to $50 million. During the following10 years manufacturing exports are assumed to grow at 10 percent a year. Withthe completion of the Saudi causeway this appears to be a feasible target.The causeway should also facilitate re-exports assumed in these projectionsto grow at an average rate of 6 percent p.a.

200. In respect of invisible earnings, the mission obtained an estimatethat the annual average cost to each of the OBU branches in Bahrain was up to$1 million of local expenditure. There are about 40 (including combined OBUsand Full Commercial Banks) of these at present. It seems that the new regula-tions for other exempt (from Bahraini equity participation) organizations willattract more firms. Obviously prediction is hazardous but foreign exchangeincome of $100 million from offshore institutions of one kind and another by1985 and $150 million by 1995 may be a possibility. Travel or tourism incomeis another source. From this roughly $32 million was estimated for 1977.With two new hotels going up and others enlarged, Bahrain's capacity toattract travellers may more than double. $120 million by 1985 and $150 mil-lion by 1995 might be assumed. Investment income is taken to continue at 1977levels.

201. Total foreign exchange earnings could thus double in real terms overthe whole 18-year period reaching about $2.4 billion by 1995. Foreign exchangerequirements, on the other hand, are likely to exceed these amounts for mostof the period under consideration. The assumption is that retained importswould rise by an average of 4-1/2 percent a year until 1985, and by 2 1/2 per-cent a year thereafter. Implied in this assumption is that the number of expa-triates working in Bahrain will not be higher in 1985 than at present, and thatduring 1985-95 most expatriates will be replaced by Bahrainis. The assumedgrowth of retained imports would thus allow continued high levels of invest-ment and a gradual increase in real per capita consumption (about 1 to 2 per-cent p.a.). Adding to this the import component of exports and taking intoaccount that remittances by expatriates would gradually disappear, grossforeign exchange requirements would rise from $1,366 million in 1977 to about$2,400 million in 1995.

202 In should again be emphasized that these projections are not in anyway predicting future trends but that they are merely illustrating possibledevelopments based on policy assumptions discussed earlier in this chapter.On balance, however, the figures shown in Table E appear to be on the conser-vative side. For example, they assume that oil prices will not increase inreal terms during the period considered, and that exports of goods and ser-vices will grow at lower rates than those experienced in recent years. If inthe event foreign exchange earnings should grow faster this would allow a morerapid increase in local consumption and/or somewhat lower foreign aid require-

ments.

C. External Assistance

203. Nevertheless, the mission believes that even under favorable condi-

tions Bahrain will be in need of foreign capital assistance for many years to

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come. Table E suggests that the need for capital inflow is likely to growuntil 1985, and gradually decline thereafter. Some of this aid will no doubtcontinue to be made available in the form of grants. But sizable borrowingsfrom Arab and other sources cannot be ruled out.

204. Bahrain's experience with official external assistance is recent.It is only in 1976 that she began to receive grants and loans on a relativelylarge scale. In 1977 Saudi Arabia and Kuwait provided grants of about BD 30million ($76 million). The Ministry of Finance estimates the level of grantsduring 1978-79 at BD 26 million annually (Table 5.2 of Statistical Appendix)and the same level for 1980. There are the cash grants that are recorded inthe budget, and grants in kind not recorded in the budget. The latter includeconstruction of schools and hospitals, mostly by Kuwait. Although not recordedin the budget, the Ministry of Finance keeps records on the volume of thesegrants and their purpose. The Ministry estimated the grants in kind madeduring 1976-77 at BD 10 million annually. Because of the relatively largevolume of the grants in kind, it is recommended that the Ministry of Financecarry out studies on these grants for its own internal use. This will alsoenable it to coordinate its investment programs with the authorities receivingthese grants such as the Ministries of Education and Health.

205. Bahrain's borrowing has been largely from the Arab development fundsto finance construction of infrastructure projects, mostly power. For financ-ing the Sitra power and desalination plant, Bahrain borrowed about US$59.9million of which US$25.0 million came from the Kuwait Fund in 1972 and aboutUS$34.9 million from the Abu Dhabi Fund (US$10.0 million for Stage I in 1974,and US$24.9 million for Stage II in 1976). For the Rifaa power station itborrowed in late 1977 about US$86.7 million, of which US$42.7 million from theSaudi fund, US$5.1 million from the Abu Dhabi Fund, US$21.0 million from the

Kuwait Fund, 1/ and US$17.9 million from the Arab Fund. Bahrain also borrowedUS$14.0 million from the Abu Dhabi Fund in 1976 to finance small industrialprojects, and US$14.0 million from the Abu Dhabi Government in 1974 to financemiscellaneous projects.

206. The terms of these loans are soft in comparison with commercial oreven World Bank loans. Their rate of interest is 3-6 percent with graceperiods of 2-5 years, and repayment periods of 10-15 years. The softest termsare those of the Saudi Fund, with an interest rate of 3 percent, a graceperiod of 5 years, and a repayment period of 15 years. The terms of the ArabFund were relatively the hardest with an interest rate of 6 percent, a graceperiod of 5 years and a repayment period of 15 years.

207. Bahrain's external public debt at the end of 1977 was estimated at$154 million, of which $65 million were disbursed (Table 4.2 of Statistical

1/ This loan was signed in late January 1978.

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Appendix). 1/ Debt service payments were relatively small in 1977 - some $7million - and the debt service ratio was less than 1 percent in that year.Even assuming that Bahrain will borrow on a substantial scale in future years -

say at a rate of $50-100 million p.a. - the service burden of public debt isunlikely to become very heavy, and the debt service ratio will probably remainat relatively low levels.

208 Summing up one can conclude that Bahrain has the potential for con-tinued viable growth. Major structural changes are, however, required as theoil sector loses its predominance in the country. Other sectors will have tobe developed further, especially services and manufacturing. This in turnrequires a significant upgrading of local labor skills. Supported by somerestraint on consumption and effective long-term planning of public sectorinvestments and operations these changes should provide the employment oppor-tunities and incomes for a growing Bahraini population.

1/ In addition, there were substantial private debts on commercial terms,the size of which is, however, not known. Current debt statistics arecollected by the Directorate of Planning in the Ministry of Finance, andits compilation methods are not adequate to give a clear picture of thecountry's debt profile or for planning her future borrowings. For thesepurposes Bahrain needs to adopt the World Bank standard debt reportingsystem which will enable her to record her debt and project her debtobligations properly. Authorities are prepared to use the system andrequested the Bank's assistance in training one of their officials forthat purpose. Bank assistance in this area has been agreed upon.

ANNEX APage 1

ALUMINUM SMELTER AND SHIP REPAIR FACILITIES

1. Aluminum Bahrain (ALBA) was incorporated in August 1968 and startedproduction in May 1971. It was planned at a time when employment was neededfor Bahrainis and there appeared to be considerable reserves of natural gaswhich could be provided at nominal cost. The design output is 120,000 metrictons per year of aluminum ingots and billets, and this has been exceeded since1976 (Table 8.10 of Statistical Appendix). Alumina, extracted from bauxitebefore export from Australia, is unloaded in Bahrain at an artificial islandsix miles offshore and carried to the works by aerial ropeway. This ropewayalso carries aluminum ingots for exports in the opposite direction. Thealumina dissolved in molten cryolite is electrolysed in 456 furnaces. Thecarbon anodes used are made on the premises from imported petroleum cokewhich is of very high purity. Current for the electrolysis is provided by19 turbines driven by natural gas with a combined capacity of 300 MWs.

2. When the company was formed there were six shareholders including theBahrain Government holding a 40.4 percent share. In 1975 three shareholderswished to relinquish their holdings, which the Bahrain Government acquired.This leaves the Government with 77.9 percent, Kaiser Aluminum with 17 percentand a German company, Breton Investments, with 5.1 percent.

3. Every six months a price for the aluminum metal is fixed dependingon the output forecast and the cash needed by the company. This is called thetransfer price. Aluminum is then distributed to the shareholders at thisprice, in proportion to their equity holding. It is the shareholders' task tosell the metal.

4. Figures are not available for the prices which the shareholdersobtained for their aluminum but world prices are shown in Table 8.10 of theStatistical Appendix compared with the transfer prices. This shows that theshareholders were losing money up to 1976. Following the trend of worldprices, which had an upturn in 1975, the shareholders probably made a smallprofit in 1977 and should continue to do so if costs can be held fairly stableand the aluminum market remains firm.

5. While Kaiser may use the metal in their downstream production, theGovernment has to sell their metal on the world market. They have recentlyformed a marketing organization called Bahrain Aluminum to do this. In thepast, the main customer has been Japan although last year considerable quan-tities were sold to China.

6. The cost of the project was modest at BD 90 million in 1971, per-haps half of what it would cost now and after provision for depreciation, thecompany has generated a small surplus. However, natural gas is supplied at atoken price only and some of the plant has a very limited life. The gas tur-bines for example will probably only last 10-12 years. The shareholders willtherefore be faced with a large capital outlay in say 1982-83 or a large loanwill have to be raised. As the debt is guaranted by the Government, this will

ANNEX APage 2

probably not disturb the other shareholders too much as long as they can getaluminum metal below world prices.

7. Alba is to be expanded by about 28 percent. This expansion, whichwas based on a Government study, will also improve the utilization of theexisting facilities.

8. As most large aluminum companies have extensive downstream facil-

ities for converting the metal into sheets or sections, the market for pri-

mary metal is somewhat limited. Thus, as 90 percent of the aluminum metalfrom Alba has to be disposed of in world markets, local downstream converting

facilities can be attractive. The extrusion, cable and powder plants dis-cussed below will probably absorb less than 20 percent of the output so thata mill for the production of sheet could be attractive. To be viable thiswould have to produce some 50,000 tons per year with a capital outlay ofabout $20 million for a cold mill and $60 million for hot rolling. The output

could probably be absorbed in the Gulf area but some research would be neces-sary to confirm this.

9. The Bahrain Aluminum Extrusion Company (BALEXCO) is owned by the

Bahrain Government but is managed by ALUSUISSE on a 7-year management contractby which time it is hoped that Bahrainis will be trained to take over therunning of the company.

10. The company buys aluminum at market prices from Alba in billet form

and extrudes it mainly into architectural sections. Output at the moment is

about 3,000 tons per annum and will rise to 5,000 tons when people for threeshifts can be trained. The sections are polished to a bright or satin finish

and anodized black or gold.

11. Home consumption is about 600 tons and the rest of the Gulf should

easily absorb the remainder. It appears to be an economic and potentiallyprofitable venture.

12. The only problem appears to be competition within the area. Dubaiis builidng a smelter and will, no doubt, install an extrusion facility. This

however is several years away and BALEXCO management are confident that by

that time they will have established their own market in the Gulf. While thequality of the sections is very high, the actual fabrication by companies to

whom these sections were sold is generally poor. BALEXCO, to foster and main-tain its reputation, may have to become involved downstream with approved

fabrications locally and in other Gulf countries.

13. Midal, a privately owned cable making plant, is being erected near

Alba to take advantage of molten metal from the smelter. A foreign partner

will own 69 percent of the equity and give technical assistance. The aluminum

cables will be produced stranded with a steel core for use for overhead trans-

mission lines. Initially the company will use 4,000 metric tons of aluminummetal on a single shift basis rising to 12,000 metric tons from three shifts.Experienced plant operators have been brought from Thailand to start up the

ANNEX APage 3

plant. It is anticipated that the Gulf countries, with their extensive elec-

trification schemes will readily absorb the whole output.

14. Almost from the outset there has been a company making aluminumpowder from the metal. This uses about 3,000 tons per year and the atomizedpowder produced is exported for use in paints and explosives.

15. There are three important ship repairing facilities in Bahrain. The

oldest is the Bahrain Slipway Company which is a subsidiary of Gray Mackenzie

which operdtes coastal shipping traffic in the Gulf. Its business has been

very bouyant and in 1975 its employment peaked at 500 persons. Bahrain Slip-

way has been forbidden by the Government to expand or to accept ships of more

than 11 feet 9 inches draft until The Bahrain Ship Repairing and EngineeringCompany (BASREC) is 20 years old. BASREC was established in 1970 near theport of Mina Sulman. It has the advantage of deep water jetties. Both com-

panies have equivalent facilities and will take ships on the slipway up toapproximately 1,000 tons displacement and 250 feet long. Employment is shown

in Table 8.12 of the Statistical Appendix.

