How Bahrain uses its small size—and being Saudi Arabia’s neighbor—to its advantage 

Bahrain has just 1.5 million people. That’s smaller than many cities around the world, much less other countries. In terms of area, the Persian Gulf island nation is only about 300 square miles.

But its size is not a disadvantage, according to Noor Al Khulaif, Bahrain’s minister of sustainable development.

“The way we see it is, Bahrain is the testing ground for countries in the region,” Al Khulaif said at Fortune’s Most Powerful Women summit in neighboring Saudi Arabia last week.

Companies keen on doing business in the Gulf Cooperation Council (GCC)—which includes Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman—use Bahrain for this purpose.

You can “come and test your idea on a smaller scale, and if it goes wrong, so what, it’s 1.5 million people—it didn’t really go wrong,” she said. But if it succeeds, you gain confidence about scaling it up across the region, she noted. “We see Bahrain as the gateway to the GCC.” 

Al Khulaif, who also serves as CEO of the Bahrain Economic Development Board as well, said the small size also allows for tight cooperation. 

“We don’t really talk as government, private sector, and society,” she said. “There’s a team Bahrain ethos in the country, and we do this collectively.” 

That helps explain how Bahrain has transformed its economy beyond oil so effectively. 

“For us, oil is not even the biggest sector in our economy, and hasn’t been for the past almost two years now, and that’s the result of a journey that stretches over decades,” she said.

Instead financial services is the biggest sector, with fintech being a big growth area, she said. Manufacturing, logistics, tourism, and technology are also key sectors.

Bahrain has long had close economic ties with Saudi Arabia and has learned to complement its much larger neighbor, to which it is connected via a causeway.

“We see ourselves as the service center to Saudi,” Al Khulaif said.

If Saudi Arabia is developing manufacturing, for example, Bahrain will try to offer support functions for that, such as by being a back office, she said: “Our economy and the Saudi economy have been interconnected for many, many years, and we see ourselves as an integral part of the GCC economy.” 

This story was originally featured on Fortune.com