Raise Economic Growth, Do Not Kill It

High economic growth also leads to additional tax income for government spending, which the government can use to develop the economy. This expansion can also be used to reduce the budget deficit.

In addition, as a country's population grows, it requires growth to maintain its standard of living and wealth.

Economic growth also helps improve living standards and reduce poverty, but these improvements cannot happen without economic development. Economic growth alone cannot eliminate poverty by itself.

The six most important economic factors

1 Natural resources

Discovering more natural resources, such as oil or mineral deposits, may boost economic growth because it changes or increases the country's production possibilities curve. Other resources include land, water, natural gas and forests, if present, and others.

Realistically, it is hard, if not impossible, to increase the amount of natural resources in a country. Countries must take care to balance supply and demand for scarce natural resources to avoid depleting them. Better land management may improve land quality and contribute to economic growth. For example, the economies of Saudi Arabia and the Kingdom of Bahrain historically depended on their oil reserves and products.

2 Physical capital or infrastructure

Increased investment in physical capital, such as factories, machinery and roads, will reduce the cost of economic activity. Better factories and machinery are more productive than manual labor. This higher productivity can lead to increased output. For example, a strong highway system can reduce inefficiencies in moving raw materials or goods across the country, which may increase gross domestic product.

3 Population or labor

A growing population means more workers or employees are available, which means a larger workforce. One downside of a large population is that it can lead to a higher unemployment rate.

4 Human capital

Increased investment in human capital can improve the quality of the workforce. This increase in quality will lead to improvements in skills, abilities and training. A skilled workforce has a large impact on growth because skilled workers are more productive. For example, investing in students of science, technology, engineering and mathematics, or supporting computer programming academies and institutes, will increase the availability of workers for higher-skilled jobs that pay more than investing in blue-collar jobs.

5 Technology

Another influential factor is improved technology. Technology can increase productivity at the same levels of labor, thereby accelerating growth and development. This increase means factories can be more productive at lower cost. Technology is likely to lead to sustainable growth in the long term.

6 Commercial and economic law

An institutional framework that regulates economic activity, such as rules and laws. There is no specific set of institutions that promotes growth.

Types of economic growth

There are four main types of economic growth

Growth driven by business cycles: boom and bust

If economic growth is high-speed and inflated, the level of growth becomes unsustainable, which may lead to a recession like the one we saw in 2008 and, to a degree, what we saw before the Covid-19 pandemic. However, this type of growth is typical of the business cycle.

Export-driven growth

For example, the Japanese and Chinese economies have seen, and continue to see, export-based growth thanks to high current account surpluses. This is because they have far more exports than imports.

Consumer-driven growth

The American economy depends on consumer spending to stimulate economic growth. As a result, they also have a higher current account deficit.

Commodity-export-driven growth

These economies rely on their natural resources such as oil or iron ore. For example, Saudi Arabia had a highly prosperous economy thanks to its oil exports. However, this caused a problem when commodity prices fell and there were no other industries to balance it, which led to new strategies to support and advance the Saudi economy.

Having learned the types of economic growth, we must also learn the costs of economic growth, as there are two problems associated with it.

First, the problem of environmental costs: economic growth is often accompanied by pollution and other negative externalities of increased production. Economists usually link the negative impact on the environment to rapid growth in developing economies.

Second, rising income inequality: growth often leads to increased income disparity. Those who do not participate in, or are not connected to, the sector of the economy generating growth are left behind, and rural residents usually suffer the most.

The global economy and the Covid-19 pandemic

The effects of this "killer" have spread, and may spread further, across countries as highly interconnected global production networks were severed and consuming countries began to groan from the absence, scarcity or high cost of key supplies.

The measures taken by most countries around the world to contain the Covid-19 pandemic have severe and far-reaching consequences for global economies. The situation affects almost every organization, directly or indirectly, regardless of whether it serves local communities and the local economy or the global economy.

Countries have different capacities to absorb the shock and confront it with fiscal policy. It is not only the nature of the pandemic that is global, since it does not stop at borders; the tight integration of the global economy makes the economic fallout a global challenge to solve.

What we are suffering from in this crisis is a lack of clarity or vision of what comes next. But the numbers do not lie, and the COVID-19 pandemic will cause more pain to emerging markets than to advanced economies. Today's response takes place mainly at the national level and, to some extent, the regional level, with a symbolic international response through scattered aid shipments for each local economy, according to the financial capacity of countries and their emergency vehicles.

