Three years after anti-government demonstrations first broke out, unrest continues to simmer in Bahrain. But despite this, confidence is returning to the Bahraini economy and Manama is embarking on a major infrastructure spending programme that includes transport projects, utilities and social housing.

With economic growth in the kingdom forecast to be about 3.5-4 per cent this year, led by expansion in the non-oil sector, the government hopes its infrastructure programme will address some of the frustrations that triggered the unrest.

Fiscal pressure

Funding remains a challenge for Manama, however, and although it is receiving financial support from the GCC Development Fund set up in 2011, the spending programme coupled with an anticipated drop in oil prices adds additional fiscal pressure that will see the budget deficit widen and public debt grow. Government spending is forecast to remain at about 25-26 per cent of Bahrain’s GDP. About 10 per cent of this will be on wages and 7 per cent on subsidies.

The GCC Development Fund provides Bahrain with a 10-year, $10bn financing package that will be used to support infrastructure projects, according to the country’s Economic Development Board (EDB). About $1bn-worth of infrastructure and housing projects are scheduled to begin in 2014, including the expansion of Bahrain’s airport as well as new roads and housing schemes.

Housing plans

About half of the GCC Development Fund projects are dedicated to housing and are part of long-term plans to address the country’s demographic bulge, rather than an explicit politically driven plan to build houses for the deprived Shia majority. About 50,000 Bahrainis are estimated to be stuck on social housing waiting lists, with many poorer families confined to single-room flats, according to a report last year by US real estate consultancy CBRE.

The government’s housing plan includes the construction of 2,548 housing units in 2013, 1,443 in 2016 and 5,241 in 2017. The government’s housing arm, Eskan Bank, appointed specialists in 2013 to seek funding mechanisms to support the building of 2,500 national housing units on the land bank held by its subsidiary Eskan Properties.

One of Bahrain’s biggest infrastructure projects is the upgrade and expansion of Bahrain International airport by Bahrain Airport Company. The estimated $4.6bn project involves the construction of a 170,000 square metre terminal building and will boost the airport’s capacity from 9 million to 13.5 million passengers a year.

The development is being financed by the Abu Dhabi Fund for Development with French consultant ADPI conducting studies on the development of the airport over the next 20 years. As well as developing the new terminal, the study also includes determining future projects that will support the airport’s operations.

Logistics hub

Bolstering Bahrain’s transport infrastructure is central to the government’s long-term economic strategy to establish the kingdom as a regional manufacturing and logistics hub. Manama is examining proposals to expand Khalifa bin Salman port and is moving forward with the development of a rail network that will eventually link with the regional GCC network.

There are plans to improve transport links between Saudi Arabia and Bahrain with a new rail causeway that may also include a road link. The railway line will form part of the $15.5bn GCC-wide rail network, which is targeted to be operational by 2018.

The Saudi-Bahrain connection was originally estimated to cost $4.5bn, but is now predicted to exceed $5bn. Initial plans envisaged the connection will be 90 kilometres long. Saudi Arabia’s King Abdullah bin Abdulaziz al-Saud approved the building of a second Saudi-Bahrain causeway, known as King Hamad Causeway, in early September, which could mean the new causeway for the railway will proceed.

Investment in the road network has been a key focus of the Works Ministry in recent years and several road projects in the kingdom are being funded by the GCC Development Fund, including the Muharraq Ring Road scheme in the northeast of Bahrain, and the expansion of the King Fahd Causeway between Saudi Arabia and Bahrain.

Increase in activity

One of the unknowns is the pace with which the infrastructure projects will get under way; this hinges on the speedy sign-off of contracts. There is also a big question mark over the ability of the economy to manage and absorb such a huge increase in project activity. Estimates of the increase in construction sector activity this year are well into double digits, yet there is only so much the Bahrain economy can handle.

Bahrain is also looking to attract more property investment, saying that suppressed property prices in the kingdom mean it offers better-value opportunities for investors than can be found in Doha’s or Dubai’s booming property markets.

Sewage crisis

Bahrain’s Works Ministry is forging ahead with plans to expand the country’s overburdened wastewater treatment plants and networks to solve a long-running sewage crisis over the next five years with $1bn-worth of investments that aim to reduce the pressure on its treatment facilities.

The overloading of wastewater plants is acute. In 2010, a National Masterplan for Sanitary Engineering Services was completed. It identified serious shortcomings in wastewater treatment capacity, sewer transmission capacity, and treated sewage effluent (TSE) network production and capacity.

The masterplan called for major rehabilitation work in the sector. That year, Bahrain’s treatment plants were receiving a combined average sewage flow of 365,000 cubic metres a day (cm/d), despite only having a total capacity of 265,000 cm/d. And the situation has worsened in the interim.

The problems faced by Bahrain’s wastewater sector are the result of years of underinvestment and a growing population. The last major increase in capacity was completed in 2009 with the 4,000-cm/d expansion of the North Sitra plant. Bahrain’s population is estimated at 1.2 million, which is significantly higher than the 820,000 people the existing treatment capacity was designed to serve.

Due to the urgency of the situation, Manama is now receiving funding from Kuwait, Saudi Arabia and the UAE to enable it to push ahead with investment projects.

The Works Ministry has set a target of achieving a total treatment capacity of 650,000 cm/d by 2020 to handle an expected total sewage flow of 500,000 cm/d. Bahrain has had a centralised wastewater collection and treatment system since the mid-1970s, when its first plants were commissioned, with about 95 per cent of the population now connected to sewerage networks. The Works Ministry is aiming to reach 100 per cent coverage by 2020.

Some relief will be provided when Bahrain’s first privately backed 100,000-cm/d sewage treatment plant (STP) at Muharraq is commissioned later this year, but until the expansion of the Tubli plant, the largest planned STP project, goes ahead, the system will remain under strain.