Business in Bahrain

Aired May 2005

Bahrain is on the move. Already the financial capital of the Middle East, Bahrain is developing fast across several sectors, with many opportunities for investment. A number of large-scale infrastructure projects are attracting global attention, and Bahrain’s profile is rising as a business and leisure destination.

The Kingdom of Bahrain is an archipelago of 33 islands located in the Arabian Gulf, off the east coast of Saudi Arabia.

Bahrain has been ruled by the Al Khalifa dynasty since 1783. Shaikh Hamad bin Isa Al Khalifa became ruler after his father’s death in 1999. In 2002, Bahrainis voted in a referendum making him the first king, and Bahrain a kingdom. His Majesty King Hamad works closely with Prime Minister Shaikh Khalifa bin Salman Al Khalifa, and the Crown Prince Shaikh Salman bin Hamad Al Khalifa.

Bahrain joined the United Nations and the Arab League in 1971. Since 1981 it has maintained close ties with its five neighbours – Saudi Arabia, Oman, Kuwait, the United Arab Emirates and Qatar – in the Gulf Cooperation Council, or GCC. With its well-managed economy and large expatriate community, Bahrain is the ideal springboard to the GCC for overseas investors.

Bahrain discovered oil in 1932. Since the 1960s it has embarked on a wide-ranging economic diversification strategy. Oil reserves are expected to run out completely by 2010, so the government has focused on non-oil industries to build sustainable, long-term growth.

TRADE AND INDUSTRY

Bahrain signed the groundbreaking Free Trade Agreement with the United States in September 2004. Negotiations that usually take a year were completed in just four months.

The US-Bahrain Free Trade Agreement, or FTA, removes trade barriers and expands regional opportunities for both countries. For Bahrain, the FTA confirms its commitment to free market principles and offers great benefits to the local business community. The removal of trade barriers gives Bahraini companies valuable access to the US market. The Bahrain FTA also serves as a regional anchor for the Gulf. The agreement has positive implications both for Bahrain and for the GCC region.

The US government has announced its commitment to working towards a Middle East Free Trade Area by 2013.

Bahrain’s oil revenues have bolstered the economy, and financed health and education programs. As a result Bahrain has made education a priority. Today standards are among the highest in the Gulf and Bahrain University is a leading university in the region along with numerous high level educational institutions catering for the local community as well as attracting students from abroad.

Also Bahrain is investing heavily in its infrastructure, through a number of large-scale projects. The government is focusing on establishing industrial estates to attract investors. The petrochemical, textiles and aluminium sectors in particular offer good growth potential.

COMMUNICATIONS

The Bahraini government recognises the need for world-class communications infrastructure to fulfil its ambition of becoming the region’s knowledge-based services hub. Bahrain’s attractiveness as a place to live and work depends on the availability of state-of-the-art information and communications technologies.

The telecom sector is undergoing a radical liberalization process, set out in the National Telecommunications Plan. The monopoly held by the Bahrain Telecommunications Company (Batelco) has ended and the market opened up. A new independent regulatory body, the Telecommunications Regulatory Authority or TRA, has been established.

Foreign investors have been able to compete for local and international fixed voice and data services licenses since July 2004. Bahrain has a strategic location as a gateway to the rapidly expanding telecom markets of Saudi Arabia and the Gulf, making it particularly attractive to investors.

DEVELOPMENT

Bahrain has a number of exciting development projects underway. The new Bahrain World Trade Centre (BWTC) is on course for completion in June 2006. Its 50-storey twin towers will become the tallest buildings in Bahrain. This landmark development is set to be the most prestigious business address in the Kingdom.

68 storeys of rentable office space will provide for every business resource. The project will double the size of the existing Bahrain Commercial Complex mall, adding several top quality facilities. The adjacent Sheraton Hotel will also undergo a complete refurbishment inside and out.

The Bahrain Commercial Complex mall at the BWTC site is already considered the most exclusive shopping location in the Kingdom. It currently has 122 luxury brand retail outlets.

As part of the BWTC project, a new mall extension will add another 100 upscale international-brand retail outlets. These will provide names, products and ranges not yet available in Bahrain, giving better choice to local, regional and international consumers. The luxury food offer will include coffee shops, cafes and a boutique restaurant overlooking the Arabian Gulf.

FINANCE

Bahrain has been the pre-eminent financial centre for the Gulf region and much of the Arab world for the past two decades. The oil boom in the 1970s and the war in Lebanon were the catalyst for the sector’s growth.

Bahrain’s stable, well regulated and liquid banking system has made it a regional hub for banking, financial and insurance services. Its products and services include commercial, investment and corporate banking; project finance; and foreign exchange. The financial sector is the largest single employer in Bahrain. Commercial bank assets currently stand at around US$ 100 billion.

The $1.3 billion Bahrain Financial Harbour, or BFH, is a new landmark project. Located on a prime waterfront site in the heart of the capital Manama, BFH will confirm the Kingdom’s dominance as the Middle East’s leading financial centre.

Bahrain has become a global leader in Islamic banking, ever since the first Islamic bank was founded there in 1979. There has been a surge of interest in Islamic banking in recent years, as consumers demonstrate more product awareness and investment know-how.

There are currently 28 Islamic financial institutions licensed to operate in Bahrain, providing products and services based on Sharia principles. Sharia law forbids the taking of interest, or riba. Islamic banking products link profits or losses directly to returns from the investment itself, instead of being a monetary investment attracting interest. This enables sophisticated Muslim investors worldwide to actively invest in an “ethical” product and International investors interested in regional Islamic banking operations should be looking at Bahrain.

TOURISM

With year-round sunshine and a tradition of hospitality, Bahrain is known as the “island of golden smiles.”

An intoxicating mix of eastern and western cultures, Bahrain looks both to the past and the future. It is rich in history and ancient civilizations have only recently been discovered by international archaeologists. A top diving destination with its clear visibility and year-round warm waters and other activities to enjoy include horse racing, golf, sailing and shopping in the famous souk.

Bahrain is undergoing unprecedented tourism development with new multi-billion dollar projects being announced frequently. This accelerated momentum has drawn the international spotlight on the island and helped to reinforce its position and importance as one of the leading tourism destinations in the region.