meed-logo

line1 line2 line3
SIGN IN / REGISTER

Foreign policy issues cloud Bahrain’s horizon

8 November 2023

MEED’s December 2023 special report on Bahrain also includes: 

> Bahrain waits for major infrastructure projects
> Bahrain takes renewables strides
> Bahrain charts pathway to net-zero future
> Bahrain banks have cause for cheer

 

Bahrain’s Sheikh Khalid bin Hamad al-Khalifa, first deputy chairman of the Supreme Council for Youth & Sports and head of the Bahrain Olympic Committee, flew into Doha on 28 October to watch his compatriots take on Japan in the final of the Asian Men’s Handball Qualification Tournament for the 2024 Paris Olympics.

Sheikh Khalid was welcomed on arrival by Qatar's Sheikh Thani bin Hamad al-Thani in what was another sign of the ongoing process of rapprochement between the two countries, following the 2017-21 boycott of Qatar by Bahrain, the UAE and Saudi Arabia.

The rebuilding of the bilateral relationship has been a slow process. Indeed, Bahraini officials complained on several occasions in 2022 that Qatar had repeatedly declined to take up its offer of talks.

However, the process picked up momentum in early 2023, with several meetings at the headquarters of the Gulf Co-operation Council in Riyadh. In mid-April, the two sides agreed to restore full diplomatic relations, although they have yet to reopen embassies or appoint new ambassadors.

Regional tensions

Other foreign policy issues are causing greater diplomatic headaches these days. As one of the two Gulf countries to sign normalisation deals with Israel, Bahrain has found itself in a difficult position in light of the Hamas attack on Israel on 7 October and the subsequent heavy bombardment of Gaza by Israeli forces.

That issue rose to the fore on 2 November, when the Council of Representatives issued a statement saying the Israeli and Bahraini ambassadors to each other’s country had returned home and there had been a “cessation of economic relations”.

This was initially taken by many commentators to mean that diplomatic relations had been broken off, but the reality appears to be a suspension rather than a formal severance of ties. The Bahrain government subsequently issued a statement confirming its ambassador to Tel Aviv had returned home “some time ago” and the Israeli ambassador to Manama had also left. There had been protests outside the embassy since the Hamas-Israel war began.

In addition, direct flights between Bahrain International airport and Tel Aviv airport “stopped as of several weeks ago”, Manama said.

However, the statement made no mention of diplomatic relations being cut. The Israeli government meanwhile said that bilateral relations were “stable”.

However, there is clear potential for the war to escalate and the Bahrain-Israel relationship to worsen. Speaking at the 10th emergency special session of the UN General Assembly on 1 November, Bahrain’s ambassador to the UN, Jamal Fares al-Ruwaei, warned about the risks that Israel’s bombing of Gaza could radicalise a new generation. “Such scenes of death and destruction can create entire generations filled with accumulated anger and thirst for vengeance,” he said.

The authorities in Manama will be watching closely in case future protests against Israeli actions include explicit challenges to the Bahrain regime itself.

Economic headwinds

On the economic front there have also been challenges. Italian energy major Eni recently pulled out of the offshore Block 1 licence it secured in May 2019. An exploratory well was drilled on the block in mid-2021.

Bahrain has also yet to make any significant progress on the Khaleej al-Bahrain offshore field, which was discovered in April 2018.

In a more positive development, a $7bn upgrade of the Bapco refinery is due to enable a ramp-up of production to about 380,000 barrels a day by mid-2024, which should bolster government revenues, though there have been some reports of delays.

Bahrain’s headline real GDP growth estimate for 2023 has meanwhile been curbed to 2.7 per cent in the latest update from the Washington-based IMF, down from an estimate of 3 per cent in April. This is down from an estimated 4.9 per cent growth in 2023 and comes amid an extension of Opec+ oil production cuts. Real GDP is forecast to rise back to 3.6 per cent in 2024.

Although high oil prices have bolstered the country’s fiscal position over the past two years, the government has also had to continue trimming public spending to bring its budget closer to balance. In 2023, Bahrain is running an estimated fiscal deficit of 5 per cent of GDP.

Capital Intelligence sovereign analyst, Dina Ennab, predicts the budget deficit will fall to 5 per cent of GDP in 2023, compared to 6.1 per cent in 2022. It could fall further, to 3.6 per cent of GDP by 2025, “provided the government continues to contain public spending and improves revenue mobilisation”, she wrote in a mid-October ratings review.