16. The two companies have serviced ships from all over the southernGulf but recently they have felt increasing competition. For instance, there

is now a slipway in Ajman (U.A.E.) so that few ships now come to Bahrain from

U.A.E. Employment totalled about 1,000 in 1975/76 but has since falled toabout 800 and it is being sustained at this level by sending crews to work at

the drydock of the Arab Shipping and Repair Yard (ASRY). Once ASRY has

trained its own labor force, this work will fade away.

17. The ideal place for repair and servicing large tankers (very largecrude carriers - VLCC) is at the end of their haul in ballast so that time may

be saved in gas freeing cargo tanks. Bahrain is well situated for all VLCCsusing the Gulf as they may be serviced while waiting for cargoes. OAPECtherefore decided to build a drydock in Bahrain and an artificial island wasconstructed in deep water and connected to the mainland by a causeway 7 kilo-meters in length. The drydock is 376 meters long and 75 meters wide and will

accommodate VLCCs up to 500,000 tons DWT.

18. The total cost of the project has been financed by equity capitaland amounts to $340 million -- $290 million for fixed costs and $50 millionfor working capital and to finance the first year's losses.

19. Shareholders are the Governments of:

Bahrain - 18.84%Saudi Arabia - 18.84%Kuwait - 18.84%U.A.E. - 18.84%Qatar - 18.84%Libya - 1.10%Iraq - 4.70%

ANNEX APage 4

20. The dock was built by Hayundai of South Korea and is being managedby Lisnave of Portugal who operate a drydock in Lisbon. One reason for select-ing Lisnave was their experience in training. A training school for 150 men isincluded in the project. In December 1977 there were 974 employees, only 360of whom are Bahrainis. Employment is planned to rise to 1,336 by end of 1978and it is hoped to achieve 90 percent Arabization within 10 years.

21. Included in the facilities are extensive workshops which will beable to undertake suitable civilian work of a heavy steel fabrication nature --for instance, for the proposed causeway from Bahrain to Saudi Arabia. It ishoped to reclaim the land each side of the present causeway and to use thisfor the industries ancillary to the drydock.

22. The first VLCC entered the drydock in October 1977 and it is budgetedto receive 40 ships during 1978 rising to a peak of 55 ships for a single dockoperation. It is now anticipated that the yard will not break even on thesingle dock facility and that another dock could be built comparatively cheaplyas all the workshop installations are large enough to serve both docks.

23. The profitability of the dock will be adversely affected by the con-struction of a three-dock installation at Port Rashid, Dubai. This dock, whichis at present under construction, is capable of taking one 1,000,000 ton VLCC(if these are ever built), and two 500,000 ton VLCCs in the three docks pro-vided.

24. There is clearly not enough work for both the Bahrain and Dubaifacilities and, if disastrous competition is to be avoided, some cooperationand joint scheduling is clearly necessary. Probably the best course, would beto put them both under the same management.

Statistical Appendix

Table No.

1.1 Population by Sex and Nationality1.2 Geographical Distribution of Population1.3 Work Permits Issued According to the Type of Economic Activity

or Industry - Bahrainis and Non-Bahrainis

2.1 Gross National Product by Industrial Origin at Current MarketPrices

2.2 Gross National Product by Industrial Origin at Constant 1977Market Prices

3.1 Balance of Payments Estimates3.2 Value of Refined Oil Exports3.3 Composition of Non-oil Exports (f.o.b.)3.4 Composition of Non-oil Imports (c.i.f.)3.5 Destination of Non-oil Exports (f.o.b.)3.6 Origin of Non-oil Imports

4.1 External Public Debt Outstanding as of December 31, 19774.2 Service Payments, Commitments, Disbursements and Outstanding

Amounts of External Public Debt as of December 31, 1977

5.1 Summary of Government Financial Operations5.2 Government Revenues5.3 Government Expenditures5.4 Breakdown of Current Expenditures Under Item "Other" in

Table 5.35.5 Breakdown of Capital Expenditures Under Item "Other" in

Table 5.35.6 Public Sector Commitments for On-going Projects by Category5.7 Projected Capital Expenditures for New and On-going Projects

by Ministry, 1979-825.8 Projected Capital Expenditures for New Projects by Ministry

and Main Projects, 1979-82

6.1 Monetary Survey6.2 Factors Affecting Changes in Domestic Liquidity6.3 Accounts of the Monetary Authorities6.4 Assets and Liabilities of the Monetary Agency6.5 Gross Reserves and Net Foreign Assets6.6 Consolidated Balance Sheet of Commercial Banks6.7 Direction of Credit6.8 Total Assets and Liabilities of Bahrain Offshore Banking Units

7.1 Land Utilization in Bahrain, 19757.2 Major Vegetable Crops by Land Use, 1975

Statistical Appendix (Continued)

8.1 Industrial Establishments Registered in Bahrain in 19778.2 Average Daily Production and Estimated Recoverable Oil Reserves

in Bahrain and Her Neighboring Gulf Countries8.3 Refined Oil Products8.4 Crude Oil Production and Refining8.5 Crude Oil Production -- Abu Saafa Field8.6 Bahrain Oil Wells8.7 BAPCO Employees by Nationality, 1970-778.8 Natural Gas Production and Distribution8.9 Forecast of Natural Gas Consumption, 1978-19928.10 Aluminum Production and Exports8.11 Gross Sales and Capital of Bahrain Fishing Company8.12 Gross Sales and Capital of the Bahrain Ship Repairing and

Engineering8.13 Registered Vehicles by Type of License, 1970-778.14 Vehicles Newly Registered, 1970-778.15 Vessels Calling at Bahrain Ports, 1971-778.16 Cargoes Imported and Exported, Excluding Oil8.17 Movements in Bahrain International Airport8.18 Passengers Arriving and Departing8.19 Telecommunications8.20 Electricity Production and Consumption8.21 Water Consumption8.22 Hotels in Bahrain by Number of Rooms and Rates as of December,

1977

9.1 BAPCO Local Consumer Price Index9.2 Government Monthly Wages Grade and Step, 1977

10.1 Number of Government Schools10.2 Teachers by Nationality and Sex10.3 Number of Students by Level in Government Schools10.4 Graduates of Teacher Training Colleges by Specialization and

Sex10.5 Graduates of Gulf Technical College10.6 Bahraini Students in Higher Education Abroad by Country and

Specialization, 1976-7710.7 Bahraini Graduates from Foreign Universities by Subjects10.8 Expected Growth in Number of Students and Classes and the

Expected Need for Teachers for Primary Education10.9 Government Health Establishments and Personnel10.10 Beds in Curative Health Directorate Hospitals

Table 1.1: Population by Sex and Nationality

Nationality and Sex 1950 1959 1965 1971 1977March May February April March

Bahraini Males ... 59,913 72,368 89,772 116,265Females ... 58,821 71,446 88,421 113,735Total 91,179 118,734 143,814 178,1931/ 230,000

Non-BahrainiMales . 17,709 27,016 26,542 90,400Females ... 6,692 11,373 11,343 22,600Total 18,471 24,401 38,389 37,885 113,00@Q/

Grand TotalsMales 58,601 77,622 99,384 116,314 206,665Females 51,049 65,513 82,819 99,764 136,335Totals 109,050 143,135 182,203 216,078 343,000

1/Annual Growth Rate, 1971-77-

Bahraini Population 3.5%Total Population 7.2%

Source: Statistical Bureau

1/ Bahraini population in the 1971 census was underestimated by 10,000 people due tounder enumeration. This was taken into account in calculating the annual growthrate for 1971-77.

2/ In May 1978 total number of expatriates in Bahrain was estimated at 115,000.

Table 1.2: Geographical Distribution of Population

1959 1965 1971 1977Towns and Villages May February April March

Manama 61,726 79,098 89,399 141,910

Muharraq and Hidd 36,742 46,373 49,540 78,660

Awali 3,123 2,097 983 1,545

Other Towns and Villages 41,544 54,635 76,155 120,885

TOTAL 143,135 182,203 216,0781/ 343,000

Urban 112,544 143,270 168,819 267,985

Rural 30,368 38,821 47,128 74,750

Unclassified 223 112 131 445

Source: Statistical Bureau.

1/ Bahraini population in the 1971 census was underestimated by 10,000people due to under enumeration.

Table 1.3: Work Permits Issued According to the Type of Economic Activity or Industry - Bahrainis and Non-BahrainisRased on' Population Census 1971 and Work Permit Records

Economic and Industrial Census Work Permit Records Total Estimates TotalActivity 1971 1972 1973 1974 1975 at 1/1/1976

Non- Non- Non- Non- Non- Non-Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini Bahraini

Agriculture and Fishing 2,995 995 8 16 4 76 2 84 5 65 3,014 1,236 4,250Production and ProcessingIndustries 5,614 2,850 5 129 250 987 545 1,105 546 3,549 6,960 8,620 15,580Electricity, Gas and Water 1,480 225 48 426 98 347 114 209 50 275 1,790 1,482 3,272Building and Construction 5,639 4,765 977 801 397 899 216 671 40 933 7,209 8,069 15,338Wholesale, Retail,Restaurants and Hotels 4,851 2,855 3 33 28 58 13 71 3 27 4,898 3,044 7,942

Transport, Storage andCommunications 5,067 2,676 310 208 279 326 296 366 196 413 6,148 3,989 10,137

Finance, Insurance, RealEstate and Business Services 740 344 757 450 695 735 6 8 556 984 2,754 2,521 5,275Social and Personal Services 10,930 7,458 80 474 519 682 679 1,800 40 959 12,248 11,373 23,621Non-specified Activities 634 183 1,390 1,258 499 1,539 1,460 2,188 1,373 4,248 5,356 9,416 14,772

Totals 37,950 22,351 3,578 3,795 2,769 5,649 3,331 6,502 2,809 11,453 50,437 49,750 100,187

The required addition (6% of above) 6.011

106.198NOTES:1. The number of economically active population for 1976 was estimated from the population census of 1971.

2. The number of permits issued was added according to the type of economic activity orindustry for the years 1972-75.

3. The general total represents an estimate of the number of economically active populationfor 1976.

4. A percentage of 6% has been added to the general total for the following reasons:

(a) We note that the percentage of increase (Agriculture and Fishing) is veryslcw as the number of Bahrainis in 1972 was 2,995 and in 1976 was 3,014.This is not accurate because the number of active population is growingvery high, following the growth of the economic activities in the country.

(b) This does not take into account those active workers who did not bother toobtain work permits during the years 1972-75.

(c) An estimate percentage must be calculated as a precaution to take intoaccount the issuing of permits, and general increases and decreases,although the number of Bahrainis working in the Government Ministriesremained at about 20,000.

