Discovering Bahrain’s economy

A series of articles looking at different aspects of the Bahraini economy: What is Bahrain’s business model built on? How is Bahrain’s economy evolving? What are the principle opportunities in Bahrain’s economy?

There are multiple reasons why foreign businesses and investors would be wise to focus on Bahrain. The Kingdom has gone to great lengths to cultivate a business-friendly environment; overheads are significantly lower than in neighbouring states; we have a rapidly expanding private sector; and Bahrain has been consistently rated as the favourite country in the world by expat workers. It is no surprise that Bahrain is assessed to be the most open economy in the region, as well as one of the most attractive economies worldwide. Here we look at the various factors which make Bahrain such an attractive environment for foreign investment.


Ease of doing business

Over the past two years a dizzying range of initiatives have made it increasingly easy for foreign companies to open businesses and make high return on their investments in Bahrain:

In 2016, the Crown Prince unveiled the Sijilat Commercial Registration Portal, which consolidates Bahrain’s position as the fastest place in the Gulf region to start a business. The Sijilat portal is aimed at foreign investors and businesses wanting to gain a foothold in Bahrain. Sijilat eliminates the need for paperwork altogether and integrates all relevant government organizations’ processes under one system. The process allows businesses to complete all the registration procedures for becoming licensed to operate in Bahrain within just a matter of hours.

The 2016 Investment Limited Partnership Law made Bahrain the first country in the GCC which allowed investors to establish nationwide limited partnerships. In 2017 a new Real Estate Law was passed for standards of regulation in the industry, ensuring greater protection for all investors. More recently, amendments to the Commercial Companies Law have been introduced to Parliament which confer additional protection for minority shareholders’ rights, strengthening their corporate governance.

Bahrain now allows 100% foreign ownership for most sectors of the economy. Minimum capital requirements have also been reduced, making it easier to set-up businesses and reducing the overall financial burden.

Plans for a second causeway to Saudi Arabia and an ongoing $1.1 billion redevelopment of Bahrain’s international airport will also massively improve commercial access to the Kingdom.


Competitive commercial rates 

For costs of doing business – in terms of commercial rent costs, utilities, labour costs, and costs of setting up a business – Bahrain in many cases was found to be more than twice as cheap as GCC states like the UAE and Qatar. 

KPMG’s 2015 Cost of Doing Business report highlights the competitive advantage of Bahrain’s financial sector. The report discovered that costs for financial services in Qatar and Dubai are respectively 46% and 37% higher than in Bahrain. Rents, labour costs and living expenses are much lower in Bahrain.

Several years running, Bahrain has been awarded first position in the Middle East in the Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal, while consistently ranking globally within the top twenty nations.


Flourishing private sector 

Even at a time where the region’s oil economy struggles with reduced income, Bahrain’s private sector has been going from strength to strength, recording 4.8 percent growth in the non-oil sector for 2017, with a long term average rate of 7.5 percent annual growth since 2001 – an exceptional record of expansion. With the non-oil section now representing more than 80 percent of GDP, Bahrain has become a genuine regional success story in its efforts to diversify away from oil.

This healthy commercial environment has seen investment in Bahrain doubled throughout the past year the year to US$ 733 million. Meanwhile over 2,831 jobs have been created in the wider economy.


A welcoming work environment

More than anything else, Bahrain is a flourishing hub for international commerce because it is a location where talented staff from around the world enjoy coming to live and to do business. 

The Expat Insider 2017 survey scored Bahrain as the most popular country in the world for expats. The Kingdom scored particularly highly for being a welcoming nation for new arrivals and a great location for families. It also rated highly for low costs of living. 

Career prospects were rated as being particularly strong, with great opportunities for women. It was also noted that the fact that most Bahrainis spoke good English was very important in facilitating commercial transactions and every-day interaction.


Massive technology & infrastructure investment

The Central Bank of Bahrain (CBB) has established a dedicated FinTech Unit, along with the Bahrain FinTech Bay development, to support the financial services sector in developing new technologies and innovation in the field. The CBB has furthermore announced what is described as the region’s first on-shore regulatory sandbox for FinTech, as well as approving new crowd-funding regulations 

A “Cloud First Policy” aspires to reduce IT expenditures by 30% to 90%, seeking to improve efficiency and productivity across a range of sectors. Such pioneering technological efforts were behind Amazon Web Services’ recent decision to build three huge data centres in Bahrain by 2019. 

Agility’s 2016 Emerging Markets Logistics Index – out of the 45 countries it assessed – ranked Bahrain the seventh most connected emerging market, given its “excellent domestic and international transport infrastructure”. In the Environmental Performance Index Bahrain held first position in the GCC.

A $32 million programme of investment in infrastructure which underpins the private sector promises to greatly enhance Bahrain’s prospects as a pro-business environment over the coming years. The tourism and hospitality sectors have been expanding rapidly, and thus continued investment is required to help ensure that such expansion continues. 

Similar patterns of investment and administrative improvements are facilitating infrastructural improvements in other areas: Dedicated 24-hour customs clearance at Bahrain Logistics Zone have helped made it a superior regional hub with an over 80% occupancy rate. The US$ 3 billion Alba Line 6 expansion, which will create the world’s largest single site smelter. Meanwhile, a new LNG terminal is under construction. 

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