This is still a far larger deficit than the government has been aiming for. In early June, the government issued its two-year budget for 2023-24 and said it was targeting a deficit of less than 1 per cent of GDP in 2024.

Under the Fiscal Balance Programme launched in 2018, the government had initially aimed to balance its books by 2022, but the year before that deadline – and amid the Covid-19 pandemic and lower oil revenues in 2021 – it pushed the target date back to 2024.

The government’s forecast revenues of BD3.1bn ($8.2bn) in 2023 and BD3.5bn in 2024 are based on a conservative target of oil prices averaging $60 a barrel. The IMF estimates that the country will need an oil price of $108.3 a barrel to balance its budget this year, falling to $96.9 a barrel in 2024 – both figures are by far the highest in the GCC.

Should instability spread around the region, there could be the sort of spike in oil prices that would, in theory, bring the budget into balance, but the wider geopolitical and macroeconomic consequences would almost certainly be broadly negative for Bahrain and neighbouring countries.

Image: Sheikh Khalid bin Hamad attends Olympiad qualifier in Doha. Credit: Bahrain News Agency

https://image.digitalinsightresearch.in/uploads/NewsArticle/11276847/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Jordan allows phosphate rail line bidders more time

    30 January 2026

     

    Abu Dhabi’s National Infrastructure Construction Company (NICC), a subsidiary of Etihad Rail, has allowed contractors until 15 February to submit their proposals for a contract to build the second section of the phosphate railway line that will run from Ghor Al-Safi to Aqaba in Jordan.

    The tender was issued on 27 December, with an initial bid submission deadline of the end of January.

    The scope of work for the railway includes civil engineering, tunnel construction, and mechanical, electrical and plumbing (MEP) works.

    Tendering is also ongoing for the first section of the line. NICC is preparing to award the contract for the first section of the railway line, stretching from Al-Shidiya to Aqaba.

    MEED understands that the evaluation is in its final stages and that the contract will be awarded soon.

    In April last year, a French-Swiss joint venture of Egis and Arx was awarded the design consultancy contract for the project.

    Etihad Rail announced in September 2024 that it had signed a memorandum of understanding (MoU) worth $2.3bn with Jordan’s Transport Ministry and local companies to develop the phosphate railway line.

    In an official statement, Etihad Rail said it had signed an agreement with Jordan to build, operate and maintain the project.

    The statement added that additional MoUs were signed with Jordan Phosphate Mines Company and Arab Potash Company to transport 16 million tonnes a year of phosphate and potash from mining sites to the Port of Aqaba via the Jordanian railway network.

    The MoUs also cover the manufacture and supply of rolling stock; the construction of terminals in Aqaba, Ghor Al-Safi and Shidiya; and the maintenance, repair and operation of the railway line. 

    Project history

    In 2015, Jordan’s Transport Ministry tendered a contract to construct the Shidiya rail link, intended to transport 6 million tonnes a year of phosphate from mines in Shidiya to Wadi Al-Yutum, near Aqaba.

    In November of that year, a joint venture of China Communications Construction Company and the local contractor Masar United was confirmed as the lowest bidder. It was awaiting the formal award to build the 21-kilometre spur line.

    The project was subsequently put on hold due to funding issues.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15541534/main.jpg
    Yasir Iqbal
  • Acwa Power to develop $200m solar plant in Philippines

    30 January 2026

    Saudi Arabia’s Acwa Power is investing $200m to build a large-scale solar photovoltaic (PV) plant in the Philippines.

    The renewables developer finalised the agreement with the Philippine government-owned Bases Conversion & Development Authority (BCDA) on the sidelines of the World Economic Forum in Davos last week.

    Under the reservation agreement, a 500-hectare site has been selected within the New Clark City Special Economic Zone in Tarlac province, north of Manila.

    The project must undergo a pre-feasibility study, technical assessments and regulatory approvals before any final investment decision is made.

    The collaboration will also explore “potential battery energy storage system (Bess) integration,” Acwa Power said in a statement. 

    No details were provided on the project’s potential power generation capacity.

    The reservation agreement follows a memorandum of understanding (MoU) signed between Acwa Power and BCDA in Riyadh last November.

    Since then, the partners have evaluated multiple locations in New Clark City and shortlisted the 500-hectare site for further technical and commercial evaluation.

    Acwa Power said it is targeting a threefold increase in its global assets under management to $250bn by 2030.

    The company currently has a global renewables portfolio of 52GW, accounting for 56% of its total power capacity, and plans to deploy 5.6GWh of battery energy storage capacity.

