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BAHRAIN

Economic Freedom Score


25

World Rank:

13

Regional Rank:

Least
free

ahrains economic freedom score is 75.1, making its econBdecreased


omy the 13th freest in the 2014 Index. Its overall score has
by 0.4 point due to slight deteriorations in labor

50

75
Most

100 free

75.1

Freedom Trend
79

freedom, trade freedom, and freedom from corruption. Bahrain continues to be the freest economy in the Middle East/
North Africa region, and its economic freedom score is well
above the world average.

Over the 20-year history of the Index, Bahrain has been consistently rated one of the mostly free economies achieving
economic freedom scores above 70. Three of the countrys 10
economic freedomsfinancial freedom, investment freedom,
and labor freedomhave recorded score gains of 10 or more
points since Index grading began. Despite challenging external and internal political environments, Bahrain continues to
be a financial hub for dynamic economic activity, with high
levels of trade and investment bolstered by a competitive and
efficient regulatory environment.
Bahrains challenging transition to greater openness and
diversification is based on foundations of economic freedom.
Firmly institutionalizing the rule of law by enhancing judicial
independence and transparency will be critical to stamping
out lingering corruption and ensuring success in the countrys
ongoing evolution.
BACKGROUND: Bahrain gained its independence in 1971
and became a constitutional monarchy in 2002. In 2011, Shia
opposition activists launched a protest campaign, demanding
a new constitution and greater political power. After modest
concessions and efforts at dialogue failed to stem the demonstrations, King Hamad declared an emergency and authorized
a crackdown supported by Gulf Cooperation Council security
forces. The government has sought to ease tensions through
a national dialogue led by the crown prince. Efforts have been
made to reduce dependence on declining oil reserves through
policies that encourage investment in non-energy sectors.
Home to many multinational firms that do business in the
region, Bahrain has a modern communications and transportation infrastructure, a cosmopolitan outlook, and a free trade
agreement with the U.S.
How Do We Measure Economic Freedom?

See page 471 for an explanation of the methodology


or visit the Index Web site at heritage.org/index.

78
77
76
75
74

2010

2011

2012

2013

2014

Country Comparisons
75.1

Country
World
Average

60.3

Regional
Average

61.5

Free
Economies

84.1
0

20

40

60

80

100

Quick Facts
Population: 1.2 million
GDP (PPP): $33.1 billion
3.9% growth in 2012
5-year compound annual growth 4.0%
$28,744 per capita
Unemployment: 3.4%
Inflation (CPI): 1.2%
FDI Inflow: $891.2 million
Public Debt: 33.7% of GDP
2012 data unless otherwise noted.
Data compiled as of September 2013.

111

BAHRAIN (continued)
THE TEN ECONOMIC FREEDOMS
Score

RULE OF
LAW

Country

World Average

Property Rights 60.0


Freedom from Corruption 49.4
0

20

40

60

80

Rank

1Year
Change

41st
49th

+5.0
1.6

100

In the years since martial law was imposed after social unrest in 2011, the government has
pursued a reformist domestic political agenda, although progress on further economic reforms
appears to be on hold. The king holds some decision-making authority within the British-legacy legal system, but the judiciary is generally well regarded and unbiased. Expropriation, especially without compensation, is infrequent, and private property is secure.
Fiscal Freedom 99.9
GOVERNMENT
Government Spending 71.4
SIZE

2nd
83rd
0

20

40

60

80

0
1.0

100

Bahrain levies no taxes on individual income. Oil companies must pay a 46 percent corporate income tax, but most other businesses are exempt from taxation. Other taxes include a
stamp tax and a tax on property purchases. Government revenue equals 3.1 percent of GDP, and
expenditures have climbed to 30.9 percent of domestic income, cushioned by energy exports.
Public debt remains below 35 percent of GDP.

REGULATORY
EFFICIENCY

Business Freedom 76.3


Labor Freedom 82.0
Monetary Freedom 78.4

41st
20th
59th
0

20

40

60

80

+0.5
8.4
+5.9

100

Starting a business costs less than 1 percent of the level of average annual income, but the minimum capital required is high. Obtaining needed permits is relatively time-consuming. There is
no nationally mandated minimum wage, but wage increases have exceeded overall productivity growth. The government scaled back natural gas subsidies for industrial users in 2013 but
maintains price controls and subsidies on food items, water, and electricity.

OPEN
MARKETS

Trade Freedom 78.6


Investment Freedom 75.0
Financial Freedom 80.0

79th
35th
4th
0

20

40

60

80

4.2
0
0

100

Bahrain has a 5.7 percent average tariff rate along with relatively few non-tariff barriers to
trade. Several state-owned enterprises have yet to be privatized. As a regional financial hub,
Bahrains diverse and competitive financial institutions account for over 25 percent of GDP.
Foreign and domestic investors have access to modern financial services on market terms.

Long-Term Score Change (since 1995)


RULE OF LAW
Property Rights
Freedom from
Corruption

112

0
20.6

GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending

+0.5
0.3

REGULATORY
EFFICIENCY

OPEN MARKETS

Business Freedom 23.7


Labor Freedom
+42.0
Monetary Freedom 8.2

Trade Freedom
+0.2
Investment Freedom +25.0
Financial Freedom +10.0

2014 Index of Economic Freedom

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