Bahrain III: Business in Bahrain

Aired March 2008

Located at the heart of the Arabian Gulf, the kingdom of Bahrain has always been commercially-oriented and outward-looking.

The kingdom has been a beacon for political reform in the region.

Ruled by the Al Khalifa dynasty since 1783, Shaikh Hamad bin Isa Al Khalifa became ruler after his father’s death in 1999. 3 years later, Bahrainis voted in a referendum to make Shaikh Hamad the first king and the country, a kingdom.

The country was the first nation in the Arabian Gulf to discover oil, but reserves are expected to run out soon. In an effort to build sustainable long-term economic growth, the government has changed its focus to non-oil industries.

This change has encouraged the economy of Bahrain to grow at about 6% for the last 10 years.

While potential investors may shun investing into the nation in favour of countries with a larger population thus promising larger returns, Bahrain offers access to more than just her country’s population. In spite of her small size, the country’s strategic position in the region offers investors easy access to a wider market base.

Bahrain enjoys friendly relations with all her neighbours. Her neutral stance and history as a centre of culture, education and health services lends to her present-day popularity.

A member of various international organisations since the 1970s - including the United Nations, the Arab League, the World Trade Organisation, and the Gulf Cooperation Council - the kingdom also boasts a strong bilateral relationship with the United States of America.

In a bid to expand trade and investment between Bahrain and the United States, a free trade agreement was signed between the two countries in 2006. Bahrain is the first country in the Arabian Gulf to do so.

This agreement has had a huge impact on bilateral relations between the 2 countries. The most tangible impact is that trade between the United States and Bahrain has doubled, surpassing the 1 billion mark for the first time in 2006.

The free trade agreement also sends a signal to the world that Bahrain is recognised as having one of the more progressive regulatory environments in the region, a cutting-edge economy and an investor-friendly regime.

In order to further encourage foreign direct investment into the kingdom, the government has gone to lengths to ensure that the country’s framework adheres to international standards.

One step to creating this sustainability is by breaking monopolies and opening up the domestic market to more players. A sector where the government has taken the lead in this is the highly lucrative telecommunications sector.

As Bahrain has long been a centre of knowledge for the region, the country offers a ready local workforce schooled in formal education. Young, talented and armed with local knowledge, this offers potential investors into the country a leg-up over other countries in the region.

Potential investors should be also encouraged by the fact that the country has won many international accolades, including the promising “Middle East and North Africa City of the Future”.

Looking at the figures of foreign direct investment into the country for the last few years, the country comes in third in the region in terms of absolute investment, but in relative terms, taking into account the GDP and population, Bahrain scores right at the top.

Knowing that she lies in a region synonymous with war and conflict, Bahrain has taken pains to present herself as a peaceful oasis. From Western-style shopping malls to international conferences, she is keen to impress upon the world that leading the list of her attractions is the safety and peace of mind that the country offers.

The country has increasingly seen many foreigners flock to its shores in recent years. Sent there to work, they find a pleasant surprise when they land.

With such a warm welcome to its shores, a well-managed economy and a large expatriate community, Bahrain is the ideal springboard to the region for overseas investors.

FINANCE

Over the last 2 decades, Bahrain has earned a reputation as the financial capital of the Middle East. The sector is the single highest contributor to the kingdom’s GDP.

The country has embarked on a number of initiatives to establish a corporate governance code in an effort to promote effective regulation and investor confidence. It is widely recognised that the legal and regulatory framework in the country is one of the highest in the Arab world, and is respected globally by international bankers.

The Central Bank of Bahrain boasts a regulatory process that is one of the more comprehensive and hassle-free in the region. This has resulted in Bahrain today having the largest concentration of banks in the region.

With the aim of being responsible custodians of the country’s economy, the nation’s regulators are careful when it comes to accepting new players, and stringent guidelines are adhered to at all times.

Over the last few years, the world has seen a surge of interest in Islamic banking due to the increase of sophisticated Muslim investors. Islamic banking is based on the principles of Sharia law, which forbids the taking of interest, among other things.

Bahrain is home to the highest concentration of Islamic financial institutions in the Middle East. A number of specialised agencies have been established in the country to ensure that the correct international standards are in place, and to further develop the industry.

The Bahrain Stock Exchange commenced operations in 1989. Currently there are both local and overseas companies listed on the exchange. Recognised as one of the emerging markets in the region, trading is done in accordance with international standards. Investors have access to other markets in the region through existing cross-listing agreements. Foreigners are allowed to purchase, own and trade on the exchange.

Further, the construction of the Bahrain Financial Harbour reinforces the country’s position as the financial capital of the Middle East. This landmark project brings together in one location all the related activities of Bahrain’s financial services sector.

REAL ESTATE

The Bahraini real estate sector is on the edge of a boom, and the country’s property market is a growing commercial asset in its own right.

Legislative changes in recent years have allowed for 100% freehold purchase by foreign nationals, and this has led to the internationalising of the property market as well as soaring prices.

The profitability of Bahrain’s real estate sector is also magnified by the country’s geographical location. It is well-placed to attract other Gulf investors and the interest of multi-national corporations seeking a Middle Eastern base.

One of the key facts that encourage real estate developers to invest in the kingdom is the government’s commitment to improving the overall infrastructure available. From wider roads to ease the flow of traffic, to connectivity to surrounding countries, all the projects outlined in the country’s blueprint spell long-term planning.

Prices that see a steady climb instead of exploding in leaps and bounds lend further stability to the market, and the country is fast building a reputation for itself that is poised to rival other longer-established Middle East markets.

TOURISM

Bahrain is undergoing unprecedented tourism development with new multi-billion dollar projects announced frequently. The country has found favour in the international arena, and is fast reinforcing its position as one of the top destinations in the region.

Known as “the island of golden smiles”, Bahrain offers year-round sunshine, and is an intoxicating mix of eastern and western cultures, with a rich history that dates back thousands of years.

One of the most popular historical sights in Bahrain is the 16th century fortress built by the Turks and later occupied by the Portuguese.

Surrounded by water all around, Bahrain offers over 100 miles of coastline to enjoy. With its clear visibility and year-round warm waters, it is a top diving destination.

The country’s first 18-hole grass golf course, Riffa Golf Club, is conveniently located between downtown Manama and the King Fahd Causeway link with Saudi Arabia. With many activities designed to cater to different needs, the golf course is a great place to unwind after work.

Another great place to unwind is the Banyan Tree Desert Spa and Resort. It is the only all-villa private pool resort in the Arabian Gulf, and is one of the Middle East’s most luxurious hideaways. Home to one of the world’s largest hammams, a stay at this resort will be truly unforgettable.

Bahrain also has the distinction of being the first country in the Middle East to host the Formula One Grand Prix championships. Since 2004, the elite of the motor racing world have made their way to this tiny country annually.

Keeping in line with its relaxed and tolerant attitude towards foreigners, one can find many nightlife entertainment places in Bahrain. From bars to clubs, party-goers can soak in the ambiance of an Arabic-flavoured night, or dance