CC BY
73Omar Al-Ubaydli*
INNOVATION IN BAHRAIN: A CRITICAL ANALYSISX
Abstract: A central theme of Bahrain's Economic Vision 2030 is the development of higher levels of innovation to fuel a transition from an oil-dependent economy to a knowledge economy. This paper describes the prevailing levels of innovation in Bahrain, and analyzes the primary factors underlying these levels. It goes on to describe the government's latest efforts at improving innovation, and examines their likelihood of success.
1. Introduction
The importance of innovation to economic development is a well-established fact in the economic literature, and the rapid pace of technological advancement is considered the primary reason why living standards during the 21st century are so much higher than those at the eve of the industrial revolution during the 18th century. This belief has migrated from academic circles to policy ones, and as a result, modern economic development plans always feature policies explicitly designed to boost innovation. Bahrain is no exception to this trend, as its Economic Vision 2030, launched in 2008, is centered around the theme of making technological advancement the primary source of economic growth.
Historically, due to the desert climate, the Bahrain economy has relied upon oil to drive economic activity. This economic model has served the country well, resulting in high living standards, reflected in both conventional measures such as per capita income, and in more nuanced one such as human development indicators. However, a combination of persistent population growth and a secular decline in oil prices that started in 2014 have rendered the prevailing oil-driven economic model unsustainable. A key weakness has been the low levels of innovation and technological advancement in Bahrain, reflected in a variety of metrics, such as research and development expenditure or scientific output.
Bahrain's low innovation levels have several causes. Some are structural, such as the low population level; while others are policy-related: high levels of public sector hiring have undermined incentives for innovation in the labor market.
During the post-2014 period, in response to the sharp regression in oil prices, the government has accelerated its efforts at realizing higher levels of innovation. These include structural reforms that make the economy more competitive, the wooing of strategically-valuable classes of foreign direct investment (FDI), and the establishment of research clusters that build on Bahrain's comparative advantage.
* Omar Al-Ubaydli - Bahrain Center for Strategic, International and Energy Studies (Derasat), Manama, Bahrain. x This paper was presented in the 2018 bicentenary conference organized by the Institute of Oriental Studies, the Russian Academy of Sciences.
Given the long-term nature of efforts at boosting innovation, it is too early to definitively evaluate the success of Bahrain's policies. However, there are already indications that certain gaps need to be addressed if the kingdom is to realize its economic vision, especially those relating to labor market reforms and the role of migrant workers.
This paper is organized as follows. Section 2 is a brief introduction to the Bahrain economy. Section 3 analyzes the factors underlying the prevailing levels of innovation in Bahrain. Section 4 examines the government's response. Section 5 concludes.
2. An Overview of the Bahrain Economy
Bahrain's small size and population means that most scholars are unaware of the economy's properties. This section describes the general features of the economy, as well as the prevailing levels of innovation, which are the paper's primary focus. The primary source of the following data is Bahrain's 2018 human development report, Naumann et al. (2018).
2.1. General Features
Bahrain is an archipelago with a land area of 770km2, located off the east coast of Saudi Arabia. Its population is 1.6 million, and citizens represent a little under half of the population (see below). In 2017, GDP was around $35 billion, and GDP per capita was approximately $30,000 at purchasing power parity. It is ranked 43rd in the world in human development, falling in the highest category (very high human development). The currency, the Bahraini Dinar, is fixed against the US dollar.
At the start of the 20th century, the most important sector in the economy was pearl production. The Great Depression and the development of cultured pearls in Japan generated a secular contraction in this sector, which was followed by the discovery of oil deposits during the 1930s. Thereafter, the economy has been dependent upon oil. However, the daily production of approximately 190,000 barrels (40,000 from the single domestic oil field, and 150,000 from a shared offshore oil field with Saudi Arabia) is considerably lower than that of the other Gulf countries. Bahrain's oil reserves are historically low, too, but the 2018-dis-covery of an oil field containing 80 billion barrels has transformed its reserves. The new field remains undeveloped as feasibility assessments are ongoing.
Other important sectors in the economy are downstream petrochemicals, and a large aluminum production sector. Moreover, tourism makes an important contribution to the economy, being driven by Saudi Arabians crossing the King Fahad Causeway, which links the two countries. The financial sector is also significant, with Bahrain playing the role of a global hub in Islamic finance.