The Kingdom of Bahrain and the Covid-19 pandemic

Multilateralism is the best hope for avoiding a long-term local depression. The state should expand its work with local organizations, existing financial institutions and business owners, especially those with scientific and practical competence and diverse experience, and come up with bold financial mechanisms to help our markets and our local economy.

On the other hand, productivity is output produced given the inputs used, such as hired labor, capital and materials. It describes how efficient a producer or service provider is at combining these inputs to deliver products or services. Critically, productivity can drive economic growth and ensure that companies survive and expand.

But while the productivity slowdown has put a brake on many advanced economies since the 2008 financial crisis, including Bahrain, which some would rather not admit, productivity is almost certainly being made worse by the COVID-19 pandemic.

At the same time, the sharp drop in demand has made companies less willing to invest in innovation and new ideas that might improve productivity. Again, COVID-19 may pose greater challenges, as companies are likely to invest less in research and development (R&D) than usual because of uncertainty and financial pressure.

The question is: what is our position on this? We say that technology, innovation and skills are the core of advancing the economy.

All of us have viewpoints that are sometimes right and sometimes wrong, and this is healthy given the knowledge and studies we have, how we work through matters, and how we connect what is happening around us with our conclusions about the outcomes.

How do we build and raise the economy, not kill it

Everyone continues to track the evolution of the core issues behind the decisions of business owners, executives and everyone who is a decision-maker at present, including reopening businesses and return-to-work strategies. Information changes and appears differently every day. Everyone keeps monitoring the pulse of change even as uncertainty continues about what is coming, near or far.

Once the dust settles and the pandemic is over (we hope sooner rather than later), it will be best for the economic powers in our beloved country to focus on more than national economic recovery. Local recovery will not take the ideal V shape without the right rescue mechanisms for our emerging markets. Without a strong response to the needs of businesses and enterprises, local economic recovery may simply stall, and some startups may not recover at all, so replacing them is the best solution.

So what must we do?!

Cultivate a culture of productivity

How can business leaders and business development professionals cultivate a real workplace culture that inspires diversity and inclusion, rather than just ticking a box without clearly seeing the content, its surroundings, its benefits and its gambles?! There is a lot of "learned helplessness" and a lot of "confusion".

In my view, there is a lot of hope for the Bahraini economy. In recent years, skills have improved at every skill level and are expected to keep doing so. High skills are already relatively abundant: according to figures provided to me by some of my personal sources, 46% of adults aged 25 to 50 have some form of higher education. Meanwhile, most university students are enrolled in science, technology, engineering and mathematics (STEM) subjects, so we see clear interest on this side. It remains for us to integrate these skills into the market and employ them.

Productivity is driven by technology, but it requires the right level of skills, deployed when and where needed to be effective. In Bahrain, growth in this new environment is still hampered by the difficulty of enabling local skills to engage in work, and by a lack of proper matching in the workplace.

There is a long way to go before maintaining a healthy economic balance. Recently, I personally ran a quick skills survey of more than 200 employees and found that only one in ten works in the field of his study or specialization, in which he is skilled. This reflects the absence of the effective productivity needed to raise the level of successful institutions that add to the local economy rather than being a burden on it.

At the same time, I found that three in every twenty employers and jobs suffer from "overskilling", where employees are overqualified with little use for their skills. This is a clear waste of resources and a missed opportunity for productivity growth.

As for the rest, most work in fields unrelated to their studies or personal skills. As they say, "this is what was available to us, what can we do?!"

But while skills gaps are a core part of the productivity problem, current efforts to address this tend to fall short, and this is what I personally see in the rising proportion of foreign labor in non-labor jobs. That is because skill levels are often measured by formal theoretical and vocational educational attainment. While most people finish their education in their early twenties, they can, and should, continue acquiring skills throughout their lives, especially if their workplace provides training opportunities. In fact, the state encourages lifelong learning and better use of skills, which I infer from the training offers and support provided by the Ministry of Labour and Tamkeen. Here we can say that the state is striving to promote growth, productivity, profits and the employment of local staff. Future research should reflect this, by focusing on levels of training and skills rather than education among the workforce.

Our wise leadership and esteemed government always strive, and we thank them, to find fundamental solutions that revive the local economy and revitalize assistance to local institutions and businesses better than it is now.

Tamkeen: a painkiller is not a cure

Through its business continuity support program, and in light of the royal directives of His Majesty King Hamad bin Isa Al Khalifa, the beloved King of the country, may God protect him, Tamkeen is working to unify efforts within the continuing national effort to confront the repercussions of the global and local spread of Covid-19 and its economic impact, by providing financial support to small and micro enterprises to help them cover their operating expenses to ensure their survival and continuity. But this is not enough! It does not mean those institutions will remain and get through this ordeal and what comes after. Millions are spent and we stay in place, and what has been spent will not come back.