Table 2.1: Gross National Product by Industrial Originat Current Market Prices

(In Millions of Bahrain Dinars)

1/1973 1974 1975 1976 1977

Agriculture & Fishing 3.9 5.0 5.5 6.8 9.4Agriculture 2.5 3.3 4.4 5.2 7.1Fishing 1.4 1.7 1.1 1.6 2.3

Mining 43.9 143.0 129.7 167.2 194.1Oil 43.7 142.8 129.7 166.2 193.0Other 0.2 0.2 0.5 1.0 1.1

Manufacturing 25.0 51.1 63.7 95.5 115.1Oil Refining 13.4 14.3 21.1 25.8 32.2Aluminum 4.3 24.3 13.7 18.6 22.6Flour Mill 0.4 0.2 0.2 0.2 0.4Other 6.9 12.3 28.7 50.9 59.9

Electricity & Water 2.9 2.9 2.0 3.8 3.7Electricity 2.7 2.7 1.9 3.7 3.6Water 0.2 0.2 0.1 0.1 0.1

Construction 11.2 19.9 29.5 54.2 61.9

Transport, Storage andCommunications 12.0 16.0 22.8 31.5 38.5

Trade and Services 26.9 40.4 53.3 82.3 106.7

Banking and Insurance 7.1 9.9 10.9 33.9 49.2

Real Estate 4.9 7.7 22.5 31.2 31.8

Public Administration andDefence 9.3 17.1 24.2 31.6 44.9

GDP at m.p. 147.1 313.0 364.1 538.0 655.3

Net Factor Income -14.1 -21.6 -33.2 -54.1 -106.9

GNP at m.p. 133.0 291.4 330.9 483.9 548.4

Source: Mission Estimates

1/ Preliminary estimates

Table 2.2: Gross National Product by Industrial Origin atConstant 1977 Market Prices

(In Millions of Bahrain Dinars)

1!1973 1974 1975 1976 1977

Agriculture & Fishing 10.2 9.7 9.4 9.0 9.4Agriculture 7.8 7.3 7.3 7.0 7.1Fishing 2.4 2.4 2.1 2.0 2.3

Mining 209.0 221.5 155.3 191.4 194.1Oil 208.6 221.3 154.9 190.4 193.0Other 0.4 0.2 0.4 1.0 1.1

Manufacturing 48.6 64.7 81.1 100.7 115.1Oil Refining 19.1 25.5 24.6 21.4 32.2Aluminum 16.0 19.9 21.4 23.0 22.6Flour Mill 0.3 0.3 0.4 0.6 0.4Other 13.2 19.0 34.7 55.7 59.9

Electricity & Water 4.5 4.6 2.9 3.9 3.7Electricity 4.4 4.5 2.8 3.8 3.6Water 0.1 0.1 0.1 0.1 0.1

Construction 34.9 40.2 42.3 55.8 61.9

Transport, Storage andCommunications 22.9 26.8 30.4 37.9 38.8

Trade and Services 56.7 68.7 80.7 103.6 106.7

Banking and Insurance 4.1 6.8 11.8 30.0 49.2

Real Estate 23.9 26.1 24.2 28.4 31.8

Public Administration andDefence 18.9 29.9 35.1 41.3 44.9

GDP at m.p. 433.7 499.0 473.2 602.0 655.3

Net Factor Income -21.0 -29.0 -36.6 -59.3 -106.9

GNP at m.p. 412.7 470.0 436.6 542.7 548.4

Source: Mission Estimates

1/ Preliminary estimates

Table 3.1 Balance of Payments Estimates

(In millions of U.S. dollars)

1972 1973 1974 1975 1976 1977(est.)

A. Transactiona of the oil sector 68.4 101.2 293.7 325.6 456.4 527.7

Government oil receipts 59.3 74.4 261.6 280.6 395.7 7457.7

Local expenditures (BAPCO) 9.1 26.8 32.1 45.0 60.7 70.0

B. Other foreign trade -138.9 -174.3 -263.9 -376.7 6 -727.2

Exports and re-exports 104.7 -19.5 181.4 212.5 34.6 399.2

Imports -243.5 -323.8 -445.3 -589.2 -980.6 -1126.4

C. Other services transfers and nonmonetarycapital (net) 1 58.8 49.8 82.0 176.3 232.3 204.2

Investment income-` 4.6 2.8 7.6 8.1 28.6 30.4Trave12C 8.0 10.1 14.4 21.0 27.8 31.7Government transfers 2.3 __ 5.6 - 1.3 2.5

Direct investment 35.3 4.3 15.2 53.1 138.9 50.4

Loans and grants (net) 3.0 6.6 9.9 11.9 32.1 102.8

All other items (including net errors andomissions) 5.7 26.0 29.3 82.2 3.5 -13.6

D. Total (A + B + C) -11.6 -23.3 111.8 125.3 53.6 4.7

E. Monetary movements (net) (increase inassets -) 1l.6 23.3 -111.8 -125 5 -4-7

IMF position -2.7 -0.3' -3.6 -4. 5.6 0.3

Bahrain Monetary Agency 21.0 7.0 -22.3 -85.0 -81.7 -71.0Commercial banks -3.0 11.3 -40.1 18.0 -11.9 25.0

Government -3.6 5.2 -45.7 -53.6 34.4 41.0

Source: IMF, Bahrain Monetary Agency, and Mission Estimates.

1/ Government and Bahrain Monetary Agency only.2/ Estimates based on hotel occupancy rate and number of persons arriving in Bahrain by

airline.Note: Exchange rates used are: BD 1 = US$2.28 for 1972; and BD 1 = US$2.53 for 1973-77. The

changes in net foreign a6sets arising from valuation adjustments in 1973 are subsumed under

"other items".

Table 3.2: Value Qf Refined Oil Exports

(In millions of U.S. dollars)

Attributable toYear Total Value Bahrain Crude

1972 240.11 63.111973 305.88 87.391974 988.71 264.461975 892.73 252.201976 1,002.53 247.141977 1,010.14 212.23

Source: Ministry of Development and Industry.

Table 3.3: Composition of Non-Oil Exports (f.o.b.)-

(In millions of Bahrain dinars)

1972 1973 1974 1975 1976 1977

Food and live animals 6.5 7.6 7.9 4.9 8.2 8.4Beverages and tobacco 0.9 1.3 1.5 1.9 2.6 2.4Manufactures, classified chieflyby material 22.2 34.3 39.7 47.0 64.0 66.4

Machinery and transportequipment 6.o 4.8 8.7 13.1 35.1 44.2

Miscellaneous manufacturedarticles 9.0 9.5 11.7 15.1 22.9 32.1

Other 1.3 1.6 2.2 2.0 3.8 4.1

Total 45.9 59.1 71.7 84.0 136.6 157.6

Sources: Ministry of Finance and National Economy, and Statistical Bureau.

1/ Exports and re-exports, f.o.b.; excludes gold and silver.

Table 3.4: Composition of Non-Oil Imports (c.i.f.)l/

(In millions of Bahrain dinars)

1972 1973 1974 1975 1976 1977

Food and live animals 14.9 19.6 24.9 214.5 39.1 42.8Beverages and tobacco 2.9 4.0 4.6 6.0 8.6 10.2Chemicals 13.1 16.0 14.8 18.5 22.0 30.9Manufactured goods classified

chiefly by material 26.7 29.2 48.1 57.0 96.1 106.3Machinery and transport

equipment 30.5 36.1 52.5 86.0 155.6 161.0Miscellaneous manufactured

articles 15.7 18.4 23.5 33.0 49.6 76.3Other categories 3.0 4.7 7.6 7.8 16.6 17.4

Total 106.8 128.0 176.0 232.9 387.6 444.9

Source: Ministry of Finance and National Economy, and Statistical Bureau

1/ Excludes gold and silver.

Table 3.5: Destination of Non-Oil Exports (f.o.b.)-/

(In millions of Bahrain dinars)

19T2 1973 1974 1975 1976 1977

Saudi Arabia 16.5 16.6 22.3 25.6 68.2 80.5Qatar 0.3 1.5 1.6 2.2 2.9 3.6Iran 1.9 1.9 2.5 4.3 5.2 14.oKuwait 2.1 1.2 2.6 1.6 3.2 5.3United Arab Emirates 2.8 4.o 5.0 11.3 6.1 5.6Oman 0.4 0.8 0.9 1.0 0.1 0.1United States 1.0 1.2 0.5 1.9 2.0 3.6Japan 8.6 23.9 25.1 17.8 25.7 23.5United Kingdom 09 0.9 2.6 1.9 4.2 0.3Other2/ 11.4 7.1 8.6 16.4 19.0 21.1

Total 45.< ,.1 -1. 84.o 136.6 157.6

Source: Ministry of Finance and Nationa1 Econovy, and Statistical Bureau

1/ Exports and re-exports, f.o.b.; excludes gold and silver.

2/ Includes aluinum exported by ALBA to countries other than Japan.

Table 3.6: Origin of Non-Oil Importsl/

(In millions of Bahrain dinars)

1972 1973 1974 1975 1976 1977

United Kingdom 21.2 24.1 25.7 42.8 68.4 87.0Japan 14.9 15.1 23.2 27.4 53.7 68.9United States 13.0 17.6 31.8 36.3 57.4 53.3China, People's Republic of 6.6 7.6 11.2 14.4 15.2 24.6Netherlands 2.4 2.5 3.4 7.4 10o.6 10.0Germany, Federal Republic of 4.7 5.2 8.2 11.5 24.8 26.2Italy 1.9 3.9 5.7 11.5 8.8 14.6India 2.8 3.5 6.5 5.8 13.4 13.8Iran 1.9 2.2 3.2 2.5 2.3 2.9Pakistan 2.0 3.6 4.8 2.0 5.1 3.0Hong Kong 2.5 2.8 3.1 3.8 7.3 10.?Australia 10.5 13.2 10.1 12.3 20.3 23.0Saudi Arabia 1.1 1.9 2.6 5.1 5.5 3.3Switzerland 1.1, 1.2 1.3 1.7 1.9 3.4Lebanon 1.5 2.2 2.4 2.0 1.2 1.0China, Republic of 2.1 2.6 3.0 4.2 8.4 10.4Belgium 1.1 0.9 2.2 2.7 2.8 4.3Denmark 1.3 1.3 1.9 2.6 4.5 5.1France 1.6 2.4 3.1 7.3 9.5 11.3Singapore 1.6 1.9 2.8 5.0 9.3 11.2Kuwait 1.1 1.1 1.7 2.4 3.5 2.3United Arab Emirates 0.9 1.4 1.6 1.9 1.4 8.6Other countries 9.1 9.7 16.4 20.3 52.3 46.5

Total 106.8 128.0 176.0 232.9 387.6 444.9

Source: Ministry of Finance and National Economys and Statistical Bureau.

1/ On a c.i.f. basis. Data exclude gold and silver.

TABLE 4.1 BAHRAIN

EXTERNAL PUBLIC DEBT CUTSTANDING INCLUDING UNDISBURSED AS OF DEC. 31, 1977

INCLUDES ONLY DEBT COMMITTED JAN. 1, 1900 - DEC. 31, 1977DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN THOUSANDS OF U.S. DOLLARS)

D E B T O U T S T A N D I N G I N A R R E A R STYPE OF CREDITOR ---------- - - - --- - - -

CREDITOR COUNTRY DISBURSED :UNDISBURSED: TOTAL : PRI;NCIPAL INTERES- - - - - - - - - - - - _ _ ----------- ----------.

MULTILATERAL LOANSARAB FUND EC SOC DEV 17,851 17,851

TOTAL MULTILATERAL LCANS - 17,851 17,851

BILATERAL LOANSABU DHABI 39,961 28,012 67,973KUWAIT 24,995 - 24,995SAUDI ARABIA - 42,796 42,796

TOTAL BILATERAL LCANS 64,956 70,808 135,764

TOTAL EXTERNAL PUBLIC CEBT 64,956 88,659 153,615

NOTES: (1) ONLY DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONC YEAR ARE INCLllDED IN THIS TABLE.(2) DEBT OUTSTANDING INCLUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS.

