At the Bahrain Economic Development Board (EDB), we meet with companies from around the world every day and one of the things we have noticed in the last year or so is that investors around the world are increasingly excited about the $1.5tn GCC market. The rapid transformation taking place across these economies is opening new opportunities that have been closed in the past – aided by major reforms that open the region to foreign investors and a $2tn projects pipeline.
Bahrain’s economy – an overview
- Real GDP growth in 2017: 3.8% (Source: BEQ)
- Non-oil GDP growth in 2017: 4.8% (Source: BEQ)
- Forecast real GDP growth in 2018: 3.4% (Source: BEQ)
- Forecast non-oil GDP growth in 2017: 4.3% (Source: BEQ)
- GDP: $34.9bn (Source: IMF)
- Population: 1.5mn
Gulf economy – an overview
- GDP: $1.5tn – equivalent to South Korea
- Active projects in pipeline: More than $2tn (source: MEED)
- Intra-GCC trade growth in last decade: 15% per year
- GCC median age in 2010: 25
When we speak to investors, one of the first questions we get asked is how they can access the GCC market.
Our role at the EDB goes far beyond investment promotion – we help businesses throughout the setup process and beyond. Our aim is to help identify and connect sector-specific opportunities with the GCC market – so we work with entities across the public and private sector to help achieve this.
At a very top level we strive to achieve our business-friendly aspiration by continuously working to reduce red-tape and creating an environment that makes it as easy as possible to invest and grow your business.
Bahrain has a liberal business environment – that offers 100% foreign ownership without any free zone restrictions and no corporation, personal income, wealth or capital gains taxes. This highly liberal environment helps to support lower operating costs – that means the cost of running a business in Bahrain is approximately 30% lower than other regional centres, like Dubai.
So what are the benefits of setting up a business outside of a free zone?
- Economic free zones usually offer lower costs and less restrictive regulations. But, they are also offshore jurisdictions, which means that companies located in a GCC free zone are not based in the GCC. For companies looking to access the Gulf economy, this introduces additional costs and complications.
- Bahrain offers the best of both worlds. It provides a business environment that has the benefits of a free zone, such as no taxes and 100% foreign ownership.
- But it does so in an entirely onshore jurisdiction. So, no matter where you are based in Bahrain, you are always a GCC company – providing much quicker and cheaper access to the $1.5tn Gulf market.
Of course, we know that in order to maintain a liberal business environment we need to continue to develop and part of the EDB’s role is to speak with investors and businesses to identify those areas.
On a more detailed level, companies looking to set up in Bahrain will have a dedicated EDB account manager that will work with them on all elements of the process.
The EDB works with companies all the way through the setup process and beyond. We provide:
- A dedicated account manager.
- Guidance and information to support the decision-making process
- Support in all aspects to speed up the setup process.
- Ongoing aftercare support to aid businesses in business development and expansion.
- Facilitate access to grants and assistance with company registration.
- Engagement across government to help develop business-friendly policies.
- Events and meetings designed to foster the business community and bring the world’s leading experts, CEOs, and investors to Bahrain.
Sometimes, it is as straightforward as connecting companies with the right people at the Ministry of Industry, Commerce and Tourism to speed up the process of obtaining a commercial registration, or providing basic information about the options and requirements for different corporate legal structures in Bahrain.
However, we also look to go further than that through what we call Team Bahrain. This is a client-focused approach where public entities and private businesses come together and are able to respond quickly to opportunities as the environment evolves.
And what are the organisations that help companies setup in Bahrain?
Bahrain takes a Team Bahrain approach to helping businesses set up and then thrive. Among the organisations working to support companies are:
- Bahrain Economic Development Board – we provide a dedicated account manager, who will work with businesses on all aspects of setting up in Bahrain and beyond. We also work with companies already operating in Bahrain to identify solutions to operational problems that may come up, or openings that support their business development.
- Tamkeen – the Bahraini Labour Fund, Tamkeen provides support to businesses in employing and training Bahraini workers, as well as supporting the development of entrepreneurs. Tamkeen also works with educational and training institutions across the Kingdom, including:
- Bahrain Institute of Banking and Finance – a leading regional training centre for the financial services sector
- University of Bahrain
- Bahrain Polytechnic
- Regulators – as a single jurisdiction with a well-established track record, Bahrain provides high quality regulation that enables businesses to thrive. Our regulators are well established and experts in their field, allowing them to move quickly to support the development of new sectors. For example, the Central Bank of Bahrain recently created a regulatory FinTech sandbox to enable innovation in the financial sector while also preserving the stability of the broader system.
- Ministries – Relevant ministries will come together to help create solutions that enable businesses to unlock new opportunities in Bahrain. For example, a new technology company might need to deal with the Ministry of Industry, Commerce and Tourism, the Electricity and Water Authority, the Central Bank of Bahrain and the Ministry of Finance. By bringing these entities to work together with an investor-oriented mindset, we can help companies set up, grow and thrive in no time.