The labor market is dominated by migrant workers on guest worker visas, who represent approximately 75% of the labor force, and occupy positions at all levels of the skill ladder, including a large presence in unskilled jobs, such
as construction laboring, refuse collection, and entry-level retail jobs. While a majority of employed citizens are in the private sector, a significant percentage (approximately 35%) work in the public sector.
Oil income accrues to the government, and represents around 80% of public revenues. The are recirculated into the economy via a combination of historically high levels of public sector hiring, and expenditure on government projects, especially infrastructure. In 2016, according to the World Bank Logistics Performance Index, Bahrain's infrastructure was ranked 48th globally, while its information and communication technology (ICT) infrastructure is ranked 31st in the world according to the United Nations.
2.2. The Prevailing Levels of Innovation
Innovation at the economy level is a somewhat nebulous phenomenon, and it can be difficult to measure. Nevertheless, there is broad agreement in the scholarly literature on a variety of indicators, reflecting both the inputs and outputs of the innovation process (Smith, 2005). In the case of Bahrain, innovation data are very limited, which is itself symptomatic of some of the challenges that the kingdom faces in improving its levels of technological advancement.
2.3.1. Input Measures of Innovation
One of the leading indicators of innovation is the volume of resources that an economy dedicates to research and development. Figure 2.3.1.1 shows research and development expenditure as a percentage of GDP in 2014, the only year for which data is available for Bahrain.
Figure 2.3.1.1: R&D Expenditure as a % of GDP, 2014
Source: World Bank/UNESCO
World ^^^^^^^ Sub-Saharan Africa (2007) 0,6%
North America
2,2%
2,7%
Middle East and North Africa (2012)
0.9%
Latin America and Caribbean
0,8%
Europe and Central Asia East Asia and Pacific
1,9%
2,5%
Bahrain ■ 0,1%
0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0%
Bahrain's level was 0.1%, which is very low compared to the world average (2.2%), and compared to other regions; in fact, Bahrain's level is one sixth of the average of the lowest region (Sub-Saharan Africa).
A complementary measure is the number of researchers dedicated to research and development, adjusted for the population level. Figure 2.3.1.2 shows these data for Bahrain and other regions in the year 2014 (again, the only year for which data are available).
With 369 researchers in research and development per million, Bahrain remains significantly below the global average of 1,277, though the gap is not quite as large as it was using the data on research and development as a percentage of GDP.
Finally, over the course of the last 40 years, ICT has begun to play an important role in facilitating innovation, thereby accelerating economic growth (Jorgenson et al., 2008). For example, the proliferation of broadband internet connections massively enhances the ability of different innovation stakeholders - including the researchers themselves - to communicate, exchange ideas, and consequently to realize technological advancements (Czernich et al., 2011).
In the case of Bahrain, as mentioned above, there has been significant investment in ICT infrastructure. While this might not have directly resulted in dramatic improvements in innovation output, it has surely facilitated some of the innovation that has actually occurred. Next, we turn our attention to output-related measures of innovation.
2.3.2. Output Measures of Innovation
While a significant percentage of innovative activity occurs in the secret labs where the results are not disseminated in the academic literature, in general, research activity yields scientific and technical research papers. Figure 2.3.2.1 shows these data for Bahrain, the world, and North America, for the years 20052016, adjusted for population.
Figure 2.3.2.1: Scientific and Technical Research Papers per Million, 2005-2016
Source: World Bank/UNESCO
1 600
2005 2006 2007 200B 2009 2010 2011 2012 2013 2014 2015 2016 Bahrain »North America »World
The data have the following notable features. First, Bahrain is consistently below the world average. Second, Bahrain is massively behind the globally-leading region, North America, almost by a factor of nine in 2016. Third, the gap between Bahrain and the world average expands over the sample period (the absence of multi-year data in the innovation inputs section precludes temporal analysis).
A more tangible innovation output is patents and industrial designs. Figure 2.3.2.2 shows these data for Bahrain and the world for the period 2011-2016, adjusted for population.
Figure 2.3.2.2: Patents an d Industrial Designs.per Milton, 2011-
A similar picture emerges to that from the papers data: Bahrain is significantly below the world average, and while not necessarily growing, the gap is certainly not shrinking.
An additional point made in Naumann et al. (2019) is that the data on scientists, papers, and patents and industrial designs likely exaggerates Bahrain's performance in these domains, due to the importance of migrant workers to innovation activity in the Kingdom. Since the overwhelming majority of these workers (especially the researchers) reside on guest-worker contracts, and will depart Bahrain permanently at some point in the future, much of their knowledge will depart with them, leaving only a small innovation footprint in Bahrain. If data on homegrown innovation were available, it would likely paint an even worse picture in terms of innovation in Bahrain. A key contributing factor is the very limited volume of fulltime PhD programs in scientific fields available in Bahrain, which is in turn partially the result of the educational system's youth, which we discuss below.