Source: Ministry of Finanance and National Economy,and World Bank - External Debt Division

TABLE 4.2 BAHRAIN

SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF -EXTERNAL PUBLIC DEBT

PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF D.C. 31, 1977

INCLUDES ONLY OEBT COMMITTED JAN. 1, 1900 - DEC. 31, 1977DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS

(IN THOUSANDS OF U.S. DOLLARS)TOTAL

YEAR : DEBT OUTSTANDING AT : T R A N S A C T I O N S D U R I N G P E R I OD OTHER CHANGES: BEGINNING OF PERIOD :

_________ - - - _ _ _ _ _ ---- -_ _ _ _ _ - - -- - -__ _ _ _ _ _ _ _ -_ _ _ _ _ _ -_ -- - -- - -- - - -- - -- - - - ---------------- - ----

: DISBURSED : INCLUDING COMMIT- : DISBURSE- : S E R V I C E P A Y M E N T S CANCEL- ; ADJUST-: ONLY :UNDISBURSED: MENTS : MENTS :-----------:-----------:-----------: LATIONS : MENT *

: PRINCIPAL : INTEREST : TOTAL: (1) : (2) (3) (4J (5) (6) (7) (8) (9)

1973 21,598 28,438 - 3,757 576 119 695 - 3,1261974 27,188 30,988 25,333 17,480 682 463 1,145 - 1371975 44,123 55,776 - 7,838 690 1,164 1,854 - -1711976 51,123 54,915 40,445 13,145 3,080 1,933 5,013 - 831977 61,275 92,363 65,119 8,207 4,610 2,463 7,073 - 7431978 64,956 153,615

* t * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * * * *

1978 64,956 153,615 - 8,047 4,325 2,602 6,9Z7 - -1979 68,678 149,2SO - 14,354 4,325 2,639 6,964 - -31980 78,704 144,962 - 13,618 7,527 2,853 10,380 - I1981 84,794 137,436 - 13,977 7,527 3,019 10,546 - -11982 91,244 129,908 - 16,418 7,440 3.243 10,683 - -

1983 100,222 122,468 - 11,844 11,379 3,516 14,895 - 11984 100,689 111,090 - 10,402 11,379 3,596 14,975 - 11985 99,712 99,712 - - 11,379 3,565 14,944 - 11986 88,334 88,334 - - 11,241 3,277 14,518 -1987 77,093 77,093 - - 11,241 2,832 14,073 - 21988 65,854 65,854 - - 9,876 2,436 12,312 - 11989 55,979 55,979 - - 9,876 2,086 11,962 - -1990 46,103 46,103 - - 8,359 1,703 10,062 - -11991 37,743 37,743 - - 6,032 1,401 7,433 - -1992 31,711 31,711 - - 6,032 1,168 7,200 - -1993 25,679 25,679 - - 6,032 937 6,969 - 11994 19,648 19,648 - - 6,032 704 6,736 - -1995 13,616 13,616 - - 4,347 488 4,835 - -1996 9,269 9,269 - - 4,347 323 4,670 - 11S97 4,923 4,923 - - 4,347 158 4,505 - -

* THIS COLUMN SHOWS THE AMCUNT CF ARITHMETIC IMOALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONEYEAR TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFER OF DEBTSFROM ONE CATEGORY TC ANCTHER IN THE TABLE.

Source: Ministry of Finance and NationaL Economy, and WorLd Bank - External Debt Division

Table 5.1: Summary of Government Financial Operations(In Millions of Bahrain dinars)

Provis.Actuals Actual Budget Budget

1972 1973 1974 1975 1976 1977 1978 1979

1. Revenues 33.0 45.1 121.5 135.0 191.1 230.1 218.8 228.9Oil revenues 26.0 29.4 103.4 110.9 156.4 180.7 161.2 160.2Non-oil revenues 7.0 15.7 18.1 24.1 34.7 49.4 57.6 68.7

2. Expenditures 32.7 42.1 77.9 121.8 203.2 256.2 280.0 280.0Current expenditures 24.4 34.5 44.4 67.6 88.3 115.1 135.0 150.0Capital expenditures 8.3 7.6 33.5 54.2 114.9 141.1 145.0 130.0

3. Surplus or deficit (-) (1-2) 0.3 3.0 43.6 13.2 -12.1 -26.1 -61.21/ -51.11/

4. Net extra budgetary operations2-/ -6.3 -5.4 -9.3 23.4 7.0 - - -

5. Financing 6.0 2.4 -34.3 -36.6 5.1 - - -Net changes in foreign accounts

(increase -) -1.6 3.6 -18.1 -21.2 13.6 - - -Net changes in domestic accounts

(increase -) 5.3 -3.8 -22.4 -20.1 -19.4 - - -Net foreign borrowing 1.3 2.6 4.0 4.7 10.4 2.1 15.0 15.0Grants 1.0 - 2.2 - 0.5 29.9 26.1 26.0Development bonds - - - - - - 20.0 10.0

Source: Ministry of Finance and National Economy.

1/ This deficit for the years 1977 and 1978 in this presentation I's shown as nil in the Ministry's presentation. Thisis because the Ministry included in the revenue all the loans, grants, and development bonds which we show hereon the financing side. Since these are equivalent to the deficit shown above, the Government recorded a balancedbudget for 1977 and 1978.

2/ Residual reflecting mainly transactions carried through the Government's Reserve Fund Account.

Table 5.2: Government Revenues

(In millions of Bahrain Dinars)

Prov.Actual Actual Budget Budget

1972 1973 1974 1975 1976 1977 1978 1979

L. Oil Revenues 26.0 29.4 103.4 110.9 156.4 180.7 161.2 160.2Bahrain fied -

16.6 17.7 63.4 73.1 88.1 89.1 79.2 78.3

Abu Saafa field 9.4 11.7 40.0 37.8 68.3 91.6 82.0 81.9

2. Non-oil Revenues 7.0 15.7 18.1 24.1 34.7 49.4 57.6 68.7

Tax revenues 4.1 5.4 9.2 13.6 18.8 25.3 27.0 29.6

Customs receipts (3.9) (5.2) (9.0) (13.3) (18.5) (24.9) (26.5) (29.0)

Gasoline tax (0.2) (0.2) (0.2) (0.3) (0.3) (0.4) (0.5) (0.6)

Non-tax revenues 3.0 10.2 8.9 10.5 15.9 24.1 30.6 39.1

Fees and charges (2.1) (9.4) (8.5) (9.4) (11.5) (19.1) (25.2) (33.7)

Income from govern-ment land (0.8) (-) (-) (1.0) - - - -

Other (0.1) (0.8) (0.4) (0.1) (4.4) (5.0) (5.4) (5.4)

3. Total Revenues(1+2) 33.0 45.1 121.5 135.0 191.1 230.1 218.9 229.0

4. Development Bonds - - - - - - 20.0 10.0

S. Grants 1.0 - 2.2 - 0.5 29.9 26.1 26.0

6. Loans - - - 10.4 2.1 15.0 15.0

7. Total(3+4+5+6) 34.0 45.1 123.7 135.0 202.0 262.1 280.0 280.0

Source: Ministry of Finance and National Economy.

Table 5.3: Government Expenditures

(In millions of Bahrain dinars)

Prov.Actual Actual Budget Budget

1972 1973 1974 1975 1976 1977 1978 1979

1. Current Expenditures 24.4 34.5 44.4 67.6 88.3 115.1 135.0 150.0Head of State 5.5 5.9 6.0 6.1 6.0 6.0 6.0 6.0Education 4.6 5.4 6.9 9.6 11.3 17.2 19.4 20.8Health 3.2 3.6 4.9 6.7 8.6 12.5 15.4 17.4Public order and defense 4.9 5.8 8.5 13.3 19.9 26.1 34.3 37.5Labor and social welfare 0.4 0.5 / 0.6 1.0 1.7 2.1 2.4 2.6Transportation 0.3 3.8/ 2.6 3.5 2.7 3.1 3.8 4.0Electricity and water 0.2 1.8-/ 3.2 5.9 8.4 11.4 14.0 15.1Other 2/ 5.3 7.7 11.7 21.5 29.7 36.7 39.7 46.6

2. Capital Expenditures 8.3 7.6 33.5 54.2 114.9 141.1 145.0 130.0Airport 0.9 0.2 3.0 5.4 4.5 1.2 1.1 1.4Port and dry dock 3/ 0.6 0.1 5.6 8.2 18.1 16.8 17.4 6.3Roads 0.2 0.3 1.8 4.3 6.2 6.7 3.2 5.0Electricity and water 4/ 0.7 5.0 10.6 17.0 25.6 34.3 39.5 46.0Housing 0.4 0.7 2.2 3.0 27.9 43.6 36.7 10.6Other 5/ 5.5 1.3 10.3 16.3 32.6 38.5 47.1 59.7

3. Total (1+2) 32.7 42.1 77.9 121.8 203.2 256.2 280.0 280.0

Source: Ministry of Finance and National Economy.

1/ The sharp increase in 1973 reflects changes in budgetary coverage; as of 1973port and transportation directorates expenditures were included in the budget.

2/ For details see Table 5.4.

3/ Includes expenditures in 1974-76 for dredging in connection with the ArabShipbuilding and Repair Yard.

4/ Includes Sitra Power and Water Station.

5/ For details see Table 5.5.

Table 5.4: Breakdown of Current ExpendituresUnder Item "Other" in Table 5.3

(In millions of Bahrain dinars)

Prov.Actual Actual Budget Budget

1975 1976 1977 1978 1979

"Other" current expendituresMinistry of Finance 4.0 4.4 5.3 6.5 7.4Ministry of Development 2.5 2.7 4.1 5.3 6.2Ministry of Commerce andAgriculture 0.9 1.6 1.9 2.4 2.5

Ministry of Justice 0.7 0.9 1.3 1.7 1.9Ministry of Information 0.8 2.0 2.7 3.7 4.1Ministry of Foreign Affairs 1.2 1.5 2.1 2.2 2.4Municipalities 2.9 6.0 6.0 6.0 6.0Subsidy programs 3.3 3.7 3.0 4.0 4.0Miscellaneousl/ 5.2 6.9 10.3 7.9 12.1

Total 21.5 29.7 36.7 39.7 46.6

Source: Ministry of Finance and National Economy.

1/ Including adjustments not included elsewhere.

Table 5.5: Breakdown of Capital ExpendituresUnder Item "Other" in Table 5.3

(In millions of Bahrain dinars)

Prov.Actual Actual Budget Budget

1975 1976 1977 1978 1979

"Other" Capital Expenditures 16.3 32.6 38.5 47.1 59.7

Health 2.6 5.0 9.4 4.5 3.6

Education 0.8 0.8 3.9 6.2 3.4

Agriculture 1.7 1.8 1.2 0.5 1.4

Dredging 0.2 2.2 8.9 17.5 30.9

Information 0.3 0.8 0.9 2.1 3.0

Land reclamation 4.4 8.6 0.9 - -

Social welfare 0.4 1.1 2.0 1.3 0.6

Miscellaneous 1/ 5.9 12.3 11.3 15.0 19.8

Source: Ministry of Finance and National Economy.

1/ Including adjustments not included elsewhere.

Table 5.6: Public Sector Commitments forOn-going Projects by Category

(As of December 31, 1977)

AmountAmount disbursed as Date of Expected

Category Name of Project committed of 12/31/77 commencement completion(BD millions) (BD millions)

Electricityand Water Sitra Power and Water

Station 33.4 30.7 1972 1978Rifa's Power Station 30.0 8.0 1976 1980Transmission Lines 41.8 13.8 1973 1980Electricity Distribution 23.6 9.5 - 1979Sundry ElectricityProjects 13.6 6.6 - 1979/80

Water Distribution 18.4 7.2 1976 1979/80

Housing 114.6 66.7 1976 1979

Airport 12.0 10.9 1976 1978

Port 59.8 35.6 1976 1979

Other Manama Central Market 5.9 5.7 1975 1978Roads 9.8 6.5 - 1978/79Sewerage 76.6 9.6 1976 1981Land Reclamation 13.8 13.8 - 1977Manama/Sitra Causeway 7.0 6.7 1973 1978Salmaniya Medical Centre 18.4 15.5 1975 1978Education Facilities 11.1 4.7 1976 1978Sundry Projects 59.8 25.1 - 1978-80

549.6 276.6

Source: Ministry of Finance and National Economy.

Table 5.7: Projected Capital Expenditures of New and On-going Projects by Ministry,1979-82

(In '000 Bahrain dinars at current prices)

1979 1980 1981 1982 and AfterProjects Projects Projects Projects

in New in New in New in NewMinistry progress projects progress projects progress projects progress projects

(1) (2) (1) (2) (1) (2) (1) (2)

Ministry of Work, Electricity andWater 68,941 21,750 16,760 44,760 11,600 40,226 - 67,323Work Directorate 1,569 7,000 - 12,562 - 14,226 - 3,823Electricity Directorate 31,173 11,000 6,260 26,700 1,600 21,000 - 58,500Water Supply Directorate 6,009 3,750 500 5,655 - 5,000 - 5,000Research and Project Directorate 30,190 - 10,000 - 10,000 - - -

Ministry of Housing 10,620 - 618 30,000 - 30,000 - 30,000Ministry of Finance and NationalEconomy 6,375 100 - 1,815 - 670 - 20

Ministry of Health 721 2,900 - 6,504 - 4,435 - -Ministry of Education 252 3,100 - 6,334 - 4,718 - 3,382High Council for Youth and Sport 1,200 - 3,300 - -Ministry of Interior 1,170 1,100 - 2,080 - 75 - -

Ministry of Defence 2,089 1,100 - 1,086 - 1,119 - 693Horse Racing Club 543 - - - - - - -

Ministry of Commerce andAgriculture 949 1,000 550 975 - 3

Ministry of Information 1,975 1,000 206 400 - 250 - -

Ministry of Industry andDevelopment 12 1,450 - 774 - 200 - -

Ministry of Labour and SocialAffairs 130 500 - 1,307 - 1,457 - 245

Ministry of Justice and IslamicAffairs 14 - - - - - - -

Ministry of Transport 9 1,000 - 1,104 - 43 - -

Total 95,000 35,000 21,434 97,296 11,600 83,496 - 101,663

Grand Total (1+2) 130,000 118,730 95,096 101,663

Source: Ministry of Finance and National Economy.