A great example of our unique approach is when Amazon Web Services was looking to establish the Middle East’s first data centre region in Bahrain, they faced a number of challenges and we worked with a large number of stakeholders to identify ways to address them. To take two examples in particular, they needed to find a way to power the facility in a sustainable manner and a way to hire skilled employees to build a long-term presence in the region.
To address the need for sustainable power, we were able to bring Bahrain’s Electricity and Water Authority (EWA) into the discussions, who are firmly committed towards realising the country’s renewable energy goals. EWA proposed the construction of a new solar power facility to meet Amazon Web Services’ power needs.
Furthermore, to address the need to ensure the availability of a cloud-ready workforce, Amazon Web Services worked with Tamkeen, the Bahrain Labour Fund, as well as educational establishments in the Kingdom such as the University of Bahrain and Bahrain Polytechnic, to establish programmes to train Bahrainis through the Amazon Web Services Educate programme. More than 2,000 Bahrainis signed up in the initial months – a faster rate than in countries like China.
What sectors offer particularly exciting prospects in Bahrain?
- Financial services – Bahrain has been a leading regional hub for more than 40 years and has a growing FinTech sector.
- Manufacturing – Sophisticated downstream aluminium sector set to benefit as major expansion makes Alba the world’s largest single-site smelter and FMCG manufacturers expanding to meet growing demand across GCC.
- Logistics – An emerging logistics centre for the region with significant investment in infrastructure, including expansion of Bahrain International Airport.
- Startups – An emerging startup hub with entrepreneurs from across the region and around the world coming to Bahrain to create and build businesses.
- Tourism – A long-standing favourite of regional visitors, averaging nearly 1 million visitors a month, Bahrain is investing to meet growing demand and attract new tourism markets.
Similarly, Mondelēz International, makers of Barni, Ritz, Oreo, and belVita, is now set to produce 45,000 tons of biscuits a year in a new state-of-the-art factory in Bahrain, one of its six global mega manufacturing and distribution hubs.
Mondelez’s factory expansion was the result of the public and private sector partnering on a common aim, with a number of ministries including the Ministry of Industry, Commerce and Tourism, the Bahrain International Investment Park, the Bahrain EDB, Mondelēz International, and Mondelēz’s suppliers and partners all working together to unlock the opportunity and ensure a seamless setup.
In fact, the facility is built on land that was only reclaimed in 2015 – meaning it has gone from ocean to Oreos in just three years.
Are there examples of leading global companies that have operations in Bahrain?
Bahrain is home to a large number of the world’s leading companies. Among those with a significant presence in Bahrain are:
- Amazon Web Services
- APM Terminals
- Bank of China
- BNP Paribas
- ICICI Bank
- JBF Industries
- Standard Chartered
- State Bank of India
How does Bahrain help businesses succeed in the country and across the GCC?
We also continue to work with businesses once they are established in Bahrain to help them succeed and expand across the GCC. Again, that might involve something as simple as connecting businesses with the appropriate regulator such as the Central Bank of Bahrain (the sole regulator for the financial sector) in order to obtain a new license to expand their existing activity. But it could also involve working alongside education and training establishments, such as the Bahrain Institute of Banking and Finance, to help train skilled local professionals in order to support the expansion of the business. Or liaising with relevant ministries to provide adequate land and resources to grow an existing facility.
It might even mean working across government and the private sector to identify new industries and opportunities – in areas like downstream aluminium or FMCG.
For instance, it was clear from talking to businesses in the financial sector that FinTech presents a real chance for innovation – but enabling that innovation needed a comprehensive approach. For that reason, we have seen a wide range of initiatives in the last couple of years, designed to help boost FinTech in Bahrain. We have seen regulatory and legislative changes that allow new fund structures and have created a regulatory FinTech sandbox to allow FinTech firms to experiment in a controlled space. We have seen new funding structures introduced, boosting the availability of venture capital such as through the $100m Al Waha Fund of Funds, and enabling crowdfunding in conventional and Shari’a-compliant finance. We have also seen the development of a series of conference and events bringing global experts to Bahrain and supporting the creation of a local ecosystem. Last but not least, this year marked the launch of the region’s largest dedicated FinTech hub, Bahrain FinTech Bay – which counts public and private sector leaders from Bahrain’s financial services industry amongst its founding partners.
The GCC economies are growing rapidly and, as technological shifts transform the global economy, the investment landscape is changing constantly. We look forward to speaking to more businesses over the course of the next few years as we look to help to find new ways to help businesses access the GCC’s vibrant market.
This was originally posted on Bahrain Economic Development Boards’ Bahrain Pulse.