Bahrain was the first country on the Arabian side of the Persian Gulf to discover oil in 1932. Oil wealth dramatically improved education and health care, but the country's oil reserves are relatively limited in comparison to most of its neighbors. Bahrain has therefore developed a more diversified economy than most of the Gulf States.
During the 1960s and 1970s, Bahrain emerged as the principal financial and communications center of the Gulf region. Oil and gas, however, still play a dominant role in the country's economy, providing about half of the government's income and accounting for two-thirds of exports. An undersea pipeline pumps oil from Saudi Arabia to Bahrain's large refinery, Sitrah. An estimated 70 percent of Bahrain's oil revenues come from the sale of products refined from crude oil extracted from an oilfield that is shared with Saudi Arabia, but from which Bahrain takes all the income. In effect, therefore, Saudi Arabia supplies Bahrain with financial aid. In addition, it enjoys grants from Abu Dhabi and Kuwait, which contribute considerably to the government budget. Most of the budget (60 percent) is used to pay salaries to Bahrainis and foreigners working in the public sector .
Until very recently, wholly or partially government-owned enterprises dominated much of the Bahrainieconomy,