Table 5.8: Projected Capital Expenditures for New Projectsby Ministry and Main Projects, 1979-82

(In '000 Bahrain dinars at current prices)

Expenditure EstimatesProject 1982 and

Ministry Cost 1979 1980 1981 After

1. Ministry of Works, Electricityand Water 174,216 21,750 44,917 40,226 67,323

a. Public Works 37,611 7,000 12,562 14,226 3,823

- Roads (32,621) (6,000) (11,000) (12,698) (2,923)

- Sewerage (2,100) (500) (1,632) (238) (-)

- Others (2,890) (500) (200) (1,290) (830)

b. Electricity 117,200 11,000 26,700 21,000 58,500

- Water desalination (18,000) (3,500) (8,000) (4,000) (2,500)

- Generation & transmission (85,000) (2,000) (12,000) (15,000) (56,000)

- Distribution (12,000) (4,300) (5,700) (2,000) ()

- Street lighting (2,200) (1,200) (1,000) (-) (-)

c. Water 19,405 3,750 5,655 5,000 5,000

- Water development (4,405) (3,750) (655) (-) (-)

- Other projects (15,000) (-) (5,000) (5,000) (5,000)

2. Ministry of Housing 90,000 - 30,000 30,000 30,000

- Housing projects (90,000) - (30,000) (30,000) (30,000)

3. Ministry of Finance and NationalEconomy 2,905 100 1,815 970 20

- Mina Sulman maintenance (2,250) (-) (1,500) (750) (-)

- Others (655) (100) (315) (220) (20)

4. Ministry of Health 13,839 2,900 6,504 4,435 -

- Construction of health

centers (6,084) (1,417) (4,667) (-) (-)

- Construction of Ministryof Health (4,535) () (100) (4,435)

- Extension and maintenance (3,220) (1,483) (1,737) () ()

5. Ministry of Education 17,534 3,100 6,334 4,718 3,382

- Construction of schools (10,600) (2,025) (5,235) (3,030) (310)

- Construction of museum (3,835) (-) (-) (1,000) (2,835)

- Extension and maintenance (3,099) (1,075) (1,099) (688) (237)

6. Ministry of Development & Industry 2,424 1,450 774 200 -

- Maintenance of airport (2,424) (1,450) (774) (200) ()

7. Ministry of Interior 3,255 1,100 2,080 75

- Maintenance and extension (3,255) (1,100) (2,080) (75) (-)

8. Ministry of Labor & Social Affairs 3,239 500 1,037 1,457 245

- Care centers (2,010) - (400) (1,370) (240)

- Others (1,229) (500) (637) (87) (5)

9. Others 10,043 4,100 3,835 1.397 693

Total 317,455 35,000 97,296 83,496 101,663

Source: Ministry of Finance and National Economy, and Table 5.7.

Table 6.1: Monetary Survey

(In millions of Bahrain dinars)

End of period 1971 1972 1973 1974 1975 1976 1977

Foreign Assets (net) 67.9 62.8 47.4 91.6 141.1 124.7 142.2Foreign assets 77.9 80.1 70.5 152.5 277.3 327.2 401.0Monetary authorities (39.7) (33.3) (25.3) (53.6) (116.7) (137.6) (177.4)Commercial banks (38.2) (46.8) (45.2) (98.9) (160.6) (189.6) (223.6)

Foreign liabilities 10.0 17.3 23.1 60.9 136.2 202.5 258.8Monetary authorities (-) (-) (-) (-) (6.5) (48.3) (61.0)Commercial banks (10.0) (17.3) (23.1) (60.9) (129.7) (154.2) (197.8)

Credit to Private Sector 35.7 44.0 73.5 120.7 160.8 267.9 310.6

Money 48.5 55.2 59.4 61.3 77.8 127.9 150.3Currency outside banks 21.2 23.8 14.9 16.9 24.0 34.2 41.6Demand deposits 27.3 31.4 44.5 44.4 53.8 93.7 108.7

Quasi-money 24.6 32.7 40.3 84.5 106.4 175.9 203.0Time and savings deposits 24.6 32.7 40.3 84.5 106.4 175.9 203.0

Government Deposits (net) 9.9 4.6 8.4 30.8 50.9 70.3 44.4Government deposits 11.8 13.7 11.3 32.1 52.2 73.9 M--8Less Credit to Government 1.9 9.1 2.9 1.3 1.3 3.6 4.6

Counterpart of GovernmentForeign Assets and ReservePosition in the Fund 13.8 16.6 13.0 32.5 55.5 39.7 23.9

Other Items (net) 6.8 -2.3 -0.2 3.2 11.3 19.7 25.9Other items (net) monetaryauthorities 3.0 -8.6 -3.8 1.8 26.6 45.3 42.5

Currency in banks 1.7 1.5 1.2 2.4 2.4 3.6 3.0Other items (net) banks 1.8 2.9 -2.6 -6.2 -24.7 -41.8 -38.1Less currency in banks -1.7 -1.5 -1.2 -2.4 -2.4 -3.6 -3.0Capital accounts (banks) 2.0 3.4 6.2 7.6 9.4 14.2 21.5

Source: Bahrain Monetary Agency.

Table 6.2: Factors Affecting Changes in Domestic Liquidity

(In millions of Bahrain dinars)

1972 1973 1974 1975 1976 1977

Changes in:

Money and quasi-money 14.8 11.8 46.1 38.4 119.6 51.8Money 6. -7 I 1.9 16.5 50.1 24.6Quasi-money 8.1 7.6 44.2 21.9 69.5 27.2

Net domestic assets 19.9 27.2 1.9 -11.1 98.4 50.0Credit to private sector 8.3 29.5 47.2 40.1 107.1 42.7Government deposits (net) (increase -) 5.3 -3.8 -22.4 -20.1 -19.4 -2.3Counterpart of government foreign assets andreserve position in the Fund (increase -) -2.8 3.6 -19.5 -23.0 15.8 15.8

Other items (net) (increase -) 9.1 -2.1 -3.4 -8.1 -5.1 -6.2

Foreigr. assets (net) -5.1 -15.4 44.2 49.5 21.2 1.8

(Percentage Change)

Money and quasi-money 20.2 13.4 46.2 26.3 64.9 17.0Money 13.8 7.6 3.2 26.9 64.4 19.0Quasi-money 32.9 23.2 109.7 25.9 65.3 15.0Credit to the private sector 23.2 67.0 64.2 33.2 66.6 16.oForeign assets (net) -8.1 -24.5 93.2 54.o 15.0 1.0

Source: Bahrain Monetary Agency.

Table 6.3: Accounts of the Monetary Authorities

(In millions of Bahrain dinars)

End of period 1971 1972 1973 1974 1975 1976 1977

Foreign assets 39.7 33.3 25.3 53.6 116.7 175.0 201.4

Reserve position in the Fund - 1.2 1.2 2.6 4.4 2. 2 2.2Bahrain Monetary Agency 25.9 16.7 12.3 21.1 61.2 135.3 177.4Government 13.8 15.4 11.8 29.9 51.1 37.5 21.8

Currency in circulation 22.9 25.3 16.1 19.3 26.4 37.8 46.8Of which: Currency outside banks 21.2 23.8 14.9 16.9 24.0 34.2 41.6

Foreign liabilities - - - - 6.5 48.3 61.0

Counterpart of government foreignassets and reserve position inthe Fund 13.8 16.6 13.0 32.5 55.5 39.7 24.0

Government deposits with BahrainMonetary Agency - - - - 1.7 5.2 27.1

Other items (net) 3.0 -8.6 -3.8 1.8 26.6 44.0 42.5Of which: Commercial banks' BDdeposits with Bahrain MonetaryAgency - - - - 22.8 35.0 22.9

Source: Bahrain Monetary Agency.

Table 6.4: Assets and Liabilities of the Monetary Agency

(In millions of Bahrain dinars)

End of period 1971 1972 1973 1974 1975 1976 1977

Foreign assets 25.9 16.7 12.3 21.1 61.2 135.3 177.4Gold 4.0 4.0 4.0 4.0 2.5 2.5 2.5Foreign exchange 21.9 12.7 8.3 17.1 58.7 132.8 174.9

Other assets 1/ - 8.8 4.6 2.0 5.9 7.7 10.6

Assets = Liabilities 25.9 25.5 16.9 23.1 67.1 143.0 188.0

Currency in circulation 22.9 25.3 16.1 19.3 26.4 37.8 46.8Currency in Bahrain 12.5 13.3 16.1 19.3 26.4 37.8 46.8Currency outside Bahrain 10.4 12.0 - - - - -

Commercial bank deposits _ - - - 22.8 35.0 22.9

Foreign liabilities - - - - 6.5 48.3 61.0

Government deposits - _ - - 1.7 5.2 27.1

Capital accounts - - - . 9.7 15.0 28.0

Other liabilities 3.0 0.2 0.8 - - 1.7 2.2

Source: Bahrain Monetary Agency

l/ Includes foreign currency deposits with local banks: BD 2.0 million at end-1974,BD 4.1 million at end-1975, BD 2.3 million at end-1976, and BD 4.9 million atend-March 1977.

Table 6.5: Gross Reserves and Net Foreign Assets

(In millions of Bahrain dinars)

End of Period 1971 1972 1973 1974 1975 1976 1977

1. Government 13.8 16.6 13.0 32.5 5.5 39.7 24.0Foreign exchange 13.8 15.4 11.8 29.9 51.1 37.5 21.8Reserve position with the Fund -- 1.2 1.2 2.6 4.4 2.2 2.2

2. Bahrain ?.onetary Agency 25.9± 6 12.3 21.1 61.2 137.6 177.4Gold 4.0 .0 4.0 770 2.5 2.5 2.5Foreign exchange 21.9 12.7 8.3 '17.1 58.7 135.1 174.9

3. Gross reserves (1 + 2) 33.3 25.3 53.6 116.7 177.3 201.4

4. Commercial bank foreiRn assets 38.2 46.8 45.2 98.9 160.6 189.6 223.6

5. Foreign liabilities 10.0 17.3 23.1 60.9 136.2 202.5 258.8Bahrain M4onetary Agency -- -- -- - 6.5 48.3 61.0Commercial banks 10.0 17.3 23.1 60.9 129.7. 154.2 197.8

6. Net foreign assets (3 + 4 - 5) 67.9 62.8 47.4 91.6 141.1 164.4 166.2

Sources: Bahrain Monetary Agency, and Ministry of Finance and National Economy.