3. Why Explains Bahrain's Low Levels of Innovation?
According to the above data, despite exhibiting high living standards according to a wide range of criteria, Bahrain has low levels of innovation, whether that is measured by inputs or outputs. This section explores the reasons, distinguishing between structural and policy factors.
3.1. Structural Factors
There are three main structural factors working against Bahrain's favor in the domain of innovation. The first is its small population. Unlike traditional, physical commodities, knowledge organically diffuses throughout the economy, meaning that the benefits of innovation accrue both to the innovator and to others in the economy. As a consequence, having a large population can contribute positively to innovation and technological advancement, as it increases the absolute number of high quality innovators whose innovation subsequently spread through the economy, to the benefit of all (Kremer, 1993). Thus, by having a small population, Bahrain will generate a small number of creative geniuses, and realize lower levels of innovation. While the experience of highly innovative, small population countries such as Iceland and Singapore means that a low population does not preclude a technologically dynamic economy, it remains a significant barrier.
The second structural factor is the small size of the aggregate economy. A lot of modern research and development is capital intensive, generating minimum scale requirements for the feasibility of the projects (Powell et al., 2015), and is a key reason why large firms invest more in research and development than do smaller ones (Shefer and Frenkel, 2005). As a result, market size is an enabling factor in innovation, as larger markets amplify the returns to innovation (Ace-moglu and Lin, 2004). This makes economic growth in general easier for larger economies (Howitt and Aghion, 1998). Thus, due to the small size of Bahrain's economy, the private sector has a lower incentive to engage in innovative activity.
The third factor is the relative youth of Bahrain's educational system. The year 2019 represents the educational system's centenary, while advanced economies
such as the UK and the USA have much older educational systems, including universities that are over 700 years old in the case of the UK. The quality of education is a key determinant of innovation capacity (Brunello et al., 2007), and thus the youth of Bahrain's educational system works as a restricting factor in the technology domain. Moreover, it is also one of the key reasons for the abundance of migrant workers in the labor force, as the existing educational system cannot deliver all of the skills required by the private sector.
In addition to Bahrain's small geographic size, underlying all of the above factors is its arid, desert climate, which makes non-nomadic life very difficult. While the presence of natural springs has facilitated the transition from nomadic to non-nomadic civilization, creating an agricultural surplus remains considerably more difficult than in the temperate regions of Europe and the Americas, thereby diminishing the rate of economic progress (Masters and McMillan, 2001). This is a key reason why desert economies in general struggle to realize higher living standards, and makes the high per capita incomes of the Gulf countries - including Bahrain - empirical outliers.
3.2. Policy Factors
While structural factors are a major cause of low innovation levels in Bahrain, government policy has also played a significant role. Cherif and Hasanov (2014) and Naumann et al. (2018) identify three main policies.
The first policy is the high levels of public sector hiring. After gaining their independence during the 1960s and 1970s, the Gulf countries began building modern civil services, necessitating the hiring of large numbers of citizens. At the same time, the government used public sector jobs as a rudimentary way of raising the living standards of citizens, as they involved high, guaranteed salaries, especially for those with limited skills (Naumann et al., 2018). As result, to this day, each of the Gulf countries exhibits higher levels of public sector hiring among nationals than in advanced economies that have similar per capita income levels (Finan et al., 2017).
A key property of public sector jobs is that it is difficult to measure the productivity of workers, because the work is often administrative in nature, such as a clerk in charge of renewing driving licenses; and because it does not generate conventional revenues, as in the case of a receptionist in an embassy (Finan et al., 2017). As a result, wages are compressed, and seniority and educational credentials play a large role in promotions than in regular private sector jobs, where demonstrated productivity is usually the primary criterion (Lazear and Shaw, 2007). Moreover, guidelines regarding the field of specialization in the educational qualifications are usually quite lax, due to the weaker observable relationship between human capital and productivity.
