Global Investor

How Bahrain wooed business

Meera Siva | Updated on January 23, 2018 Published on April 05, 2015

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Emerging and frontier markets are keen to attract foreign funds but when money exits, there can be a crisis.

Bahrain weathered the storm of global meltdown in 2008-09 and clocked an average real output growth of 5 per cent between 2000 and 2012.

In 2014, its GDP grew an estimated 4.2 per cent amid an oil price rout.

What helped the country attract capital while ensuring stability? Data indicates that four key focus areas helped.

Regulatory framework

The first is a strong regulatory framework. Jarmo Kotilaine, Chief Economist, Economic Development Board (EDB), Bahrain, says the country adopts international standards such as the Foreign Account Tax Compliance Act. “We have met the capital adequacy requirements for Basel-III in January 2015 and expect to apply the rules by 2017,” he says.

He believes that to ensure compliance, regulators should take feedback from industry. “We consult with industry to understand their concerns at every stage of forming regulations,” he explains.

Another reason foreign investors shy away is due to difficulties such as bribes, says Abayomi Alawode, Head of Islamic Finance, World Bank.

Ease of doing business

To allay these concerns, Bahrain has put in electronic transactions to improve transparency and reduce the cost of doing business. The country has an internet penetration of 140 per cent – 1.84 million broadband subscribers in a population of 1.3 million. And transactions with the government such as paying traffic fines and getting tourist visas can be done online.

The country’s e-Government strategy aims to have over 90 per cent of key services available online by 2016.

In Bahrain, a foreign investor can retain 100 per cent ownership and can freely repatriate capital, profits and dividends. There is also good infrastructure to help companies setup operations.

For instance, the 2.5-million sq m Bahrain International Investment Park, is being developed and as of October 2014, the park has attracted $2 billion in investments mainly from international businesses.

Broad-based growth

Bahrain has also diversified its economy from oil and gas by setting up downstream industries such as aluminium to use the energy. The country produces 82 per cent of the gulf region’s aluminium cables and wires, as per the EDB. There is also a sizeable food processing, steel, consumer goods and financial services industry.

As a result, oil and gas contributed only 21 per cent to the country’s GDP in 2013. Financial services and manufacturing accounted for 17 and 14 per cent, as per data provided by the Bahrain Central Informatics Organisation.

Talent availability

Bahrain has invested in developing talent locally In the country’s financial services sector that employs over 14,000 people, nearly two thirds are local.

Also, the country’s favourable tax regime and living environment attracts outside talent.

Capri Jalota, an Indian who is the Chief Operating Officer of Royal Bahrain Hospital, says that there is work-life balance and what's more, the education system in Bahrain is good.

The writer attended the Global Islamic Investment Gateway Conference in Bahrain on invitation by the Economic Development Board of Bahrain

Published on April 05, 2015
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