Table 6.6: Consolidated Balance Sheet of Commercial Banks

(In millions of Bahrain dinars)

End of period 1971 1972 1973 1974 1975 1976 1977

Assets

Reserves 1.6 1.5 1.2 2.4 25.3 38.5 25.3Cash at hand (1.6) (1.5) (1.2) (2.4) (2.4) (3.6) (3.0)Balances with BahrainMonetary Agency (-) (-) (-) (-) (22.9) (34.9) (22.3)

Foreign assets 38.2 46.8 45.2 98.9 160.6 189.8 223.6Cash and sight deposits (6.8) (8.7) (9.0) (16.2) (41.2) (39.2) (37.6)Other deposits (31.1) (35.7) (21.2) (63.7) (99.9) (124.8) (145.1)Treasury bills and bankers'acceptances (-) (0.8) (0.9) (2.3) (3.8) (3-L) (13.1)

Other (0.3) (1.6) (14.1) (16.7) (15.7) (22.4) (27.8)Credit to Government 1.9 9.1 2.9 1.3 1.3 3.6 4.6Credit to private sector 35.7 44.0 73.5 120.7 160.8 267.9 310.7Unclassified assets 5.1 6.8 22.7 28.4 49.4 62.5 74.7

Assets = Liabilities 82.5 108.2 145.5 251.7 397.4 562.3 638.9

Liabilities

Demand deposits 27.3 31.4 44.5 44.4 53.8 93.7 108.7Time and savings deposits 24.6 32.7 40.3 84.5 106.4 175.9 203.0Foreign liabilities 10.0 17.3 23.1 60.9 129.7 154.2 197.8Government deposits 11.8 13.7 11.3 32.1 50.5 68.7 49.0Capital account 1.9 3.4 6.2 7.6 9.4 14.2 21.5Unclassified liabilities 6.9 9.7 20.1 22.2 47.6 55.6 58.9

Source: Bahrain Monetary Agency

Table 6.7: Direction of Credit

(In millions of Bahrain dinars)

Credit Outstanding Per Per Per Per Perat End-Year 1973 Cent 1974 Cent 1975 Cent 1976 Cent 1977 Cent

Trade 29.8 40.5 58.2 48.2 64.5 40.1 79.1 29.1 76.1 24.1

Construction 12.4 16.9 25.7 21.3 43.0 26.7 87.8 32.3 130.6 41.4

Manufacturing 11.4 15.5 14.8 12.3 25.7 16.0 37.5 13.8 143.2 13.7

Transport 4.8 6.5 5.7 4.7 16.4 10.2 32.0 11.8 27.3 8.7

Personnel 6.4 8.7 8.4 7.0 8.1 5.0 21.5 7.9 25.9 8.2

Government 2.9 3.9 1.3 1.1 1.3 0.8 3.6 1.3 4.6 1.5

Other 5.8 7.9 6.6 5.5 1.8 1.1 10.0 3.7 7.7 2.4

Total 73.5 100.0 120.T 100.0 160.8 100.0 271.5 100.0 315.4 100.0

Source: Bahrain Monetary Agency.

Table 6.8: Total Assets and Liabilities ofBahrain Offshore Banking Units

(In millions of US dollars)

1975 1976 1977End of period Dec. Dec. Dec.

Assets

Loans to non-banks ... 1,734 3,706Interbank funds

Commercial banks in Bahrain ... 136 162Other OBUs ... 510 2,012Outside Bahrain ... 3,780 9,303

Other assets ... 54 518

Assets = Liabilities 1,687 6,214 15,701

Liabilities

Deposits of non-banks ... 598 3,513Interbank funds

Commercial banks in Bahrain ... 87 128Other OBUs ... 510 2,012Outside Bahrain ... 4,939 9,629

Other liabilities ... 80 419

Source: Bahrain Monetary Agency

Table 7.1: Land Utilization in Bahrain, 1975

Area

Land Under: (In dunim)l/

Vegetables 2,815Alfalfa 3,046Date Palms & Fruit Trees 10,631Not is use

- with scattered trees 10,725- bare 9,262

Unclassified 542

Total Arable Land2/ 37,021

1/ 1 dunim = 1,000 square meters = 10,750 square feet

2/ This constitutes about 46 percent of the wotentiallvcultivable agricultural land.

Source: FAO and Ministry of Commerce and Agriculture.

Table 7.2: Major Vegetable Crops by Land Use. 1975

Area

Crop (In dunim)

Tomatoes 1,182

Radishes 398

Cucumbers 300Cantaloups & Melons 236

Onions 236

Eggplants 220

Lettuce 152

Marrow 120

Leek 111Okra 77

Carrots 77

Cabbage 68Pepper 58

Parsley 55

Pumpkins 51

Sub-total 3,373Other 133

Total 3,506

Source: FAO, and Ministry of Commerce and Agriculture

Table 8.1: INDUSTRIAL ESTABLISHNiENTS BY TYPE OF ACTIVITYAND PERSONS EMPLOYED

1973 1977LNDUSTRY No. of No. of Establishments with Emiiployee No. of No. of Establishments with EmployeeEstablish- Employees Numbers Establish- Employees Numbersments 10 11-50 51-200 +200 ments 10 11-50 51-200 +2001. Agricultural, Food & Beverage Industries 21 448 10 8 3 - 28 587 16 9 3 -2. Wood and Derived Industries

(including Joiners' Shops) 64 221 60 4 - - 80 370 72 8 -3. Paper and Derived Products(including printers) 6 194 1 4 1 _ 10 19421 5 4 -4. Chemical Industries(including oil refining) 9 4,056 3 3 2 1 10 4,085 5 3 1 15. Building Materials(excluding building contractors) 20 364 6 13 1 - 54 538 35 16 3 -6. Glass Industries

2 15 2 - - - 4 46 1 3 -7. Plastics Industries 2 41 1 1 - - 4 69 1 3 - -8. Basic Metals

(Production and working; notfabrication)

2 1,006 - 1 - 1 4 3,142 - 2 1 19. Mechanical Industries 29 172 23 6 - - 59 1,013 36 21 1 110. Electrical Industries 4 136 1 2 1 - 40 483 31 7 2 -11. Transport(including ship repairing) 3 1,928 - - - 3 20 2,380 4 11 1 412. Miscellaneous

1 4 1 - - - 7 94 2 5 - -Total 163 8,585 108 42 8 5 320 13,001 20F 92 13 7

Source: 1973: Industrial Planning Study by ACTIM, August 1973(Employee numbers adjusted in 5 companies where employee numbers seemed incompatible with turnover).1977: Bahrain Official Industrial Directory - Ministry of Development and Industry(Plus 50 small carpenters' shops).

1/ Ihis appears iow compared with the 1973 figure.

Table 8.2: Average Daily Production & Estimated Recoverable OilReserves in Bahrain and Her Neighboring Gulf Countries

Average Daily Estimated Proven ReservesProduction, 1977 As of Jan. 1, 1978(In 000 barrels) (In million barrels)

Country

Bahrain 56 280

Qatar 438 5,600

Oman 340 5,650

United Arab Emirates 2,013 32,425

Abu Dhabi (1,667) (31,000)Dubai (318) (1,400)Sharjah (28) (25)

Iraq 2,265 34,500

Iran 5,700 62,000

Kuwait 1,684 67,000

Saudi Arabia 9,016 150,000

Total 21,512 357,455

Source: Oil and Gas Journal, December, 1977 andPetroleum Economics Ltd. Jan-Feb 1978.

Table 8.3: Refined Oil Products

(In thousands of US barrels)

1Q72 1973 1974 1975 1976 1977

Ilaphtha 5,992 7,745 10,069 5,638 7,919 9,062

Gasoline 7,326 8,607 9,733 9,667 9,520 9,829

Kerosene 94z9 1,529 3,681 2,939 5,361 3,265

Aviation turbinefuel 15,060 11,839 7,309 8,842 7,833 11,723

Diesel oil 19,728 20,449 18,284 20,184 19,475 23,571

Fuel oil 32,743 35,872 37,877 28,056 26,476 33,687

Lube distillate 630 -- 666 548 71 334

Asphalt 320 35C 261 548 839 1,o84

Total 82,748 86,307 87,880 76,422 77,494 92,555

Source: Ministry of Finance and National Economy.

Table 8.4: Crude Oil Production and Refining

(In thousands of U.S. barrels)

Production: Runs to RefineryBahrain Total Stocks Total

Year Field Bahrain Arabian Crude Run Processed Processed

1972 25,508 25,566 60,309 85,875 1,363 87,238

1973 24,948 24,882 64,744 89,626 1,127 90,753

1974 24,597 24,586 64,834 89,420 1,975 91,395

1975 22,309 22,113 49,901 72,014 1,119 73,133

1976 21,258 21,212 58,795 80,007 786 80,793

1977 21,236 21,237 73,233 94,470 763 95,233

Source: Ministry of Finance and National Economy.

Table 8.5: Crude Oil Production, Abu Saafa Field

(In thousands of U.S. barrels)

Year Production

1972 34,1781973 39,4111974 45,7541975 21,3271976 39,1601977 40,377

Source: Ministry of Fi4 ance and National Economy.

Table 8.6: Bahrain Oil Wells

WellCondition 1970 1971 1972 1973 1974 1975 1976 1977

Completed 256 263 270 276 286 294 302 305

Producing Oil 203 215 211 203 207 212 225 229

Producing Gas 8 8 10 13 11 15 14 17

Gas Injection 7 7 7 6 5 5 8 8

Standing 16 10 16 26 26 26 26 34

Abandoned 22 23 26 28 28 28 28 27

Source: Statistical Bureau, Ministry of Finance and National Economy, Bahrain.

Table 8.7: BAPCO Employees by Nationality, 1970-77

Nationality 1970 1971 1972 1973 1974 1975 1876 1977No. % No. % No. % No. % No. % No. % No. % No. %

Bahrainis 3,900 89.1 3,460 89.1 3,330 89.2 3,313 89.3 3,385 89.0 3,335 88.6 3,205 87.4)3,300 83.6Gulf Arabs 53 1.2 47 1.2 44 1.2 36 0.9 30 0.8 24 0.6 20 0.5 )

British 249 5.7 225 5.8 210 5.6 209 5.6 222 5.8 220 5.8 235 6.4 290 7.3

Commonwealth 114 2.6 101 2.6 88 2.3 89 2.4 15 0.3 116 3.1 138 3.7 300 7.6

American 13 0.3 12 0.3 12 0.3 21 0.5 36 0.9 39 1.0 34 0.9 )O) 58 1.5Other

Nationalities 48 1.1 38 1.0 47 1.2 41 1.1 113 2.9 30 0.8 35 0.9

Total 4,377 100.0 3,883 100.0 3,731 100.0 3,708 100.0 3,801 100.0 3,764 100.0 3,667 100.0 3,948 100.0

Source: Bahrain Petroleum Company, Limited, Bahrain.

Table 8.8: Natural Gas Production and Distribution

(In millions of cubic feet)

1972 1973 1974 1975 1976 1977

.'roduction

Arab zone 20,855 21,170 20,803 20,251 20,360 18,930

Khuff zone 44,033 61,685 79,256 81,295 87,100 102,298

Total 64,888 82,855 100,059 101,546 107,460 121,228

Distribution1/

Power stations 6,043 6,570 7,464 10,292 12,610 16,167

ALBA 26,969 37,960 40,880 40,870 41,830 42,096

Refinery2/ 7,920 12,045 21,332 22,181 22,400 25,129

Reinjected 23,929 26,280 30,307 28,136 30,530 37,765

Awali domestic -- -- 76 67 70 71

Total 64,861 82,855 1L00,059 101,546 107,440 121,228

Source: Ministry of Industry and Development

1/ Excludes small amounts of flared gas and total distribution may notequal total production.

2/ Includes the low sulfur fuel oil facility beginning 1973.

