Between its parliamentary elections and the flotation of Mumtalakat, the kingdom of the two seas stands at a critical juncture.
A weekend that will shape Bahrain's future
Politics and business will run parallel courses during the next few weeks in the kingdom of Bahrain.
This coming weekend, parliamentary elections take place in an exercise widely regarded as the most ambitious attempt at liberal democracy by an Arab state.
At the same time Mumtalakat, the kingdom's sovereign wealth fund, will be showcasing its wares around the world in an equally ambitious corporate transaction: the US$540 million (Dh1.98 billion) stock market flotation of one of its biggest assets, the Aluminium Bahrain company (Alba).
The outcome of these two events will help determine the economic progress of Bahrain for years to come. "This is a country on the cutting edge of development in the region, with economic reform complementing political reform," says an adviser to the government. Business leaders in the Gulf and around the world will be looking closely at the results.
The elections come at a time of increased tension between the kingdom's Shia majority and its ruling Sunni minority, which has been reflected in street protests and disturbances, and the arrest of Shia activists.
This unrest is taking place against a wider backdrop of international tension between Iran, which has close historical and cultural ties to Bahrain, and its Arab neighbours in the rest of the Gulf.
Add in the fact that the country is a major military base for US forces operating in Iraq (the American 5th Fleet is based there) at a time of confrontation between the US and Iran over UN sanctions, and the global impact of events in Bahrain is clear.
Bahrain's experiment with western-style democracy has not been entirely without its problems. The 40-member chamber of deputies has split along Sunni-Shia lines, and found itself overruled by the upper house, the shura, which is dominated by the government and has the power to block legislation from the chamber.
One opposition candidate, Ebrahim Sharif of the National Democratic Action Society, said recently that "those who make the rules make sure that the rules cannot be changed. The government uses the shura to kill anything it does not like".
The government does not see it like that. "For all its limitations and imperfections, Bahrain runs under the rule of law," an adviser says. "The elections are run with judicial insight and open to judicial review."
The 10-year-old exercise in democracy, initiated by King Hamad bin Isa Al Khalifa as a step towards constitutional monarchy, has been accompanied by an economic development programme designed, like other Gulf states, to reduce the dependence on oil.
Under the Bahrain Economic Development Board, run by crown prince Sheikh Salman bin Hamad Al Khalifa, the country has attempted to diversify the economy away from the energy sector, as mapped out in the Vision 2030 strategy.
Mumtalakat was set up in 2006 as the principle agency for this strategy. It holds all the kingdom's non-oil assets in a portfolio that includes transportation, aviation, property, telecommunications and financial assets, in addition to Alba.
"The mission is to grow the wealth of Bahrainis," says Talal al Zain, the chief executive of Mumtalakat. "Many want to see evidence now that their prosperity is rising, and we have a threefold strategy to do this: we must enhance the value of portfolio companies; divest where it's appropriate and sensible; and diversify investments, both geographically and by asset class.
"The crown prince believes the private sector is the machine that will drive economic growth."
The Mumtalakat assets are concentrated in Bahrain, and mostly take the form of private equity investments in the kingdom's big industrial sectors. "We have to move into more liquid investments," says Mr al Zain.
As a sovereign wealth fund, Mumtalakat has some $10bn of assets and was recently rated alongside Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, as the two most transparent sovereign wealth funds in the Gulf region.
"We believe transparency and good corporate governance are essential," says Mr al Zain. "The idea is to involve more of the private sector in high corporate governance standards."
After the Alba flotation, he will turn his attention to other parts of the Mumtalakat portfolio with an eye to listing on regional and global stock exchanges. He says Gulf Air, the Bahrain airline, could be "an attractive proposition, which we expect to break even by 2013".
Mr al Zain believes the kingdom's moves towards political democracy complements the strategy of greater corporate transparency. "International investors will want transparency and democracy," he says.
"There are issues, of course, but overall democracy has increased stability in the country."