The smallest of the Persian Gulf states, Bahrain has long since been eclipsed by its larger neighbours. But it does have its appeal, says Francesca Syz

I’ve just been to Dubai and everything smells of money there,’ says Fatima Alireza, owner of La Fontaine Centre of Contemporary Art. The centre is the first private museum in the Kingdom of Bahrain, which now has the fastest growing economy in the Middle East, according to the City of London’s Global Financial Centres Index. ‘Of course we need money to survive, but there is no need to smell of it.’

Alireza has touched upon one of the many differences between Bahrain and neighbours like Saudi Arabia and Dubai. While in other parts of the region there are only very rich and very poor, Bahrain has a substantial middle class. Its people are famously hospitable and it offers a more liberal, sophisticated version of the Middle East.

Alireza’s father launched Bahrain’s National Bank and was the first person to import kerosene from southern Iran, providing many people with light in their homes for the first time. ‘He would talk equally to a beggar and a king,’ says Alireza. ‘This is the thing about the Bahraini people – they have great spirits and big hearts.’

A kingdom of 33 islands between Saudi Arabia’s east coast and the Qatar Peninsula, Bahrain is the smallest of the independent Persian Gulf states. It was the first country in the Gulf to exploit its ‘liquid gold’ so has been doing business with the outside world for longer than many of its neighbours. But then Dubai overtook and development in Bahrain came skidding to a halt.

Today, things in Bahrain have picked up, banking is big business and commercial progress is once more gaining momentum, but a respect for local history and an old world charm – rare in this part of the world – remains.

Between the high-rise corporate hotels are tangles of winding alleys lined with ancient houses, sprawling souks and coffee houses that billow shisha smoke.

Of recent developments, two are particularly significant. In 2004, Bahrain hosted the first ever Middle Eastern leg of the Grand Prix in a magnificent new $150m stadium situated on the site of an old camel farm in the middle of the desert. That the opportunity was not bagged by Dubai was a surprise to many but signalled the ‘return’ of Bahrain.

Then there was the opening of the Banyan Tree Desert Spa & Resort Al Areen in 2007, just a five-minute drive from the stadium – an all-singing, all dancing, all-suite luxury spa resort and the group’s first Middle Eastern project. ‘Its arrival has certainly contributed to Bahrain’s image change,’ says Sami Ayari, the general manager.

A monumental project within Al Areen – a $1 billion new desert community currently under construction – the spa resort resembles a spectacular royal Arabian compound, with Moorish arches, cloistered corridors and clusters of huge, sand-coloured villas set amid landscaped gardens and courtyards with pools and water features. With so much opulence, the resort is just the right side of brash with an understated elegance unique in the Middle East.

At the foot of the property is Al Areen Wildlife Park, a lush little oasis that is home to the rare Arabian oryx and almost 300 species of bird. Beyond that, you can just catch a glimpse of the twinkling Arabian Gulf.

For real local flavour, join the throngs of locals heading to the Sakhir race course to watch prized Arabian horses competing in nail-biting races, take a free tour of the great mosque of al-Fatih and head to the dizzying maze of shops and stalls at the Manama souk.

Close by is Alireza’s La Fontaine Centre of Contemporary Art, housed in what was once the family home – a strikingly beautiful 19th-century monument fusing European chateau with ancient Gulf Islamic architecture. Much more than just an art gallery, it also incorporates an award-winning restaurant, spa, Pilates and dance studios and offers an extensive programme of outdoor concerts in the fractionally cooler months between October and May.

Stop by its earthy, minimalist fine-dining restaurant any day of the week and you may well see local and Saudi women socialising, enjoying themselves and even drinking wine – a wholly unusual site in the Middle East. Unsurprisingly, it has a sophisticated, loyal following and is a social hub to those in the know.

Alireza is definitely a ‘progressive’, showcasing art so original that international galleries in Paris and New York are taking note – but like many others, she remains passionate about preserving her Bahraini heritage.

Where to stay

Five nights at Banyan Tree Desert Spa and Resort Al Areen, including economy class flights on Gulf Air and private transfers costs from £2,760 ($5,400) per person with Tropical Locations www.tropical-locations.com