Tab] e 8.9: FORECASi OF TO"AL. NATU LPL ';AS CONSLflPTION

(In mil lion scf of Khuff gas equivalent)

Year Power Generation ALBA Refinerv BAPCO Awaali Total Cumulative Gas ConsumptionBSED (Gas Injection) Domestic Gas Con- X of actual

sumption billion scf reserves

1978 19,110 42,010 34,740 33,980 130 129,970 254 2.5

1979 21,960 42,010 36,570 35,060 130 135,730 390 3.9

1980 24,600 42,010 38,390 35,800 130 140,930 531 5.3

1981 27,520 42,010 38,740 36,880 110 145,260 676 6.8

1982 30,800 42,010 38,740 37,620 110 149,280 825 8.3

1983 34,510 42,010 38,740 38,700 110 154,070 979 9.8

1984 38,640 42,010 38,740 39,440 110 158,940 1,138 11.4

1985 43,280 42,010 38,740 40,190 90 164,310 1,303 13.0

1986 47,630 42,010 38,740 40,890 90 169,360 1,472 14.7

1987 52,330 42,010 38,740 41,640 90 174,810 1,647 16.5

1988 57,610 42,010 38,740 42,010 90 180,460 1,827 18.3

1989 63,380 42,010 38,740 42,710 90 186,930 2,014 20.1

1990 69,730 42,010 38,740 43,090 70 193,640 2,208 22.1

1991 75,290 42,010 38,740 43,090 70 199,200 2,407 24.1

1992 81,280 42,010 38,740 - 70 162,100 2,569 25.7

Source: Moto Columbus: BSED Thermal Power Plant Study

Table 8.10: Aluminum Production and Exports

(Volume in metric tons and value in millions of Bahrain dinars)

Production ExportsUnit Unitvalue value

Volume Value per ton Volume Value per ton

1971 1/ 8,133 2.04 250.8 6,619 1.66 250.8

1972 70,103 15.97 227.8 57,899 13.13 226.8

1973 102,630 28.75 280.1 96,959 26.56 273.9

1974 117,961 38.85 329.3 97,849 31.47 321.6

1975 116,500 38.87 333.6 90,088 31.10 345.2

1976 122,058 44.86 367.5 120,457 44.28 367.6

1977 121,356 48.54 400.0 122,894 49.16 400.0

Source: Ministry of Industry and Development

1/ The smelter began production in April 1971.

Table 8.11: Gross Sales and Capital of Bahrain Fishing Company!/

Total capitalYear Ended June 30 Gross Sales employed

(Bahrain dinars)

1970 1,865,084 681,486

1971 1,406,720 682,860

1972 1,292,728 755,051

1973 1,827,150 966,186

1974 2,108,709 1,203,129

1975 1,850,115 1,211,602

1976 1,991,980 1,349,223

1977 2,929,656 1,513,722

Source: Annual Report of the Bahrain Fishing Company, variousissues.

1/ Sales value of shrimp caught and other income, mainlyprocessing shrimp for other countries.

Table 8.12: Gross Sales and Capital of

Bahrain Ship Repairing and Engineering Companv

Total capitalYear Employees Gross sales employed

(Bahrain dinars)

1972 354 1,287,419 1,429,283

1973 347 1,787,577 1,746,901

1974 344 2,073,740 2,128,861

1975 425 2,878,485 2,790,279

1976 481 3,805,730 3,635,337

1977 400 1/ 4,000,000 2/ 4,963,313 2/

Source: Bahrain Ship Repairing and Engineering Company, Bahrain

1/ At February 1978.

2/ Company's estimate.

Table 8.13: Registered Vehicles by Type of License, 1970-1977

Type of License 1970 1971 1972 1973 1974 1975 1976 1977

Private Cars 8,960 10,400 12,389 15,228 18,689 22,389 27,509 34,279Taxi Cabs 915 908 837 895 945 985 1,050 1,178

Vans & Lorriesl/ 2,999 3,439 4,267 5,156 6,343 8,382 11,109 14,334

Private Buses 381 419 491 545 666 802 1,007 1,320Public Buses 142 145 175 184 207 249 259 283Motor Cycles 1,529 1,772 1,966 2,286 2,742 2,996 3,522 3,957

TOTAL.2/ 13,397 15,311 18,159 22,008 26,850 32,807 40,934 55,351

1/ Private and Public Vans and Lorries

2/ Total does not include Motor Cycles

Source: Immigration Directorate, Public Security Department, Bahrain

Table 8.14: Vehicles Newly Registered, 1970-77

Year Private Cars Taxis Vans & (1) Private Public MotorLorries Buses Buses Cycles

1970 1,468 44 500 52 7 5031971 1,781 20 559 44 7 3221972 2,305 34 653 97 - 3031973 3,844 73 1,177 113 10 5591974 4,401 85 1,324 158 41 9381975 4,147 67 2,127 147 55 5051976 5,120 65 2,727 205 10 5261977 6,770 128 3,225 313 24 435

Note: (1) Private and Public Vans and Lorries

Source: Immigration Directorate, Public Security Department, Bahrain.

Table 8.15: Vessels Calling at Bahrain Ports, 1971-77

Type 1971 1972 1973 1974 1975 1976 1977

Cargo Ships - Deep WaterJetty (Mina gulman) 597 660 602 587 706 738 904

Cargo Ships - Sitra 6 40 - - - 19 -Oil Tankers 422 500 732 1,129 584 726 792Other Vessels 367 241 384 - - 23 53Naval Vessels 85 37 23 23 53 21 32Small Ships 268 107 2,626 2,771 3,034 108 127

Source: Customs and Ports Directorate.

Table 8.16: Cargoes Imported and Exported, Excluding Oil

1970 1971 1972 1973 1974 1975 1976 1977

Imported

Deadweight tons 323,519 354,153 332,137 377,364 662,706 553,829 875,514 959,613Tons, measurement 501,285measurement 501,285 542,611 516,778 625,871 925,960 926,784 1,446,415 1,515,134

Exported

Deadweight tons 12,117 23,665 25,286 26,381 20,902 6,577 3,764 4,920Tons,measurement 24,756 46,301 37,856 38,465 25,900 8,653 6,227 5,677

Packages Handled

Thousands 6,425 5,625 5,792 ... ... 8,219 ... ...

Source: Customs and Ports Directorate.

Table 8.17: Movements in Bahrain International Airport

1970 1971 1972 1973 1974 1975 1976 1977

Air Cargol/Imported 1,762 3,472 3,728 5,016 5,220 5,531 12,205 n.a.

Exported 2,707 1,490 1,460 1,658 2,514 2,238 2,708 n.a.

Civil AircraftMovement 2/ 16,098 13,239 19,088 25,917 23,864 26,068 35,714 36,000 _

Passengers inTransit 98,404 135,012 392,035 491,883 562,312 579,701 744,108 800,000 3

1/ In thousand kilos.2/ Incoming and outgoing.

3] Estimate

Source: Statistical Bureau, Ministry of Finance and National Economy

Table 8.18: Passengers Arriving and Departing

Incoming OutgoingYear By Air By Sea Total By Air By Sea Total

1970 112,288 61,280 173,568 118,886 56,730 175,616

1971 127,878 60,335 188,213 129,622 60,771 190,393

1972 152,165 48, 45 200,910 142,361 60,023 203,384

1973 178,659 54,193 232,852 176,057 50,976 227,033

1974 217,491 59,145 276,636 219,479 55,602 275,081

1975 268,705 57,110 325,815 263,197 53,292 316,489

1976 362,567 56,878 419,445 348,689 55,637 404,326

1977 440,762 45,836 486,598 400,958 48,752 449,710

Source: Immigation DirectoratePublic Security Department,

Table 8.19: Telecommunications

1970 1971 1972 1973 1974 1975. 1976 1977

Telegraph ('000 paid words) 2,552 2,904 3,192 3,796 3,908 3,875 4,271 4,340Telex (paid minutes) 113,739 215,843 289,160 413,240 560,078 953,915 2,008,279 2,920,752Radio telephone (paid

minutes) 377,046 643,482 865,287 1,120,012 1,447,805 2,165,247 3,744,787 6,839,134Radio telephone (number of

calls) 75,141 110,308 144,585 183,123 224,475 260,464 309,956 320,484Telephones (number) 7,046 7,734 8,310 9,121 12,242 13,982 15,666 19,411

Source: Cable and Wireless, Ltd., Bahrain

Table 8.20: ELECTRICITY PRODUCTION AND CONSUMPTION

Installed Peak UnitsCapacity Load Produced!/ Number of

Year (Megawatts) (Megawatts) (KWH) Consumers

1970 79.8 60.8 243.3 42,0001971 79.8 67.8 257.5 44,0001972 92.0 73.0 283.2-2/ 46,0001973 92.03/ 93.03/ 331.0 48,0001974 92.0.2/ 108.02/ 395.0 50,0001975 161.0 143.0 505.0 52,5001976 230.0 171.0 682.3 54,0001977 290.0 223.0 896.0 59,500

Source: Statistical Bureau, Ministry of Works, Electricity, andWater.

1/ Excluding losses in transmission.2/ 7.2 million is the contribution of ALBA to the domestic consumption.3/ Difference in installed and peak is made up by Alba power station.

Monthly Electrical Generation,Maximum and Minimum Loads, 1976

Electricity Maximum MinimumGenerated Load Load

MW MWV MW

January 30.4 65.4 28.0February 28.6 64.5 27.5March 29.5 64.8 22.1April 33.7 76.0 27.6May 58.2 127.1 48.1June 76.1 152.6 69.2July 85.0 158.0 64.0August 91.6 171.0 88.0September 94.0 171.0 92.6October 79.6 158.0 70.0November 41.2 89.5 37.0December 34.4 68.3 35.0

All Year 682.3 171.0 22.1

Table 8.21: Water Consumption

(In millions imperial gallons)

Months 1973 1974 1975 1976 1977

January 389 402 422 464 574

February 385 377 396 435 564

March 418 424 446 490 596

April 424 434 456 501 601

May 458 465 489 537 619

June 461 473 497 547 639

July 482 510 535 589 669

August 597 505 541 595 678

September 495 499 523 575 664

October 487 512 538 591 674

November 444 468 491 541 620

December 427 448 470 517 571

Total 5,467 5,517 5,804 6,382 7,469

Source: The Water Supply Directorate.

Table 8.22: Hotels in Bahrain by Number of Rooms and Ratesas of December 1977

No. of Rooms by Type Room Charges, BD per day-1/Hotel With bath Suite Single Double Suite

Hilton 188 9 30 40 80-140

Sahara 32 8 30 35 35

Delmon 120 4 30 35 70-90

Ramada 125 5 28 38 90

Gulf 250 2 28 35 70

Le Vendome 90 10 26 35 75-90

Tylos 72 4 25 33 60

Moon Plaza 106 25 22 34 36-70

Middle East 50 - 20 25 -

Palace Inn 29 - 19 25 -

Omar Khayyam 71 5 18 24 25-30

Bahrain 80 - 14-16/ 22-24-/ -

Bristol 14 9 11-14-/ 15-22-/ 28-45

Park 24 - 102/ 152/ -

Capital 34 - 1 02/ 14.42/ -

Total 1,285 81

1/ Rates are subject to 15 percent service charge, except those covered by footnote 2.

2/ Rates are subject to 10 percent service charge.

Source: Ministry of Information

Table 9.1: BAPCO Local Consumer Price Index

(1970 - 100)

Year Index % Change

1965 89.71966 91.6 2.11967 95.5 4.31968 98.6 3.31969 98.4 -0.11970 100.0 1.61971 105.8 5.81972 111.2 5.11973 127.3 14.51974 158.2 24.21975 183.7 16.11976 201.3 9.61977 223.9 11.1

Source: Ministry of Finance and National Economy.

Table 9.2: Government Monthly Wages by Grade and Step, 1977

(In Bahrain dinars)

Grade Minimum 1st Step 2nd Step 3rd Step 4th Step 5th Step 6th Step 7th Step 8th Step 9th Step 10th Step

1 65.000 67.000 69,000 71.000 73.000 75.000 77.500 80,000 82.500 85.000 87.500

2 78.000 80.500 83.000 85.500 88,000 90.500 93.500 96.500 99,500 102.500 105.500

3 93.500 96,500 99,500 102.500 105,500 108,500 112.000 115.500 119,000 122.500 126.000

4 113.000 117,000 121.000 125.000 129.000 133,500 138.000 142.500 147.000 151.500

5 134.000 139,000 144.000 149,000 154.000 159.500 165.000 170.500 176.000 181.500

6 161.000 167,000 173.000 176,000 185.000 191.500 198.000 204.500 211,000 217.500

7 195,500 203.000 210.500 218.000 225.500 233.500 241.500 249.500 257.500

8 234.500 243.500 252.500 261.500 270.000 280.000 269.500 299.000 308.500

9 280.000 291,000 302.000 313.000 324,000 335.500 347,000 358.500 370.000

10 336.000 351.000 366.000 381.000 396.500 412,000 427.500 443.000

11 397.000 417.000 437.000 457,000 478.000 499.000 520.000 541.000

12 478,000 503.000 528.000 553.000 580.500 608,000 635.500 663.000

13 580.000 610.000 640.000 670.000 701.000 732.000 763.000

14 704.000 737.000 770.000 803.000 836.000 869.000 902.000

Source: Ministry of Finance and National Economy.