Alongside its business continuity support program, Tamkeen should reopen and continue its services for the business development program, which was designed to provide financial grants to help enterprises in the Kingdom of Bahrain grow and develop, by providing 50 percent grants spent on the cost of approved materials, services, organization, marketing, consulting and most of what increases work productivity for the beneficiary institutions, and it can reach 80 percent if the institution can achieve the set growth indicators by the end of the agreed period. In this way the wheel of development keeps turning, and institutions can add to the economy rather than being a burden on it.

Encourage entrepreneurship and small and medium enterprises

Contributing to local economic development also means providing the communities around us with the means to shape and manage their development independently and on the basis of their own priorities. That is why our efforts should focus on developing the industrial base and small and medium enterprises.

Further strengthen the presence of local labor and employees

To contribute to economic development responsibly, it is important that institutions and businesses, especially large ones, take part in efforts to hire local staff as a responsible partnership in economic development, and provide guidance and support to partner companies in economic development to preserve local jobs, thereby helping strengthen the economic and industrial fabric of the local labor market. It is also necessary to work closely with major companies on plans to replace foreign labor with national staff as far as possible, including economic development organizations and chambers of commerce and industry.

Contribution of large local companies to economic development efforts. Large companies should be involved in financing the country's infrastructure projects and projects for safety, health, climate, the environment and joint development, in order to work in a sustainable, active and positive way and reduce the burden on the state treasury.

Tax cuts

Ideally, consumers spend part of this money at different companies, which increases company revenues, cash flows and profits. Having more money means companies have the resources to raise capital, improve technology, grow and expand. All of these actions increase productivity, which grows the economy. Proponents argue that tax cuts allow consumers to stimulate the economy themselves by increasing spending and buying. Tax cuts are designed to put more money back into consumers' pockets.

Stimulating the economy by lifting restrictions

Deregulation means easing the rules and regulations imposed on an industry or business, not increasing them. It has become a focus of the economy in the Kingdom of Bahrain at present. Proponents of deregulation argue that strict regulations restrict businesses and prevent them from growing and operating at full capacity. This in turn slows production and employment, hindering GDP growth. However, economists who favor regulation blame regulation and the lack of government oversight for the many economic bubbles.

Using infrastructure to stimulate economic growth

Infrastructure spending happens when the government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. Infrastructure includes roads, bridges, ports and sewage systems. Economists who favor infrastructure spending as an economic stimulus argue that having first-class infrastructure increases productivity by enabling companies to operate as efficiently as possible. For example, when roads and bridges are plentiful and in working order, trucks spend less time in traffic and do not have to take roundabout routes.

In addition, infrastructure spending creates jobs as hiring happens continuously. It is also able to generate new economic growth. For example, building a new highway may lead to other investments, such as gas stations and retail shops that open their doors to beneficiaries. There will therefore be continuous supply and demand.

Reconsidering the flexible work permit

This is the permit issued by the Labour Market Regulatory Authority, which gives its foreign holder the freedom to reside in the Kingdom of Bahrain and work in any non-specialized job without a sponsor for one or two years, and the holder can work for his own account.

Personally, I do not see a problem with this permit: the benefits of issuing work permits are fully met, and we also need foreign labor to carry out work that is not available among local national staff. By law, the flexible permit holder can move between jobs whenever he wishes, according to the rules of agreement with the other parties he has contracted with.

But issuing the work permit gives its holder an "open door" to practice commercial activities without any restriction or official record of those activities. This means the Labour Market Regulatory Authority is fighting local and national small and micro enterprises, without any concern on its part.

If it is important to keep issuing flexible work permits (as a lean concession), they should be made in two types:

The first type

A flexible work permit whose holder can (only) move between jobs and institutions according to the set law. Heavy financial penalties should be placed on anyone who breaks the law.

The second type

A flexible work permit whose holder can (only) practice his work for his own account, provided he obtains an official commercial registration and record, and the terms and conditions set by the Ministry of Commerce apply to him.

This sets a correct and healthy equation for building a healthy institutional economy. Competition does no harm; without competition, there will be no means of strengthening institutions, and therefore no direct strengthening of the local economy and no contribution to building it.

