By Dr Jasim Husain Ali An eminent economist and Member of Parliament, Bahrain

Linking economic progress between Qatar, Bahrain

With the economies of Qatar and Bahrain heading towards raPid development, the proposed 40-km causeway between the two countries will keep the momentum going

In May, Qatar and Bahrain took some concrete steps to integrate their economies. In particular, the two countries made notable headway by sealing a deal to develop a causeway linking the northwestern region of Qatar with the southeastern area of Bahrain.

Also, the two sides signed a memorandum of understanding to set up a joint insurance firm based on Islamic principles, apart from agreeing to strengthen cooperation in the tourism sector. All these developments took place during the 8th session of the joint Bahraini-Qatari Supreme Co-operation Committee held in Manama. The Crown Princes of Bahrain and Qatar co-chair the committee.

The causeway deal
Undoubtedly, the most important progress relates to the signing of an accord between the Qatar-Bahrain Causeway Foundation and Vinci Construction of France to construct the 40-km causeway. The French firm leads a consortium of five companies mandated to construct the project.

Only a few details of the deal are currently available, though actual construction is likely to start towards year-end, with completion projected in 2013. Still, there are no hard facts regarding actual cost of the ambitious project. Nevertheless, it is estimated that the price tag would hover around US$3 billion. The actual bill, however, could end up being higher due to inflationary pressures in the region. The deal carries notable advantages to firms and nationals of both Qatar and Bahrain. The accord dictates that Qatari and Bahraini concerns should be assigned sub-contracts wherever possible.
Additionally, the deal calls for granting engineering students from both Qatar and Bahrain the opportunity to get hands-on experience during the implementation stage. The unique stipulation deserves to be complimented.

Economic gains
The link should bring economic benefits to both nations, but particularly to Bahrain. Benefits include invigorating local economies, strengthening trade relations and enhancing integration among Gulf Cooperation Countries (GCC), which include Saudi Arabia, the UAE, Kuwait, Oman, Qatar and Bahrain.

Certainly, local economies of both countries stand to benefit from spending on the project. Each country is scheduled to spend some US$1.5 billion over a span of five years, the period in which the project will be executed. Undoubtedly, the gross domestic product (GDP) of both countries should benefit from this, as the funds will find their way to different contractors. Then, there is the multiplier effect. Traditionally, each dollar spent generates more than three dollars in the economies of both Qatar and Bahrain. Thus, there is likely to be considerable spillover effects.

With a GDP of about $16 billion, Bahrain’s economy stands to benefit the most from the link, as the causeway will provide easy access to one of the region’s fastest growing economies. Qatar’s economy is doubling once every five years and its GDP is three times that of Bahrain. Qatar’s economy reportedly grew by 10 per cent in real terms in 2007, after an inflation adjustment that averaged around 14 per cent.

Bilateral trade
The link will certainly assist in increasing the level of bilateral trade. The two-way trade figure amounted to $162 million in 2007, with Bahrain enjoying a trade surplus. The value of Bahraini exports amounted to $123 million. This is a sizable amount as it comprises more than 5 per cent of Bahrain’s non-oil exports.

Eventually, the causeway should open up prospects for further trade by making it easy for enterprises to engage in trading activities. Already, there are talks of Qatar’s industrial undertakings, in sectors such as steel, finding easier ways to reach the Bahraini market. Chances are that Qatar will be able to bridge the trade gap with Bahrain once the causeway becomes operational.

Among other areas, Bahrain’s financial services sector should make gains from having easy access to Qatari nationals, who in turn are enjoying one of the highest per capita incomes in the world. By one account, Qatar ranks No. 6 worldwide in per capita income after only a handful of countries, including Luxembourg and Switzerland. Per capita income in Qatar has reportedly crossed the level of $50,000 per annum. Undoubtedly, many financial institutions operating in Bahrain would like to sell their products to well-to-do Qatari nationals, notably those products that comply with Islamic teachings.
Jobs for Bahrainis

Improved trade relations help in keeping some jobs as well as in creating new ones. The link can provide a venue for Bahraini nationals exploring employment opportunities in Qatar as they have the advantage of sharing a common culture. Bahrain today faces an acute unemployment problem with the rate of unemployment being no less than 8 per cent. Qatar, on the other hand, needs qualified workers.

GCC success
Above all, the causeway link falls in line with the broader goal of achieving economic integration within the GCC, which started the common market project at the beginning of 2008 that necessitates granting unrestricted access to member states.

Implementation of the Gulf Common Market (GCM) commenced in January 2008. The GCM aims at finding a unified market through which nationals will benefit from available opportunities. The ambitious project covers all economic and investment services, dealings in the stock market and setting up of companies in the public and private sectors besides social insurance among GCC citizens.

The GCM allows for free movement of factors of production amongst member states. In practice, therefore, the deals signed by Qatar and Bahrain represent the actual execution of GCM objectives.

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