Manama – Decypha: The investment climate in Bahrain managed to remain stable throughout 2016, despite the global drop in oil prices.
Bahrain has been a strong performer in the region in terms of attracting Foreign Direct Investments (FDI), News of Bahrain reported citing researchers.
Investment is among the key tools for Bahrain to achieve its 2030 Economic Vision and aims at improving the competitiveness of the national economy, according to the portal of Bahrain’s government.
Bahrain has several factors that are deemed attractive to investors, the first one is its strategic location in the heart of the Arabian Gulf region, which enables the access to any Middle East market, making it rather easy and economically feasible. Also, the Kingdom of Bahrain was rated in a top position in the Economic Freedom Index. Bahrain also enjoys low costs, with a rather low rent rate to offices and industrial plots and several privileges that it tends to provide to investors.
Even though there are multiple countries investing in Bahrain, Kuwait and Turkey are the two main investors,according to Stantander trade portal.
During 2016, Bahrain secured about $280 million in Foreign Direct Investments (FDI) flows, as it witnessed about 40 new investing companies including the Swedish prominent company of IKEA. The rate of FDI in Bahrain in 2016 nearly doubled in 2016 in comparison to 2015 when it secured $142 million from 22 companies, according to Santander Trade portal. For the current year, EDB is eyeing for $300 million.
All the FDI that Bahrain managed to draw in 2016 depended majorly on non-oil sectors including tourism and manufacturing.
One of the industries that keep on attracting investments in Bahrain, even though it is not included in EDB’s sector preferences, is real estate. It performed well in 2016 unlike what was expected However, it doesn’t mean that it’s in the finest state, according to Bahrain Weetas Insights.
The investing companies in Bahrain are various. However, they were mainly from China, Germany, the U.S and India.
Figures and values on FDI, sectors, contribution to GDP
FDI in Bahrain has been performing impressively in recent years, according to World Investment report released by the United Nations Conference on Trade and Development (UNCTAD), News of Bahrain reported.
The report went on to say that FDI stock per capita of Bahrain has reached $20,000 in 2017.
The Economic Development Board (EDB) in Bahrain, chaired by the crown, targets the FDI in several sectors including information and communication technology, financial services, manufacturing and logistics, startups and tourism, according to export.gov.
The financial services sector contributes to the GDP by 17.2%, while manufacturing is the third largest contributor to Bahrain’s economy behind oil and financial services, according to EDB.
Tourism sector represents about 55 of Bahrain’s GDP and Bahrain’s capital of Manama was chosen as the 2016 Gulf capital of Tourism. Last year, tourism sector accounted four three-quarter of the investments, Arabian Business reported.
Economic and Political Challenges
Bahrain has been dealing with an unstable political climate. Also, social unrest has been mounting since 2011. This unrest has led up to deterioration of investor confidence, according to Arabian Business.
Last year, Forbes said that there had been an outflow of FDI due to the political uncertainty that erupted in 2011 in Bahrain during the Arab Spring.
The Economist added that the country has been experiencing protests and low-level violence which had a direct effect on FDI.
The country has also been dealing with economic pressures due to lower oil prices and the global economic crisis in 2008-09 as it was a blow to the business fraternity.
According to a new research, however, the economic stability will remain reasonably unattainable through 2017, Arabian Business reported.
The overall GDP is expected to slow to around 1.8% this year due to these challenges, in comparison to 2% in 2016, according to Gulf Insider.
However, Bahrain is showing reasonable resilience in the face of the economic, political and social unrest that it is going through.
The Gulf state is managing to attract foreign investments in spite of the knock-on effect of the suffering global economy, Trade Arabia said.
Government Policies
The government of Bahrain holds a liberal approach towards foreign investments and always seek new business and investment opportunities. It’s a top priority for the government to increase the FDI, US outlet export.gov said.
Bahrain is the only Gulf state that allows100% foreign ownership of a business or branch office, with no need whatsoever to a local partner.
The Bahraini government also doesn’t tax personal income, corporate income or capital gains.
Moreover, Bahrain is keen on attracting new investments, particularly from the US, the free trade agreement between the two countries started in 2006. The agreement stipulates on the protection of US investors in Bahrain and give them right to make financial transfers with no delays, among other privileges.
Bahrain’s crown prince advocates for the privatization and increased foreign investments to grow the private sector. On his quest to achieve his vision, he approved of the establishment of “one-stop-shop” for possible investors. The government, together with EDB, is working highlight to investors the business-friendly environment the country is enjoying.
The Gulf state also focuses on entrepreneurship and startups field on or to attract more FDI.
Over the past few years, it was quite obvious that the country opts for and prioritizes the investments that will create the maximum number of jobs of its nationals.
All in all, the EDB is aiming at $500 million of FDI inflow in the next few years, chief executiveKhaled al-Rumaihi said according to the Hindu Business Line.
There are currently fiscal incentives in order to attract more investments, including reduced charges for water, electricity, and fuel despite the recent price hikes, Merza Al Marzooq, Founder and Managing Partner at AlAtheer Business Gate (ABG), told World Finance.
The kingdom of Bahrain is in the process of making comprehensive changes to the laws of its corporation to assist global investments, in order to assist its liberal economy and help boost it to meet its 2030 Economic Vision. The Gulf state continues to build a regulatory framework for investments that started 24 months ago.
By Toqa Ezzeldin