    As part of its foreign investment plans, the company also recently signed major agreements for large-scale renewable energy projects in Uzbekistan.

    This comprised $1.8bn in financing for the Samarkand solar and battery energy storage project, Uzbekistan’s biggest solar development.

    The project is being developed in partnership with Japan’s Sumitomo Corporation, Chubu Electric Power and Shikoku Electric Power.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15541146/main.jpg
    Mark Dowdall
  • Algeria plans Constantine tramway extension

    30 January 2026

     

    Algeria is planning another extension of its Constantine tramway network, which currently runs from Ben Abdelmalek Stadium in the city centre to the Ali Mendjeli area.

    The project client, Algiers Metro Company (EMA), received bids on 14 December last year from consultants for a tender to undertake feasibility and detailed preliminary design studies for the project.

    The client had tendered the contract in October.

    The current tramway network spans approximately 19.3 kilometres (km).

    The tramway is owned by EMA and operated by Societe d’Exploitation des Tramways (Setram), a joint venture of EMA and French firm RATP Group.

    The first route of the tramway, with a length of 9km, was commissioned in July 2013, according to GlobalData’s sister company, Railway Technology.

    The expansion phase began in July 2015 and was completed in June 2019, increasing total ridership to over 30,000 passengers a day.

    The initial 9km-long section of the Constantine tramway system runs from the Zouaghi terminal to the Ben-Abdelmalek Stadium station through the old town and the university area.

    The route includes 11 stations, three of which are multimodal, two viaducts measuring 465m and 114m long, and an underpass.

    A 65,000-square-metre ground-level depot serves the fleet for maintenance and train parking.

    The Ben-Abdelmalek Stadium was renovated as part of the project to accommodate the line's passage.

    Contractors involved 

    EMA awarded a contract for the tramway line extension to France’s Alstom and the local firm Cosider Travaux Publics consortium in July 2015.

    Spanish firm Idom was awarded the detailed design and construction works management, while US-based engineering firm Aecom was responsible for civil engineering and urban planning.

    Cital, a joint venture of EMA, Spain’s Ferrovial and Alstom, delivered 24 trainsets to open the first phase of the extension in 2019.

    The company also maintains 51 trainsets and the infrastructure of the Constantine tramway.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15540773/main.jpg
    Yasir Iqbal
  • Dewa desalination plans offer timely boost

    30 January 2026

    Commentary
    Mark Dowdall
    Power & water editor

    Dubai Electricity & Water Authority (Dewa) is taking early steps towards procuring its second independent water producer (IWP) project, a signal that the utility may be further expanding its role from service provider to long-term utility asset developer.

    Consultancy bids were received this week for a pre-feasibility study that will assess capacity and location requirements for a planned seawater reverse osmosis (SWRO) desalination plant.

    The project, being pursued with Etihad Water & Electricity (EtihadWE), would build on the 180-million-imperial-gallons-a-day Hassyan IWP, awarded to Saudi Arabia’s Acwa Power in 2024.

    It would also align with Dewa’s wider objective to lift Dubai’s desalination capacity to 750 million imperial gallons a day by 2030, from around 495 million today. Achieving that target may require a further pipeline of privately developed water assets between now and then.

    A useful point of comparison lies in Saudi Arabia’s power sector. Saudi Electricity Company has increasingly relied on independent power producers over the past decade to accelerate capacity expansion, ease pressure on public capital spending and deepen the project finance ecosystem.

    For regional developers, competition in Saudi Arabia’s water market continues to intensify. In December, Saudi Water Partnership Company (SWPC) prequalified 50 developers to bid for five upcoming IWPs and 63 developers for independent sewage treatment plant (ISTP) projects.

    Unlike Saudi Arabia, the UAE entered 2026 with limited visible momentum in desalination. EtihadWE’s $400m Fujairah SWRO IWP is the only large desalination plant expected to be tendered this year.

    In a crowded market, increased activity by Dubai’s utility would provide a welcome boost.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15540724/main.jpg
    Mark Dowdall
  • Projects show resilience in 2026

    30 January 2026

     

    While priorities may have shifted over the past two years, the region’s projects market continues to display resilience and will offer opportunities in 2026 in areas including Saudi Arabia’s gigaprojects progamme, regional rail schemes and other strategic sectors.

    Despite much having been written over the past two years about the reprioritisation of Saudi Arabia’s gigaprojects, work is continuing. 

