The Crown Prince: Why Bahrain needs economic reform

16 December 2008

As protests for political change continue, Sheikh Salman al-Khalifa is proving to be the progressive face of the kingdom.

Tensions are running high in Bahrain. The relatives of activists detained during riots in December 2007 are campaigning for their release. However, far from condemning the demonstrators, Crown Prince Sheikh Salman bin Hamad al-Khalifa views the protests as part of the kingdom’s democratic development, which sets it apart from its neighbours.

“It is a free country and dissent is allowed,” he says. “The demonstrations are something to be proud of. We think our country is more stable than many in the region. However, demonstrations are one thing, violence is another. The violence results from the gripes of people that refuse to participate in the political process.”

The crown prince, the son of King Hamad bin Isa al-Khalifa, is the progressive face of the kingdom. In his late-30s with degrees from the American University in Washington and Cambridge University in the UK, he oversees Bahrain’s economic reform programme. He chairs the Economic Development Board (EDB) set up in 2000 to encourage private sector development and foreign investment.

In January, King Hamad promoted Sheikh Salman to deputy supreme commander of the Bahrain Defence Force, thereby eliminating any ambiguity over who would control the army in the king’s absence.

Accelerating reform

Later that month, Sheikh Salman moved to speed up his economic reforms, expanding the EDB’s board of six ministers and 10 other members to include 16 ministers.

The change consolidates the crown prince’s power base by making a majority of the cabinet directly accountable to him on economic matters.

The move followed an open letter sent by the crown prince to the king protesting at unnamed obstacles in government blocking the EDB’s reform agenda. The principal obstacle that he was referring to was widely taken to be the long-serving prime minister, the king’s uncle Sheikh Khalifa bin Salman al-Khalifa, and his entrenched network of associates.

The expansion of the EDB seems to finally resolve an issue that has dogged the body since its inception in 2000.

“The mistake we made in the beginning was that we struggled to define a working relationship with government,” says Sheikh Salman. “Our task is to make sure that the government delivers faster by eliminating bureaucratic steps within the cabinet.

“Expanding the board makes its easier. We do not need to discuss things twice. We do it just once and pass it along for approval [by the king].”

The confused relationship with the executive has led to criticism that the pace of reform has been too slow. The crown prince refutes this claim. “Momentum is on our side,” he says. “You maintain it by rewarding those who get with the programme and marginalising those who get in the way. Keeping people motivated is the real key.”

The real brake on change has been tradition, he says. “Individuals are set in their ways. There is a legacy way of doing things. Bureaucracy we can cut through, but there are legacy concepts. We are not fighting an individual; what we are against is a paradigm.”

Stimulating business

Included in this outmoded thinking is the idea that the state should manage businesses, says Sheikh Salman, which is directly opposed to the EDB’s mission.

“We are reinventing the role of government from an operator to regulator and making the private sector the engine of growth,” he says. “We are going to invest in our people - they are our real resource - and stimulate business in target sectors.”

The investment is needed. At the heart of the friction between government and protesters is the perception held by large sections of the majority Shia population that it suffers political and economic discrimination under the Sunni-led government.

Political reforms following King Hamad’s accession in 1999 - the declaration of a constitution and national elections in 2002 for a newly established National Assembly and another round of balloting in 2006 - have not been enough to counter this view.

Neither has the rise of an opposition bloc in parliament, nor rising per capita income driven by annual gross domestic product (GDP) growth of 6 per cent.

The unrest has increased pressure on the EDB to improve the economic prospects of Bahrain’s local population, many of whom are vociferously demanding jobs, housing and a share of the country’s oil wealth.

Economic progress and political change go hand-in-hand, says the crown prince. “The success of the political reform programme rests on successful economic reform,” he says. “For political reform to succeed over the long term, we need to show the economic dividend.

“People need to feel that their lives are getting better. You need to get people invested in the economy. It is crucial for stability in a democratic system for people to develop into a middle class.”

Wealth distribution

The crown prince does not reject the charge that discrimination exists. “No society is perfect,” he says. “ We are focusing on opportunities for all. Economic disparity is a concern and wealth distribution is important. Discrimination probably occurs among parts of the population. It is something we must fight and work against.”

