Big problem, obvious solution.
The Problem: We have a government that was afraid of getting pushed off the rocker for more than 30 years. Rather than investing in infrastructure, capital markets, labor market, and natural resources; it chose to buy bigger guns, hire more policemen from different countries, and smooched off money for security in case - god forbid- something happened.
The Solution: So the oil business (bapco), ALBA (aluminium), Batelco (telecommunications), Gulf Air (aviation), NBB, the sea ports, and pretty much most of the "private" sector is owned and run by the government. Since we dont have taxes in Bahrain (direct distribution of wealth,) why don't they cut out some government expenditures (like overstaffed police, fat government contracts, entities we dont really need like the ministry of "information," and sending paychecks to some folks just because they belong to a certain clan.) Its not as easy as I make it look. Now you're asking, how is the transition period? Here is the trick. Since all the money is still funneled through the government, the EDB or any other capable agency can launch ventures. Not necessarily profit maximizing, like real estate thats apparently selling like hot cake right now, but long term stability and growth projects. Something like the International Circuit or ALBA. The government's capital reserve can serve as an incubator until they start picking up, and then offered for public ownership by listing (selling) shares for people like you and me, for a PROFIT!! We own more of Alba and Bapco; they have extra money to re-invest in other projects and infrastructure to sell off, and more people are hired to keep these projects going.
By then no one will need to hire forces to beat up the unemployed, because they will be in a factory somewhere rather than throwing stuff at the parliment.