Table 10.1: Number of Government Schools

Type of School 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77

Primaryl/ Boys 42 43 44 44 44 42 39Girls 31 32 34 35 36 35 31Total 73 75 78 79 80 77 70

Religious Boys - - 1 1 1 - 1

Intermediate2/ Boys 13 12 12 12 12 12 14Girls 12 9 10 10 10 10 12Total 25 21 22 22 22 22 26

Religious Boys - - 1 1 - - -

Secondary- 2/ Boys 4 5 6 6 6 6 6(General) Girls 3 6 6 6 6 7 7

Total 7 11 12 12 12 13 13

Technical Boys 2 2 2 2 2 2 2Religious Boys 1 1 1 1 - - -Higher Education3/

Boys 1 1 1 1 1 1 1Girls 1 1 1 1 1 1 1

Others4/ Boys 1 1 - - - - -

Grand Total 111 113 119 120 119 116 114

Source: Statistics Division, Ministry of Education.

1/ There are also seven private schools and three kindergartens under thesupervision of the Ministry of Education.

2/ In some of the intermediate schools, there are some primary classes andin some of the secondary schools, there are some intermediate classes.

3/ Teacher-Training Institutes.

4/ Isa Town which includes primary, intermediate and secondary classes.

Table 10.2: Teachers by Nationality and Sex

1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77

Bahraini Males 1,132 1,021 1,162 1,256 1,170 1,174 1,089Females 734 685 867 886 930 995 968Total 1,866 1,706 2,029 2,142 2,100 2,169 2,057

Non-Bahraini Males 304 307 303 320 332 388 449Females 260 234 258 255 264 313 320Total 574 541 561 575 596 701 769

Total Males 1,436 1,328 1,465 1,576 1,502 1,562 1,538Females 994 919 1,125 1,141 1,194 1,308 1,288Total 2,430 2,247 2,590 2,717 2,696 2,870 2,826

Source: Statistics Division, Ministry of Education.

Table 10.3: Number of Students by Level in Government Schools

Level Sex 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77

Primary Boys 20,590 21,196 21,568 21,858 22,765 23,532 23,929Girls 15,523 15,757 16,335 16,704 17,660 18,219 18,661Total 36,113 36,953 37,903 38,562 40,425 41,722 42,590

Religious Boys 96 94 99 85 82 67 54

Intermediate Boys 4,268 4,045 4,227 4,450 4,494 4,632 4,938(General) Girls 3,020 3,219 3,426 3,566 3,717 3,901 4,215

Total 7,288 7,264 7,653 8,016 -8,211 8,533 9,143

Religious Boys 20 21 24 36 36 28 24

Secondary Boys 2,731 2,435 2,699 2,891 3,217 3,258 3,306(General) Girls 2,511 2,897 3,131 3,506 3,818 3,896 3,959

Total 5,242 5,332 5,830 6,397 7,035 7,154 7,265

Technical Boys 439 601 592 633 684 681 718Religious Boys 34 23 15 15 15 18 26Commercial Boys 452 523 526 500 516 526 545

Girls 38 109 231 357 399 458 497

Higher Education(Teacher Boys 138 146 149 134 77 42 50Training) Girls 151 166 203 252 260 239 279

Total 50,011 51,232 53,225 54,987 57,740 59,497 61,201

Source: Statistics Division, Ministry of Education.

Table 10.4: Graduates of Teacher Training Colleges bySpecialization and Sex: 1967/68-1976/77

Physical ArabicEducation Languages Sciencesand Fine English Social and Islamic and

Year Sex Total Hygiene Arts Language Sciences Religion Mathematics

1967/68 Male 25 3 2 3 4 4 9Female - - - - - -

Total 25 3 2 3 4 4 9

1968/69 Male 39 5 5 5 8 9 7Female 37 - 4 7 9 5 12Total 76 5 9 12 17 14 19

1969/70 Male 50 8 5 6 9 10 12Female 56 7 5 12 16 11 5Total 106 15 10 18 25 21 17

1970/71 Male 55 7 5 11 11 11 10Female 65 7 5 15 16 19 3Total 120 14 10 26 27 30 13

1971/72 Male 79 10 8 10 15 12 24Female 84 8 8 15 13 15 25Total 163 18 16 25 28 27 49

1972/73 Male 62 7 6 10 10 15 14Female 80 10 9 14 13 13 21Total 142 17 15 24 23 28 35

1973/74 Male 82 10 14 17 9 12 20Female 114 7 9 12 16 13 57Total 196 17 23 29 25 25 77

1974/75 Male 51 7 9 9 6 8 12Female 128 10 9 13 6 29 61Total 179 17 18 22 12 37 73

1975/76 Male 18 4 3 1 2 2 6Female 130 7 8 24 10 23 58Total 148 11 11 25 12 25 64

1976/77 Male 10 2 2 1 3 - 2Female 98 5 11 16 15 19 32Total 108 7 13 17 18 19 34

Source: Ministry of Education.

Table 10.5: Graduates at Gulf Technical College(1972/73 - 1976/77)

Bahraini Omani Total GrandYear Male Female Male Female Male Female Total

1972/73 8 10 2 3 10 13 23

1973/74 19 16 4 - 23 16 39

1974/75 48 21 8 2 56 23 79

1975/76 33 24 7 5 40 29 69

1976/77 22 24 - 3 22 27 49

Source: Ministry of Education.

Table 10.6. Bahraini Students in Higher Education Abroadby Country and Specialization, 1976/77

SaudiSpecialization Egypt Kuwait Iraq Arabia UK India USSR Qatar Lebanon Others Total

Medicine 126 - - - - - 22 - 5 43 196

Pharmacy 11 - 5 1 - - - - - - 17

Engineering 57 10 32 48 1 - 18 - 28 20 214

Sciences 66 86 41 42 - - 5 16 14 11 281

Mathematics 35 2 8 4 - - - 17 4 - 70

Commercial 132 146 4 18 - - - 1 6 307

Administration 7 13 42 3 - - - - - 65and Economics

Economic and Po- 19 10 6 - 1 1 3 40litical Scinece

Law 26 34 4 - - - - - 1 65

Law and Sharia 8 1 - 7 - - 14 - - 2 32

Fine Arts 33 - 4 - - - 1 - - 2 40

Arabic Language 66 37 2 10 - - - 12 - - 127

English 40 33 2 18 2 2 - 14 3 5 121History 11 30 2 5 - 2 7 1 - 4 62

Geography 14 46 1 15 - - - 5 - 4 84Philosophy - 35 - - - - - - - 9 44

Psychology and 35 85 3 17 - - - 1 2 3 146Sociology

Arts 60 65 55 17 - - 1 2 5 - 205Agriculture 4 - 6 - - 3 - - - 13

Physical 14 - 4 - - - - - - - 18Education

Music and 27 - - - - - - - - - 27Theatre

Graduate Course 10 - - 1 3 2 2 - - 7 25

Others 41 - 13 6 159 90 3 16 1 16 345

Total 842 636 248 212 165 96 77 84 64 136 2,544

Thhle L0.7: Bahraini Graduates from Foreign Universities by Subjects1/

1973 1974 1975 1975/76 1976/77Specialization M. F. T. M. F. T. M. F. T. M. F. T. T.

History 3 4 7 - 5 5 3 - 3 2 4 6 10

Languages - 4 4 - 5 5 3 - 3 - 1 1 11

Philosophy 3 3 6 1 3 4 1 - 1 2 - 2 2

Education - -… … …- - - 5

Psychology - - - - 15 15 - - - - - - 16

Commerce - 3 3 2 11 13 4 - 4 3 7 10 10

Economics 2 1 3 9 11 20 5 - 5 3 4 7 13

Geography 3 1 4 4 10 14 2 - 2 1 7 8 15

Politics - - - - 1 1 1 - 1 2 1 3 1

Public Administration - - - - - - 2 1 3 .. .. .. 4

Sociology 1 - 1 - - - - - - 4 17 21 7

Journalism - - - 2 - 2 1 1 2 -

Law 2 1 3 8 - 8 3 - 3 - - - 5

Arts 1 - 1 1 - 1 - 2 2 - 1 1

Biology - - - - - - 6 - 6 - - - 6

Chemistry - - - 6 2 8 5 2 7 1 1 2 2

Physics - - - - - - - - - - - - 1

Geology - - - 4 - 4 - - - 3 1 4 2

Engineering Sciences 7 - 7 6 - 6 15 - 15 5 - 5 17

Statistics - - - - - - - 1 1 1

Medicine - - - 8 1 9 - - - 15

Dentistry 1 - 1- - - - - -

Agronomy 1 - 1 33 - 3 - - - 1

Others - - - - - - 13 4 17 24 12 36

Total 41 17 41 84 74 118 64 11 75 50 56 106 146

Source: Ministry of Education.

1/ Comprising of students on government scholarship and others who report theiroraduation to the Government.

Table 10.6: Expected Growth in Number of Students and Classes andthe Expected Need for Teachers for Primary Education

Number of Number of Number of Required Available Shortage ofYear Students Classes Periods Teachers Teachers Teachers 1/

Males

1977/78 24,609 638 22,330 957 957 -1978/79 25,700 666 23,310 999 926 731979/80 26,351 683 23,905 1,024 956 561980/81 27,000 699 24,465 1,049 993 561981/82 27,750 719 25,165 1,078 1,018 601982/83 28,550 740 25,900 1,109 1,047 621983/84 29,350 760 26,600 1,141 1,078 631984/85 30,150 781 27,335 1,174 1,110 641985/86 31,100 806 28,210 1,209 1,143 661986/87 32,165 833 29,155 1,250 1,178 721987/88 33,290 862 30,176 1,293 1,219 741988/89 34,348 890 31,150 1,336 1,262 741989/90 35,432 918 32,130 1,379 1,305 74

Females

1977/78 19,116 491 17,185 737 858 -1978/79 20,100 515 18,025 773 704 691979/80 20,900 536 18,760 804 740 641980/81 21,600 554 19,390 831 771 601981/82 22,400 574 20,090 861 798 631982/83 23,400 600 21,000 900 828 721983/84 24,500 628 21,980 942 867 751984/85 25,400 651 22,785 977 909 681985/86 26,450 678 23,730 1,017 944 731986/87 27,800 713 24,955 1,070 984 861987/88 29,350 753 26,355 1,130 1,037 931988/89 31,000 795 27,825 1,193 1,097 961989/90 32,550 835 29,225 1,253 1,160 93

Source: Ministry of Education.

1/ This estimate includes the expected annual replacement for those whowill leave the service.

Table 10.9: Government Health Establishments and Personnel

1970 1971 1972 1973 1974 1975 1976 1977

Hospitals 3 3 7 7 6 6 6 6 6 7

Health centers withmaternity beds 2 3 3 3 3 3 3 3

Health centers withoutmaternity beds 10 8 5 5 6 10 10 12

Public health centers 1 1 5 5 6 7 7 8

School clinics 4 4 4 4 4 4 4 4

Doctors n.a. n.a. n.a. n.a. n.a. n.a. 130 170

Nurses n.a. n.a. n.a. n.a. n.a. n.a. 892 944

Source: Ministry of Health.

Table 10.10: Beds in Curative Health Directorate Hospitals

Number of BedsCategory 1970 1971 1972 1973 1974 1975 1976 1977

Medical 97 97 93 128 88 106 110 110

Surgical 103 103 100 101 109 133 122 122

Obstetrics and gynecology 231 231 166 200 207 204 204 204

Pediatric 88 88 98 88 78 84 94 95

Eye diseases 42 42 38 38 38 38 38 38

Ear, nose and throat 14 14 29 29 19 29 39 40

Chest diseases 112 112 80 80 80 80 101 100

Geriatric 42 42 45 45 46 46 46 46

Psychiatric 156 156 184 184 168 168 168 168

Intensive care unit 8 8 4 4 4 4 4 4

Sick staff 2 2 - - - - - -

Police 12 12 8 8 8 8 8 8

Total 907 907 845 905 845 900 926 935

Source: Ministry of Health.