Given the large contribution of the public sector to hiring in Bahrain, these special properties of public sector jobs have important implications for the labor market. In terms of innovation, a key consequence is a distortion in human capital, characterized by underinvestment in the technical degrees that represent
a key input into technological advancement (Atkinson and Mayo, 2010; Naumann et al., 2018). Fields such as engineering, physics, and chemistry require higher levels of mental aptitude and student effort than do degrees in the social sciences, but public sector bylaws and salary tables do not recognize these differences, nor do they recognize the implied differences in worker productivity, due to the difficulty of measuring productivity. Therefore, in Bahrain, students will rationally exhibit a tendency to avoid the technical fields, hurting economy-level innovation in the process. Low levels of public sector hiring would help remedy this problem, but historically, the government has preferred high levels.
The second policy is the openness of the economy to migrant workers, which has two effects on the behavior of firms in the private sector (Cherif and Hasanov, 2014). By making unskilled labor very low in cost, and much cheaper than it is in other rich countries, firms become fixated on low-cost labor as a source of profit, at the expense of focusing on innovation. Further, migrant workers on guest-worker visas have contracts that are two years at a maximum, meaning that a company can easily adjust its payroll. In contrast, in many advanced economies, especially in the European Union, redundancies are difficult or sometimes even impossible, meaning that firms facing difficulties due to recessions are forced to increase efficiency to survive. This innovation incentive is much weaker in Bahrain due to the ease of hiring and dismissal of migrant workers.
The third policy is the government's leadership in the investment domain (Cherif and Hasanov, 2014). Major capital projects are typically spearheaded by the public sector, because oil revenues accrue to the government, affording it the requisite liquidity. The private sector therefore has the option of investing alongside the government, safe in the knowledge that such projects are likely to succeed as they have the government's backing. This significantly weakens the incentive to invest in the risky, innovative projects that drive economic growth. In principle, the government could lead the innovative investments instead; however, the public sector lacks the competition and profit-based motive to be as successful as the private sector typically is in this domain in an advanced economy.
4. Government Efforts at Boosting Innovation
None of the policies described in the previous section represent policy failures per se, as they are arguably effective policies when seen from the perspective of their primary goal. The fact that they encourage low levels of innovation should be seen as an unfortunate byproduct, rather than as a fundamental design flaw. Nevertheless, the weaknesses must be acknowledged, and appropriate countermeasures need to be deployed. This section explores the government's efforts in this regard.
4.1. The Economic Vision 2030: An Overview
The accession of King Hamad bin Isa Al Khalifa to the throne in 1999 led to the launch of a comprehensive series of modernizing reforms, covering economic, political, and social spheres. In 2008, the government launched the Economic
Vision 2030, a document that formalized the economic reforms that it was seeking to implement over the course of the subsequent two decades. The Vision's primary goal is to facilitate the diversification of Bahrain's economy, including a diminution of its dependence upon oil, and transforming innovation and technological progress into the main drivers of economic activity.
The Vision has three guiding principles: sustainability, competitiveness, and fairness, rendering it highly consistent with the paradigm associated with the United Nations (UN) Millennium Development Goals and the UN Sustainable Development Goals (SDGs). The Vision contained a series of goals, falling under three classes: the economy, government, and society.
The economic goals emphasized making productivity and skills the drivers of the economy, and on diversifying by focusing on existing high-potential sectors. All of these are associated with innovation playing a larger role in the economy.
The government goals focused on developing infrastructure; improving accountability, transparency, and the quality of government services; and diminishing fiscal dependence on oil revenues. This last goal is also strongly associated with improving levels of innovation.
The society goals emphasized comprehensive and equal access to high-quality education and health care, as well as social safety nets and a secure environment. Innovation does not play an important role in this set of goals.
A key theme is transforming the public sector from a driver to an enabler of the economy, by shifting from the provision of services to their regulation; and in its stead, developing a dynamic private sector. Again, enhancing the economy's ability to technologically advance is central to realizing this goal.
The Vision itself does not contain specific policies or action plans; that task is performed by the government action plans, which are a series of complementary documents designed to operationalize the Vision. The next section describes some of the most notable components.
4.2. The Economic Vision 2030: Operational Components
Before describing the Vision's implementation, it is worth noting that some of the policies actually predate the Vision, and are therefore technically not part of it. However, we include them as they adhere to the Vision's spirit, and are clearly antecedents of the Vision. The primary reference for what follows is Naumann et al. (2018).
One major theme in the Vision is liberalization, achieved through a mixture of partial privatizations and deregulation of previous state monopolies, building on the UK's largely successful trailblazing in this domain. Bahrain's biggest success story in this regard is the liberalization of the telecommunications sector, which has been a direct cause of the considerable improvement in the quality of ICT infrastructure (Naumann et al., 2018), as well as contributing to the diversification of the economy away from oil.