Key takeaways and the bottom line

Economic growth is often driven by consumer spending and business investment. Through tax cuts, buying and selling become larger and continuous and spending is boosted. Economic and trade deregulation eases the rules and fees imposed on companies, and it has been credited with creating growth, but it can also lead to excessive risk. Infrastructure spending is designed to create construction jobs and raise productivity by enabling companies to participate and operate more efficiently. Tamkeen supports institutional advancement and development through its two programs, for continuity and for development at the same time. We also hope the Labour Market Regulatory Authority will set correct and healthy controls for issuing flexible work permits.

Economic development is an investment, not a cost. Both the private business sector and the government play important roles in economic development. Businesspeople organize human, financial, physical and natural resources to create marketable goods and services that make a profit. The government provides the infrastructure, incentives and services that support business, which in turn produces jobs and revenue.

We may have heard that economic developers do only three things: attract new businesses to an area, help retain and expand existing businesses, and create new businesses.

But it is not as easy as it looks. A community's success depends on whether it is better prepared, more strategically skilled and more steadfast.

Our economy will not flourish while we depend only on government funding and aid! We must keep working and investing in every aspect of our businesses to avoid closing them.

You also have responsibilities as an owner, trader, manager and decision-maker. With or without continuing government support, you carry the first and last responsibility for your business's success or failure.

Here are some tips that owners and leaders of medium, small and micro enterprises can follow to increase their ability to build and grow our economy:

• Leadership leads local economic development and builds the business climate. Your organization's leadership needs to make clear that economic development is a priority. You must have a clear strategy. Set a plan, a roadmap and a practical program that shows where you want to go, and involve your employees and your community in the process.
• Pass a decision adopting this strategy as a primary policy. Your organization must know that you are serious and committed to your strategy in the long term. Creating and implementing an effective economic development program takes a long time, so you must not tire; work hard.
• Fund your strategy and program. Invest in your program with the intent of achieving financial returns.
• Choose staff and professionals carefully. Volunteers are wonderful, but they are not a substitute for paid, committed staff assigned to implement the economic development strategy you set.
• Communicate and cooperate with others. Create partnerships with key stakeholders, such as workforce investment boards, companies you depend on, and community colleges, so you do not try to do it alone.
• Retention equals attraction. Taking care of the businesses you already own will show you that your community is an attractive place for companies.
• Customer service is essential. Your ability to deliver your product and goods quickly and with quality is very important. Continuously measure your customer service and strive to develop it.
• Results matter. Economic development may be a long-term process, but you must define your short-term results and celebrate them with your employees.

Measure your success: define how you will measure your efforts, then track your performance

Tell the community about your success. It is not enough to know that you are reaching or have reached your goals; you must share this success with patrons, customers, suppliers and companies so they can celebrate and share the vision with you.

There are no overnight sensations in economic development. Lasting, future-oriented economic development requires a commitment to building an organization the right way and creating a product that can compete with the best, locally, nationally and globally. Successful economic development organizations have consistent goals, objectives and funding arrangements, and long-term staff commitment.

Think outside the box, not inside it. Do not be shy about asking for advice from specialists, for they have eyes that see more than you see.

Make material, financial and moral sacrifices to win. You surely know that Apple, and its late leader Steve Jobs, is one of the biggest American manufacturers and developers of mobile phone and computer technology, and indeed the most successful technology company in the world.

Apple's value exceeds 1.3 trillion US dollars, making it the biggest competitor of Microsoft and its founder Bill Gates, who was the richest businessman for many years. Who among us has not heard of him?

But do you know the secret of Apple's success? Specifically, in 1997, Apple faced financial problems that pushed it to the brink of bankruptcy. At that point Bill Gates intervened and rescued it, and Steve Jobs with it, with a personal investment of 150 million US dollars. In addition, Microsoft provided its Office software on Mac computers for 5 years, while Apple agreed to make Internet Explorer the main web browser on Macs, among other agreements.

Only then did Steve Jobs say his famous line: we have to let go of the notion that for Apple to win, Microsoft has to lose.

Remember that the more Apple advances and the more its value and profits grow, the more Bill Gates's coffers fill with money, since he holds preferred, not ordinary, shares. He is also known as the savior of Apple from bankruptcy, and Microsoft appeared as the white knight who saved its weak competitor from death.

Let us learn that Apple is more valuable than Microsoft, and Bill Gates is richer than Steve Jobs.

You must sacrifice, and be wise

While you work to build a better economy for your institution, I am here to support you and advise you, to work with you hand in hand, to help you find solutions to your problems, and to contribute to providing the resources needed to support your efforts.

We want to raise economic growth, not kill it.