Notwithstanding potential geo-political implications, the expansion of the US naval base in Bahrain should help the country address critical economic challenges.

At stake is the announcement of the start of work on a 70-acre plot of land for use by the US military in Bahrain.

The site used to serve as Bahrain's only port in Manama, but it was abandoned after a modern port was set up north of the capital Manama. The area is adjacent to existing American facilities

Bahrain serves as the home of the Fifth Fleet.

American military presence in Bahrain goes back to 1946, years prior to the country's independence from Britain in 1971.

Benefits

With the new leased area, the US pays some $9.6 million (Dh35 million) in annual rental fees to Bahrain. However, this is a small amount compared to total economic benefits that Bahrain enjoys from the US military presence.

The US has allocated some $580 million over a five-year period for erecting numerous facilities including utilities and telecommunication capabilities.

In fact, work is already under way, with the winner being announced of the contract worth $28 million to carry out numerous jobs including erecting camping units for US military personnel.

The local economy stands to benefit from the $580 million fund allocation.

It was suggested that some $100 million will go to Bahraini companies with an additional $150 million allocated for the local purchase of construction materials.

The spending plan is uniquely essential for Bahraini authorities while addressing economic challenges including creating job opportunities for locals.

Unfortunately, Bahrain suffers from an alarming unemployment problem, officially put at around 4 per cent, but considerably higher by other sources.

Growth

Still, another benefit of expanded US military spending relates to generating added economic growth.

The amount of $580 million intended is sizeable for a small economy like that of Bahrain.

It emerged last week that actual governmental spending in fiscal year 2009 amounted to $5.7 billion.

Like elsewhere in Gulf Cooperation Council (GCC) countries, state spending in Bahrain representing a whopping 25 per cent of the gross domestic product (GDP).

Undoubtedly, the injection of $580 million would reflect positively on GDP growth rate.

Bahrain's economy needs to grow by more than 5 per cent annually in real terms in order to address different challenges including population growth.

Bahrain's population size stood at 0.89 million in 2005 increasing to 1.18 million in 2010.

According to figures, the US naval base contributes some $150 million to Bahrain's economy.

Again, this is sizeable noting Bahrain's relatively small GDP of $21.8 billion by current terms and $12.5 billion in constant figures. Of the amount, $62 million is spent on housing, $28 million on other living expenses, $21 million on commercial activities, $11 million on hotels, another $11 million on human resources, $10 million in the form of operating expenses, $4 million on goods purchased on the base and $3 million on other matters including promotions.

Yet, the figure does not include personal expenses made by US military personnel on matters such as food and entertainment.

Some 3,500 personnel and family dependents are assigned to the base.

Multiplier effect

Yet, full economic impact of the Fifth Fleet should be much stronger by taking into account the multiplier effect.

For every dollar spent in the economy, it creates $4 as funds exchange hands.

The American naval base is credited for helping turn Juffair into a lively place in the country.

Located in the eastern part of the capital city of Manama, Juffair is regarded as one of the most dynamic regions of Bahrain even during late hours with its many restaurants, cafés, hotels and car rental firms.

Expansion of US military presence would only reinforce Juffair's position in Bahrain's economy.

 

The writer is a Member of Parliament in Bahrain.