Filling up fast: Business park attracts foreign manufacturing and services firms

Space is fast running out in the Bahrain International Investment Park (BIIP), with up to 75% now allocated. The park, one of the most successful of the Kingdom’s specially developed industrial zones, has been designed by the Ministry of Industry and Commerce (MoIC) to attract local, regional and multinational firms seeking a global base of operations.

BY THE NUMBERS: As of January 2012, the BIIP had allocated roughly 75% of its land to 75 different companies, 33 of which are already in operation with the rest at different stages of development. It is hoped that by December 2012 up to 50 will be in production. The park’s tenants manufacture a range of products, including foodstuffs, medical equipment, household products and electronic devices. It also features companies offering such export-led services as insurance claim administration and advance information system development.

Advantages of BIIP include its close proximity to Saudi Arabia, the largest market in the region. The park also provides three property options: fully serviced plots of lands, pre-built industrial units and office space. The BIIP is designed to attract export-oriented companies in manufacturing and internationally traded services that are seeking a business park location for their Middle East operations. To simplify the process for investors, BIIP also provides assistance in terms of securing the necessary permits, licences, approvals and clearances.

RECENT ADDITIONS: The BIIP has come a long way since it secured an initial $40m investment from US-based food manufacturer Kraft back in 2007. German firms have been in the vanguard of the most recent investment drive. In September 2011 chemicals giant BASF commenced construction on a 16,000-tonne-per-annum (tpa) manufacturing plant in the BIIP, while pipeline maker RMA announced in July 2011 that it would set up a manufacturing facility in the park. Up to 95% of the BD4.5m ($11.88m) plant’s inspection gauges and pipe fittings are planned to be exported. Siemens has been operating its $5m manufacturing and service facility in the BIIP since October 2011, while Lauscha Fibre International, a high-precision fibre manufacturer, has managed a $20m facility since 2009.

In the oil and gas services sector, Singapore-based MTQ, which provides equipment repair to oilfield services firms, built a 40,000-sq-metre plant in BIIP in 2010. Also in 2010 Saudi-owned S&A Abahsain Group set up a joint venture with American firm, Glass Strand, which operates an $64m plant with an annual capacity of 30,000 tonnes, producing chopped strand mat, assembled roving and assorted fabrics. Abahsain is in discussion with another group to build a further fibreglass facility in the park, which would create 1000 jobs.

During the third quarter of 2012, BIIP hopes to announce further significant projects from investors in key business sectors, which would further increase the diversity and range of activities that companies undertake in the park.

ADDITIONAL FACILITIES: The country’s industrial infrastructure has played a key role in attracting industrial firms to Bahrain. The BIIP sits at the heart of the Salman Industrial City (SIC) project, which officially opened in January 2010 and is the bedrock of the government’s industrial policy going forward under Economic Vision 2030.

There are three major parks in the SIC: the BIIP, the Bahrain Investment Wharf (BIW) and the Hidd Industrial Area (HIA). Gathered together to reduce transport costs, all of these parks benefit from proximity to the Khalifa Bin Salman Port, the King Fahd Causeway linking the Kingdom to Saudi Arabia and the Bahrain International Airport.

Set up in 2008, the $1.6bn BIW is a mixed-use business park dedicated to light industries, including warehousing and logistics, medium industries, business centres, and commercial and residential facilities. Covering 1.7m sq metres, BIW is split into four zones. The industrial/logistics and warehousing park covers 900,000 sq metres. Meanwhile, the 250,000-sq-metre business and commercial park features low-rise office blocks. Finally, the residential area covers 120,000 sq metres and accommodates labourers and offers a hotel for visitors. The remaining 410,000 sq metres are dedicated to service areas for roads, green areas and utilities.

The oldest of SIC’s parks is the HIA, which the government set up in 1987. Covering a total area of 7.9m sq metres, the HIA is managed by the Industrial Areas Directorate at the MoIC and is home to 30 industrial projects. The HIA caters to a cross-section of industrial manufacturing sectors, including construction products, furniture, engineering products, packaging and textiles as well as other sectors such as logistics and business incubation. Indeed, the HIA is the location of a business incubator centre that is sponsored and managed by the state-run Bahrain Development Bank, which also helps finance small and medium-sized enterprises in the Kingdom.

REAL ESTATE VALUES: Despite the political protests in 2011, the BIIP has continued to be able to attract firms. In a third-quarter 2011 report on the property market in Bahrain, UK-based Cluttons stated that while other sectors have suffered, industrial real estate in areas around Al Hidd in the SIC like the BIIP and the BIW have been a source of growth.

Occupancy levels of 75% were reported for the BIIP, thanks in part to the state’s subsidising the cost of land. Indeed, all of the industrial land under the control of the MoIC, including the BIIP and HIA, is leased at 500 fils ($1.33) per sq metre per year, based on a renewable 50-year lease.

At the BIW, up to 50% of the plots are developed, with prices ranging from BD129-151 ($341-399) per sq metre for a 30-year lease. Land values in the Al Hidd area start from around BD86 ($227) per sq metre per month, while buildings in the BIW can be leased for BD22-27 ($58-71) per sq metre per month.

INCENTIVES: Many firms are attracted to the Kingdom’s business parks thanks to one of the country’s most vital assets – its free-trade agreement (FTA) with the US. In effect since August 2006, Bahrain-registered firms benefit from direct access to the vast US market. The Kingdom is the only Gulf state, other than Oman, to have such an FTA.

Aside from the ready-made infrastructure and access to the US market via its FTA, international firms are attracted by other incentives, such as the possibility of 100% foreign ownership of the subsidiaries that they establish, without needing to joint venture with local companies. In Bahrain 0% corporate tax is available and this is guaranteed for 10 years in the BIIP. In addition, companies located in the park can also benefit from unrestricted access to Greater Arab Free Trade Area (GAFTA, encompassing the GCC plus Jordan, Tunisia, Libya, Sudan, Yemen, the Palestinian territories, Egypt, Iraq, Lebanon, Syria and Morocco) and GCC markets. In regard to the latter, as there is a 5% Customs duty on goods produced in free zones in the region that are then sold into GCC markets, this effectively gives companies located in the BIIP an additional 5% margin.

Finally, firms that set up in BIIP are subject to more lenient rules regarding employment of Bahraini nationals, with a grace period of five years before they are required to hire significant numbers of local workers. However, given that one purpose of the BIIP and other industrial parks is to provide employment opportunities for locals, the government has taken steps to encourage the hiring of Bahraini nationals. For example, the state employment agency Tamkeen works closely with companies in the parks to set up apprenticeships for Bahraini workers, in some cases subsidising the cost.

The combination of these incentives, linked with continuous investment in infrastructure managed to international standards, provides the BIIP with all the enticements required to bring in quality investment from the US, Europe, Asia and the Middle East. The park continues to offer access to the US, GCC and GAFTA markets and is good at harnessing its global position midway between the developed markets in the West and the growing economies in the East. These fundamental advantages should serve the BIIP well as it continues to develop in the years ahead.

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