He vehemently rejects the often-made characterisation of the tension between the government and activists as a sectarian conflict. “I refuse the accusation that this is sectarian based,” he says. “My over-arching goal for all economic reforms is to build a sense of national identity. It is so destructive to think in terms of sect or religion.”

Instead, he says, feelings of discrimination emanate from entrenched economic roles. “Traditional roles have been passed down from father to son and have likely contributed to feelings of difference,” says Sheikh Salman. “A lot of it relates to standards of living. People feel disadvantaged economically.”

The National Assembly is sometimes criticised for being nothing more than a talking shop, with constituencies engineered to ensure a government majority.

The crown prince firmly rejects this view, saying it is a check on the executive and has legislative powers. EDB initiatives must pass cabinet approval and then be subject to a parliamentary vote before sign-off from the king.

However, Sheikh Salman says the pace of political change should be measured to give people the chance to understand how democracy works, and that it involves collaboration in decision making.

“Our daily life is based on compromise,” he says. “Legitimate opposition to government policy is welcomed, and through the process of consultation and compromise we have achieved plenty, including privatisation schemes. Labour market reforms are being brought in gradually, and a union law that allows people to bargain.”

The EDB’s mandate is extensive. In addition to pushing labour, education and healthcare reforms, it is promoting Bahrain abroad as an investment destination.

Foreign investment now outstrips government spending by three times. However, the EDB’s agenda reflects its central goal: to create jobs for Bahrainis and train people to fill them. The crown prince is not in favour of handouts.

“The only way to change [economic disparity] is to drive up productivity,” he says. “People have to work. You have to empower people with skills and education to be right for the work environment. Poverty is prevalent in every society.

“It is a myth that everyone can have the same standard of living. People should be rewarded for their contribution.”

Unemployment, which stands at 4 per cent, is not as much of an issue as underemployment, he says, and the EDB is guiding Bahrainis into getting jobs. “Everybody knows they need a better lifestyle but are lost on how to get there,” he says.

Bahrain is one of the most advanced economies in the Gulf in terms of diversifying its income stream away from oil. It has focused on developing its banking and insurance, tourism and industrial sectors. But now other Gulf states are catching up, establishing their own financial centres, Formula 1 circuits and aluminium smelters.

However, Sheikh Salman is sanguine about the competition. “Competition is good in the financial sector,” he says. “We need to grow other sectors to match that one, but you don’t abandon that sector because it is big.”

Bahrain’s location will be to its longstanding benefit, says the crown prince. “We are 50 minutes drive from 50 per cent of Saudi Arabia’s GDP. Geography works to our advantage despite our lack of resources.”

Among EDB’s key achievements identified by Sheikh Salman are the liberalisation of the telecommunications sector, the consolidation of financial services regulation under the central bank, and the privatisation of Manama’s international airport and Al-Ezzel power plant.

“That we built the EDB is a major achievement” he says. “It has a broad mandate. Rem-inding people every once in a while that Bahrain is a centre of business and is not to be forgotten is important.”

Tackling judiciary

There is a lot left to do. In an indication of his reach, the crown prince plans to tackle judicial reform. “We have to make sure the courts are adequately staffed, managed, run and informed, and that people [employed] are experts,” he says.

Training is always on the agenda. The EDB is also hoping to establish public-private partnerships that will bring professional talent into the kingdom.

“In 10 years, we should be reaping the rewards of education reform and have a trained workforce and be less reliant on unskilled labour,” says Sheikh Salman.

In a further example of how the economic fortunes of the population are tied to the political stability of the state, the crown prince is targeting corruption, which many in the Shia and wider community view as robbing them of access to opportunities.

“We are pursuing this aggressively and are shutting this down,” he says. “I hope that in 10 years this will be eliminated. It is an issue for public confidence and good governance. People need to believe in a system that is working in their best interest.”


  • 1999 Commander in chief of the Bahrain Defence Force (BDF)

  • 1999 Chairman of the Committee for the Implementation of the National Charter

  • 2001 Chairman of the Economic Development Board

  • 2002 Deputy supreme commander of BDF

  • 2008 Chairman of the Supreme Council for Youth & Sport

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