    “They are still going, all the gigaprojects,” says Pierre Santoni, president – infrastructure for Europe, Middle East and Africa (Emea) at US-based Parsons. 

    “Even Neom, where the slowdown has been widely publicised, we still have people there working on Oxagon, and we still have people on the Line. All the other ones are still ongoing,” he adds. “We just signed a contract to design all the infrastructure around the Mukaab for New Murabba. We have live tenders and are designing the public realm for Diriyah Gate 2. We are on Sports Boulevard, King Salman Park and the expansion of King Abdullah Financial District. All of those are ongoing.”

    Another focus for the region is rail. Parsons led the Riyadh Metro Transit Consultants joint venture that project managed the first six lines of Riyadh Metro, which opened in late 2024. 

    “Riyadh Metro was a great success for Parsons and our partners, and all the people involved. That was the original gigaproject. At one point, there were 50,000 workers on Riyadh Metro every day,” says Santoni.

    The success of this project, and of earlier schemes such as Dubai Metro and Doha Metro, combined with high-level governmental backing, have given the rail sector in the region unprecedented momentum. 

    “Rail is a major market in the region at the moment,” says Santoni. “The UAE is a good example – you have the freight railway and the opening of passenger traffic. The high-speed rail project has also started. In Abu Dhabi, the tram on Yas Island was launched last year. In Dubai, the Blue Line is in full construction mode with delivery firmly scheduled for 2029. It is a major undertaking, and the intention of the Roads & Transport Authority is to continue with further extensions, which is much needed given the growth in population.”

    Roads and airports are two other areas of focus for Parsons. The company continues to work as the lead consultant for major road schemes in the UAE, and it secured delivery partner roles in 2025 for the airside and landside infrastructure at Riyadh’s King Salman International airport.

    Operations and maintenance 

    The infrastructure market is not just about building new projects. As the region’s infrastructure ages, operations and maintenance (O&M) has become a central pillar of Parsons’ strategy, Santoni notes.

    “The game is not just about building new infrastructure; it’s about making existing infrastructure perform better,” he says. 

    “A lot of O&M considerations are coming to the forefront. We are deploying technology like iNET, which is Parsons’ proprietary intelligent traffic management system. We did the initial feasibility study last year and managed to improve transit times through 320 intersections in Riyadh. We just signed a contract to fully deploy the system. 

    The game is not just about building new infrastructure; it’s about making existing infrastructure perform better

    “It’s not just physical infrastructure; it’s the management of all that through technology-enabled tools.” 

    Santoni says this technological “brain” is also being applied to the King Salman Park project, which involves developing the world’s largest urban park and requires a highly complex O&M system to manage it effectively. Automated management of soil and water for hundreds of plant species will remove the need for a vast on-site workforce.

    Traditionally known for core engineering and transport, Parsons is increasingly recognised for work in other sectors, including hospitality and defence. The firm is currently managing over 30,000 luxury hotel keys in the region, a surge driven by Saudi Arabia’s tourism goals.

    “We became recognised, sort of unknowingly, for these complex, niche-type hospitality projects where it’s about preserving heritage and respecting culture, but doing so in the most modern and technologically advanced way possible. This is going to be a very nice market for us in the future,” Santoni says. 

    “We also signed two major contracts last year for confidential defence clients in Saudi Arabia to deliver infrastructure.”

    Capacity crunch

    As the industry faces a talent shortage, Santoni highlights Parsons’ internal mobility as a competitive advantage. While competitors have struggled with project transitions, Parsons has focused on relocating staff to sustain its growth.

    “We did see a lot of people either exiting Saudi Arabia or relocating within,” Santoni says. “We have been very good at relocating people. This is one of our strengths. When projects changed pace, we made a conscious effort to relocate people, give them options and extend them on the job until something else came up. Last year alone, about 350 people were relocated internally within the region. We are still in hiring mode.”

    Being a multidisciplinary firm present in several countries gives flexibility. “In Saudi Arabia, most of Parsons’ work has traditionally been project management consultancy (PMC), although we have had for a number of years now a growing design office in Riyadh with an offshoot in Dammam and one in Jeddah. 

    “We currently have almost 300 people in our design office in Saudi Arabia, which is slightly less than 10% of our workforce in the kingdom. The rest are doing PMC work. In Dubai, Abu Dhabi, Doha, it’s mostly the more traditional model of design and construction supervision work with some PMC,” says Santoni. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15527825/main.jpg
    Colin Foreman