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Executive
Summary
The Guide presents a
comprehensive look at Bahrain's business environment,
using economic, political and market analysis in order to
evaluate the future opportunities for international as
well as local investors. The key sector analysis and a
look at current development projects in the country reveal
that the economy will keep upswing trend during years to
come leading to a healthy return over investments.
Located half way between the
time zones of East and West, the country is enabled to
communicate virtually with the entire business world
during the working day. The importance of Arabian Gulf for
trade and trade routes has been attracting business in the
region throughout the history. The GCC countries (mostly
import oriented) have an estimated population of more than
19 million, and added 100 million to adjoining neighboring
countries that leads to enormous sales attractions. With a
long trading history and excellent location to cover the
whole region, Bahrain has always been an excellent place
as a regional base for business.
The country’s limited oil
resources will be maximized by next 10-15 years. Observing
the ground realities, the leadership of the country is
determined to discover new areas of investment.
Accelerating the diversification program, the leadership
of the country has been keen to abide by the policy of
economic liberalization and openness to stimulate a
prosperous and dynamic environment and create appropriate
climate to attract private investments. The government’s
strategy targets five primary areas for expansion. These
are business & financial services, tourism, information
technology, telecommunications, healthcare & education.
The highest standards of financial regulations, political
stability, and strong legal framework have transformed
this small country into a high standard commercial area
with which other Gulf countries are hard-pressed to
compete.
Despite longstanding efforts
at diversification, oil and gas continue to play a
dominant role in Bahrain's economy. According to Bahrain
Monetary Agency (BMA), the trade volume of the country has
increased to BD3.76 billion from BD3.71 billion at the end
of 2002. The exports surpassing the imports, at the end of
the year stood at BD2.0 billion as against total imports
of BD1.74 billion. The major contributor to exports was
oil that accounted for BD1330.9 million; whereas, non-oil
exports were BD654.4 million and re-exports were BD33.4
million during the same period. On the other hand, non-oil
imports reached at BD1741.7 million at the end of 2002 and
the oil imports reached at BD496 million during the same
period.
Today, there are 180
financial institutions operating in Bahrain and financial
services sector has contributed by 19% in 2001 to GDP as
compared with 21% from the hydrocarbons industry and 12%
from manufacturing. Currently, the banking sector assets
stand around US$100bn. Recently launched $100 million
Islamic bond has been attracting attention of the market.
Despite of war in Iraq, the bond has slightly
oversubscribed at the end of March 2003. According to BMA,
bids totaled $112.8 million for the five-year bonds,
called Ijara Sukuk and will carry a return of 3.75 percent
annually and will be listed on the Bahrain stock market.
Having diversified business
leverages, the country offers a variety of incentives to
the investors. Significant among these are no taxation on
personal or corporate income and no withholding and VAT
tax. Other competitive advantages include duty free
merchandise for re-export, duty free import of materials
and machinery for manufacturing, duty-free access to Gulf
Cooperation Council (GCC) member states provided that 40%
of the content has been added locally, low costs for
energy, utilities and rents, 100% repatriation of capital
and profits, fast track registration service, 100%
Ownership of business to foreigners and more importantly
100% ownership of land to foreigners in designated areas.
A number of multinational
groups of companies have established offices in Bahrain as
their regional base such as Citicorp, American Express,
Nomura Investment Banking, Arab Banking Corporation, Gulf
International Bank, DHL and Investcorp. The United States
is Bahrain’s leading trading partner with US$ 450 million
in exports for the year 2000. As of July 2001, more than
100 firms have started operating in one form or another
from a Bahrain base and new ones continue to arrive.
The diversification program
of Bahrain mainly targets the non-oil manufacturing sector
to establish large-scale energy-intensive and export
oriented industries by taking advantage of the relatively
cheap natural gas. Petrochemicals, aluminum-related
industries and ship repairing dominate the country’s
manufacturing sector. Light industries with 94%
establishments represent the major part of industrial
sector in the country. Favorable investment policies and
financing plans to encourage young entrepreneurs have also
given a growth to light industrial sector by attracting
local investors and joint ventures with the participation
of foreign companies. Bahrain’s first private sector
industrial park the Ras Zuwayyid Industrial Park will also
benefit the sector.
The ALBA’s US $ 1.7 billion
expansion project will increase the annual production to
827,000 tones from 307,000 tones. The expansion will also
increase the contribution to national economy from US $
200 million to US $ 300 million. The government is also
following an active strategy to enhance the role of
aluminum downstream industries mainly to reduce the burden
of imports for aluminum-based industries. Other major
industrial projects include modernization of the BAPCO
(Bahrain Petroleum Company) refinery, and a new superport
at Hidd with estimated cost of US $ 300 million. The port
would offer modern facilities for containers, general
cargo, dry bulk and roll-on-roll-off traffic. The
expansion of Bahrain International Airport will increase
the number of aerobridges from 7 to 25 and the airport
will be able to handle to over 15 million passengers a
year from the current 6 million.
Telecommunications Company (BATELCO)
is considered a key regional force in both telecom and
information technologies. Telecommunications are intrinsic
to Bahrain's success as an international business and
financial center. The government of Bahrain has issued a
new telecom law in October 2002 that stipulates to open up
Bahrain’s communications market to other companies.
Bahrain’s e-government strategy spells out the
transformation process by implementing a series of related
projects to improve the effectiveness of systems and
technology within the Government of Bahrain.
The infrastructure
development projects show the commitment of the government
in creating a sound base for business. The islands are
interconnected through causeways, and some new are at
developmental stage. A causeway between Manama & Hidd, and
a causeway between Qatar and Bahrain (Shaikh Khalifa bin
Salman Causeway) will bring positive effects on trade and
investments. In a bid to increase the share of tourism
sector, the government has started to construct tourist
friendly attractions that include world-class golf course,
an ice rink, Aqua Park, a go-cart facility and a Kids
World fun center. In addition to this, a number of other
mega projects are underway that will entirely change the
tourism industry of the country. These are Durrat
Al-Bahrain, Amwaj Islands (that includes Italian style
Venice city), Danat Huwar, Mu’awad, Al-Danah, and Al-Jaza'ir
beach resort.
The real estate market in
Bahrain is booming in terms of both new construction and
refurbishment with a strong investor and occupier demand.
Bahrain is regarded as one of the most developed countries
in the real-estate sector in the region as real estate is
considered a major pillar of the Kingdom's rapidly growing
economy. The private developers are increasingly active in
taking on infrastructure projects in developing areas and
then selling serviced plots. The decree of 2001, allowing
foreigners to own a land in Bahrain has changed the
scenario of country’s real estate market. International
investors can also own high-rise commercial and
residential properties, as well as property for tourism,
banking, financial, health and training projects in
specific areas.
Bahrain government with
simplified procedures of setting up a new company offers a
fast track commercial registration procedure for
qualifying companies. To attract more investment in the
country, the Bahrain government has amended the commercial
companies law No. 28 of 1975 by legislative Decree No. 21
for 2001. The amendments include introduction of holding
and sole proprietorship companies. In general setting up a
business in Bahrain is relatively easy and
straightforward. Firms may be 100 percent foreign-owned,
but to produce for the local market must have majority of
Bahraini ownership. Bahrain is very competitive as an
operating base as compared to Dubai, with costs
approximately 40 per cent lower.
Entrepreneurs are looking
for a favorable place with access to the entire gulf
region to establish or expand their business ventures.
Well if you happen to be one of the prospectors, then
Bahrain is an ideal location as a regional base from which
you will have trading opportunities not only to the region
but also to the adjoining markets of Middles East.
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