Countries of the World/COUNTRYS.BIN/dp/0028/00289.txt

Text File | 1991-06-24 | 37KB | 608 lines

$Unique_ID{COW00289}
$Pretitle{385A}
$Title{Bahrain
Chapter 1C.   Budget}
$Subtitle{}
$Author{Laraine Newhouse Carter}
$Affiliation{HQ, Department of the Army}
$Subject{million
percent
bahrain
government
amir
assembly
bahrain's
system
court
members}
$Date{1990}
$Log{Street scene, Manama*0028901.scf
}
Country:     Bahrain
Book:        Persian Gulf States, An Area Study: Bahrain
Author:      Laraine Newhouse Carter
Affiliation: HQ, Department of the Army
Date:        1990

Chapter 1C.   Budget

     The annual budget was both the government's principal instrument of
economic development and its barometer of progress. It included neither large
projects in Bahrain financed by other Arab governments nor international
financial and investment institutions, including the causeway, cracking plant,
twin ammonia and methanol plant, and the Arabian Gulf University. It did,
however, include yearly appropriations for Bahrain's share of such projects.

     For more efficient planning the government presents biennial budgets,
although until 1983 it had a four-year investment plan. In 1983 the government
expanded the four-year program to six years because only BD175 million of the
BD330 million ear-marked for 1982 was spent. Clearly the absorptive capacity
of the economy was more modest than had been thought. In 1982 the budget
surplus dwindled to BD80 million.

     Bahrain's economy performed well in 1983, despite the challenge proffered
by the decline in oil prices. The 1981 growth rate of 9 percent dropped to 6
percent for both 1982 and 1983, a relatively small decrease in the face of a
loss of between US$8 million and US$10 million a month following the OPEC
price realignment.

     The government's total revenue fell from approximately BD646 million in
1982 to BD607 million in 1983. This relatively small drop in revenue and the
overall good performance of the economy was made possible by non-oil income
and, particularly, by subventions from the wealthier GCC states. Although the
oil sector represented 75 percent of government revenue, it was only 25
percent of the gross domestic product (GDP), exhibiting the foresight of
Bahraini planners in early diversification of the economy.

     Because of the premium investment in major project planning, the
government decided to stretch out major projects over longer periods of time
rather than cancel them. For example, the most expensive project-the
heavy-oil cracking plant-was being reevaluated in mid-1984 (see Petroleum
Industry, this ch.). Major government subsidies were also cut. Gasoline prices
were doubled in 1983, easing, though not eliminating, a US$45.05 million
government subsidy.

     Government economists expected that government revenues in 1984 would
total BD545 million. Although the industrial sector's percentage of GDP
dropped from 13.7 percent in 1981 to 12.3 percent in 1982, it was expected to
perform better by the end of 1984, when such major projects as the aluminum
rolling mill and the steel and petrochemical plants should be in operation.

     Increases in both the development program and recurrent expenditures rose
from 1983 to 1984 and were expected to increase in 1985. The development
budget of BD201 million ($532.6 million) in 1984 will rise to BD210 million,
and recurrent expenditures will move from BD343 million to BD363 million.

     The overall increase in the budget from BD545 million to BD575 million
was expected to occur without increasing medical or electricity costs or
reducing food subsidies. One reason the Bahrainis may have felt confident
about their budget was that the Saudis, among others, were expected to
continue their economic support. The total in direct aid to Bahrain was
expected to reach BD56 million in 1984. At the October 1983 GCC meeting in
Qatar, the heads of state voted that Bahrain will share a US$1.8 billion
defense fund for improvement of its defense facilities. In addition to paying
for the causeway, Saudi Arabia will pick up the tab for a new and immense
desalination plant, and Abu Dhabi will fund the cost of other projects. Kuwait
was funding Bahrain's school-building program.

[See Street scene, Manama: Courtesy Ministry of Information, Bahrain]

Foreign Trade and the Balance of Payments

     Traditionally, Bahrain had been the entrepot and the distribution center
of the region. This position has been usurped to a great extent, however, by
the development of Saudi ports and strong competition from Dubai. Oil
continued to be the dominant factor in the trade account, representing 82
percent of visible export receipts and 50 percent of merchandise imports. The
government strategy of diversifying the industrial base and encouraging the
growth of local industries has contributed to a reduction of imports by 9.6
percent (value terms) in 1982, in contrast with an 18.1 percent increase in
1981. Bahrain will remain strongly dependent on the outside world, however,
for its basic requirements for some years to come. Government officials hope
that the opening of the Bahrain-Saudi causeway may bring in new business for
Bahrain's deep-water port, Mina Salman. To this end a new access road has been
planned that will run from the container terminal directly to the causeway's
link road.

     A surplus of US$59.63 million in 1982 characterized foreign trade, down
from US$222.6 million in 1981 and US$117.93 million in 1980. The oil accounts
surplus declined 6.9 percent from about US$1.4 billion in 1981 to about
US$1.3 billion in 1982. The deficit in the non-oil account continued to
increase, although the rate was lower. A deficit of US$1.2 billion was
recorded in 1982, in contrast with US$1.2 billion in 1981 and US$1.1 billion
in 1980, representing increases of 6.5 percent in 1981 and 5.7 percent in
1982.

Imports

     The total value of imports in 1982 was approximately US$3.7 billion, a
9.6-percent decrease from the 1981 total of about US$4.1 billion. There was a
25.8-percent drop in crude oil imports from about US$2.5 billion in 1981 to
about US$1.9 billion in 1982. Crude-oil imports to the end of the second
quarter in 1983 were 37.9 percent lower than the same 1982 period. Non-oil
imports increased 15.1 percent, from approximately US$1.6 billion to about
US$1.9 billion. Machinery and transport equipment were the major non-oil
imports, at US$702.8 million, followed by some other manufactured goods,
including the raw material for aluminum, at US$393 million; chemicals,
US$223.93 million; and food and live animals, US$186.03 million. Chemical
imports rose by 42.9 percent, machinery and transport material by 19.2
percent, food and live animals by 16.4 percent, manufactured goods by 7.8
percent, and miscellaneous manufactured articles by 2.3 percent.

     In 1982 Bahrain's chief trading partners were the United States, Japan,
Britain, Australia, and West Germany, accounting for 20 percent, 15 percent,
13.8 percent, 10.4 percent, and 6.4 percent, respectively, of total non-oil
imports. The United States share of the total declined slightly from 22.4
percent in 1981, although it increased in value from US$363.3 million to
US$375.2 million. Japan also experienced a marginal decline from 15.7 percent
in 1981, although the value rose from US$256.3 million to US$281.4 million.
Britain's share also declined from 15.2 percent in 1981, rising in value from
US$247.25 million to US$259.97 million. Australia and West Germany's
respective shares increased. In value terms West Germany recorded a huge
increase of 78.6 percent to US$120.8 million in 1982, followed by Australia's
50.8 percent increase to US$196.1 million.

Exports

     Total exports of about US$3.8 billion were recorded in 1982, down
12.8 percent from 1981. As a consequence of the oil glut, the value of total
exports of refined oil decreased by 19 percent, from about US$3.9 billion in
1981 to US$3.1 billion in 1982. Because of the surplus of oil on world
markets, exports of refined oil decreased by 11.8 percent to reach a total of
86.8 million barrels in 1982