In particular, the government opened the market to two new entrants (a Kuwaiti firm, Zain; and a Saudi Arabian firm, Viva), resulting in the archetypal
improvements in services associated with higher levels of competition and consumer choice. Without these positive improvements, poor quality ICT infrastructure may well have transformed into a significant barrier to innovation growth in Bahrain.
Also on the input side, the government has contributed significant resources to improving the quality of education. One of the most important reforms has been the establishment of an independent authority to audit the performance of educational establishments (Abdulla, 2018). Due to the long-term nature of such reforms, it is far too early to assess their impact, but discussions with education-sector stakeholders indicate that there is an increased impetus to improve service quality as a result of these reforms (Naumann et al., 2018).
A parallel strategy to the direct stimulation of homegrown innovation activity has been the attraction of strategically-chosen FDI. This has the dual goal of importing innovation directly, and enhancing homegrown innovation via knowledge transfers. The leading example in this area is Amazon Web Services, which in 2017 chose Bahrain as its regional headquarters. Its arrival - as well as the government's commitment to transitioning all of its IT infrastructure to the cloud -has resulted in a massive training program for Bahrainis in cloud computing. In principle, the result will be ICT innovation, though again, it is too early to assess the impact.
In response to the challenge of achieving minimum efficient scale in a dynamic research sector, the government has wisely chosen to focus its efforts on sectors where Bahrain exhibits a comparative advantage. Accordingly, in 2018, Bahrain launched a financial technology cluster known as Bahrain FinTech Bay, seeking to build upon the kingdom's mature financial sector, and on its international reputation in the area of Islamic finance.
The government has also introduced policies that tackle the adverse effects of a bloated public sector. First, in 2018, as part of a fiscal balancing plan, it introduced a large, early-retirement scheme coupled with a restructuring of the public sector that permanently eliminates a large percentage of the existing jobs. The goal is for some of the high quality people currently working in the government to enter the private sector and launch their own businesses. In the short-run, the government hopes that some of these businesses will be directly innovative; in the long-run, it hopes that by downsizing the public sector, it can diminish some of the aforementioned adverse unintended consequences of the historically high levels of public sector hiring, such as distortions to educational investments, and the concomitant diminution of innovative capacity.
Second, a globally unique organization called "Tamkeen" (an Arabic word which translates to "enablement," or "empowerment"), and it has been assigned two goals: making Bahraini citizens (rather than migrant workers) the employee of choice for the private sector; and transforming the private sector into the main source of economic growth. In terms of innovation, Tamkeen plays a leading role in training prospective entrepreneurs, and in funding them, along with sister organizations such as the Bahrain Development Bank. Moreover, it also
addresses the long-standing distortions in educational investments made by citizens by systematically subsidizing the acquisition of skills in commercially-relevant areas. This has the dual effect of providing the private sector with some of the technical human capital inputs it needs to realize higher levels of education; and diminishing the demand for low-cost migrant workers, thereby decreasing its adverse effect on the incentives to innovate in the private sector.
4.3. Appraisal
The policies described above generally constitute sound steps in the right direction, and in certain cases, such as the liberalization of the telecommunications sector, they can be considered highly successful interventions. Nevertheless, as Naumann et al. (2018) show in detail, these policies are insufficient for reversing Bahrain's low levels of innovation, and additional steps are necessary. This section examines some of the prevailing weaknesses and proposes remedies. We consider three main areas.
First, there need to more significant changes made to the structure of incentives in the private sector. The aforementioned policies, along with others omitted for brevity (such as imposing fees on companies that hire migrant workers), have made hiring low-cost migrant labor less attractive that it was during the end of the 20th century. However, commercial entities remain fixated on the low-cost labor model, with its adverse consequences for innovation. Prospective entrepreneurs in Bahrain too often conceive of business plans that are based on importing a foreign-made commodity and selling it domestically via migrant workers, such as sales assistants or basic technicians. They are better described as "merchants" than "entrepreneurs", and until this rudimentary commercial model evolves into a version which involves substantial value-added from Bahrainis, innovation levels will continue to be low.
