68 December 2016 www.bahrainthismonth.com annualreview LIZ O’REILLY Looking towards 2017, BTM considers the path for continued economic health. As 2016 draws to a close, the fall in oil prices continues to present economic challenges both in Bahrain and across the region. At the same time significant instability, characterised by the ongoing conflicts in Syria, Iraq and Yemen and political milestones including the Brexit vote, which could change the face of the European Union, and the result of November’s US presidential election, look likely to pose ongoing concerns. This year has seen subsidy reductions across the board in the Kingdom with fuel prices rising by 60 per cent in January. New electricity and water tariffs were brought in from the beginning of March applying to the industrial and commercial sectors and expatriates. However, Bahraini citizens still enjoy the old lower rate on their individual home accounts. VAT, or value added tax, is expected to be introduced throughout the GCC in 2018 at a rate of five per cent and a recent report from the International Monetary Fund (IMF) revealed GCC countries are also considering several additional reforms, including 10 to 15 per cent tax on business profits, to raise non-oil revenue in the years ahead. According to the Khaleej Times, the IMF staff report, prepared following the October meeting of GCC finance ministers and central bank governors in Riyadh, revealed the additional reforms also include taxes on remittances, income and wages paid to foreign workers and financial transactions. A report released earlier this year by Oxford Business Group (OBG) stated that increasing revenues and reducing spending have been established as the core objectives of Bahrain’s economic policy. Economic Development Board chief executive Khalid Al Rumaihi told OBG: “We have made strong progress on diversification, with oil now accounting for around a fifth of GDP, down from 44 per cent in 2000. Key to this has been reforms put in place over the last decade, which have created an open economy and one ranked with the greatest level of freedom in the Middle East. However, recent volatility in oil prices serves as a reminder of the need to address wider challenges. “One major focus has been to make the private sector an engine for growth, particularly in the non-oil sector. More than half of Bahrainis in the workforce are employed in the private sector, and in 2014 year-on-year (y-o-y) grew around five per cent in the non-oil sector, with overall growth reaching 4.5 per cent. Foreign direct investment inflows have also remained robust and firms investing in Bahrain are targeting not only Bahrain but also the USD1.6trn GCC market as a whole, and one of our key advantages is that we are a gateway for firms and investors to access the GCC.” In a further move to encourage investment, Diversity Key for Future Growth Khalid Al Rumaihi Ramada Amwaj opening Bahrain Financial Harbour
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