Bahrain could lead the way in stimulating growth across the region by introducing taxation and offering expats residency.

The region's economy has come out of the slowdown and will now post annual growth of around 4.5 per cent, well ahead of the West and at least as good as Asia.

But the region needs to overcome structural impediments to achieve even greater growth, according to HSBC Middle East economist Simon Williams.

He argues that introducing more taxation could stimulate more government spending while offering residency would see expats spend more in the region rather than remitting cash, or saving for when they return home.

'Because Bahrain is not as cosseted as the oil exporting GCC states its policy makers' understanding of competitiveness exceeds its neighbours,' he said. 'It is more forward looking and could lead the way in the removal of the impediments that prevent even greater growth.'

He said that GCC tax currently contributed only 2.5 per cent to gross domestic product across the region compared with 10 per cent in Singapore, 20 per cent in Lebanon and 40 per cent in the UK.-TradeArabia News Service