Note that the solution is not to simply introduce strict quotas on migrant workers. In fact, making large and abrupt changes to the availability of migrant workers can cause severe disruption to an economy that is predicated upon the abundance of low-cost foreign labor (Al-Ubaydli, 2015). Moreover, low-cost migrant workers confer significant downstream benefits upon the economy that are often hard to measure (Al-Ubaydli, 2015). Part of the problem is that the government's existing migrant worker policies are based primarily on the premise that migrant workers decrease the jobs available to citizens, or depress living standards for low-income Bahrainis. Instead, the policies need to focus on the issue of the effect of low-cost labor on innovation. We consider specific proposals below when we discuss knowledge transfer.
The second area for improvement is in the government's investment strategy, and its relationship with the private sector. As Cherif and Hasanov (2014) demonstrate, supplying the Bahraini private sector with liquidity and expecting it to organically make the investments that will propel the economy forward is not realistic, due to decades of simply following in the government's footsteps. In the long-run, the private sector will hopefully be mature enough; but in the
medium-term, the government must act as a strategic venture capitalist, and improve capacity in the private sector by increasing the level of partnership.
In particular, Cherif and Hasanov (2014) emphasize the need to invest in intelligently-selected sectors that exhibit growth and innovation potential, high linkages to other sectors, and knowledge spillovers to the rest of the economy. Historically, tradable goods sectors, such as manufacturing of electronic components, have performed this role in other economies. In the manufacturing domain, the Gulf governments have placed too much emphasis on investments in downstream petrochemicals, which are too mature and segregated from the rest of the economy to exhibit the innovation-boosting criteria cited by Cherif and Hasanov (2014).
As it happens, Bahrain's new oil field does offer a unique opportunity to transform petrochemical investments into a strategic source of innovation in the Bahrain economy. The deposit is offshore shale oil, and as of early 2019, there were no operational offshore shale oil fields in the world. The USA, which houses the most cutting-edge and innovative shale oil activity in the world, operates only terrestrial fields. Accordingly, as Bahrain examines the feasibility of its oil field, it has the opportunity to establish a globally unique research cluster in offshore shale oil. Here, the government must play a central role in providing the nascent cluster with the requisite support in terms of legislation, educational resources, and labor market reforms that ensure a steady supply of innovative, Bahraini engineers.
The final major area that requires attention is the prevailing disincentives for knowledge transfer from foreign specialists in the labor market. At present, foreigners working in Bahrain invariably secure work permits in the form of guest-worker visas; unlike the norm in OECD countries, there is no structured and automatic path to permanent residency and, eventually, citizenship, meaning that foreigners working in Bahrain can only continue to reside in the country as long as they have a job.
As Naumann et al. (2018) discuss, this undermines the incentives for knowledge transfer from foreign workers to Bahrainis, and actually creates disincentives: migrant workers fear that should they excel in capacity-building among Bahraini citizens, upon the expiry of their contracts, rather than seeing them renewed, the migrant workers will become victims of their own success: they will be replaced by the Bahrainis who have developed the requisite skills.
In OECD countries, skilled foreign workers do not face such fears, as they know that upon acquiring an initial work permit, within a matter of years, they can begin the process of securing permanent residency, and eventually citizenship, rendering them equal to any other citizen in the labor market.
Returning to the case of Bahrain, the result of these perverse incentives in the knowledge transfer domain is that skilled foreign workers may even actively impede knowledge transfer, as an act of self-preservation. And upon their eventual repatriation, they leave a hole that may only be filled by another migrant worker. This is especially disruptive to the process of innovation, which requires stability and breadth of knowledge transfer.
One potential solution is to emulate the Saudi Vision 2030, which contains plans for a system of permanent residency. Admittedly, the Saudi system is motivated by an effort to attract foreign investors, by making them feel more secure in their ability to monitor their investments. Nevertheless, it should be explicitly considered as a means of rehabilitating the system of knowledge transfer, with the ultimate goal of improving homegrown innovation capacity.
5. Conclusion
Historically, innovation levels in Bahrain have been significantly below the levels to which the Kingdom aspires, owing to a variety of persistent structural and policy factors. This has spurred the government into drafting a comprehensive strategic plan, known as the Economic Vision 2030. Many of the early policies, such as the liberalization of the telecommunications sector, have been resounding successes, and have made substantive contributions to Bahrain's ability to innovate and advance technologically.
Owing to their fundamentally long-run nature, many of the policies cannot be evaluated yet, especially those relating to the educational sector. However, some policies are either insufficient in their reach, or leave critical issues unresolved. At the start of 2019, the private sector's ability to innovate and drive the economy remains underdeveloped, and additional reforms to the labor market and to public sector are necessary to realize the ambitious targets set.
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