Interview: Khalid Humaidan
In what ways can investment support Bahrain’s long-term diversification strategy?
KHALID HUMAIDAN: The Bahrain EDB surpassed its target of $1bn in direct investment in 2022. Investment not only stimulates robust economic growth, but also creates value-added opportunities, leading to more sustainable growth across various sectors. Consequently, higher levels of investment contribute to paving the way for a more competitive economy. The objectives of the Bahrain EDB align with Bahrain’s national Economic Recovery Plan (ERP), which aims to attract $2.5bn in foreign investment by the end of 2023. The ERP focuses on stimulating economic growth and achieving fiscal balance and stability by 2024. In 2022 the economy experienced a growth rate of 4.9%, supported by a 6.2% expansion in non-oil GDP. This marks the fastest pace of economic growth in the past decade.
Despite the challenging global economic conditions and fluctuating inflation, Bahrain has managed to maintain high levels of economic growth and lower levels of inflation. As such, we remain optimistic about the economic outlook for the future.
How can Bahrain cater to investors amid competition from neighbouring countries?
HUMAIDAN: Countries in the Gulf region are pursuing diversification to reduce their reliance on hydrocarbons revenue. The financial landscape following the Covid-19 pandemic has accelerated these efforts, prompting governments to prioritise large-scale digital, social and economic initiatives. A notable shift in Saudi Arabia is the decision to open its previously closed borders to tourists from around the world.
When it comes to attracting international investment, each GCC nation has distinct value propositions that complement one another. As one economy within the greater ecosystem experiences growth, it positively impacts the entire region, creating mutually beneficial areas for synergy. Bahrain will continue to maintain economic, cultural, political and trade ties with the rest of the region in order to support growth.
Trade agreements among Gulf countries facilitate the agility of their economies on the international stage. These agreements enable the exchange of knowledge, best practices and investment, leading to enhanced capabilities. An example of such collaboration is the partnership between the UAE’s Mubadala and Saudi Arabia’s Public Investment Fund. The entities are exploring co-investment opportunities and exchanging knowledge and best practices to leverage their respective strengths and capabilities.
Bahrain’s strategic location in the Gulf region positions it as a gateway for investors. Additionally, the country provides investors with a qualified workforce. Initiatives like the Labour Fund, commonly known as Tamkeen, is tasked with supporting private sector growth, further support the development of talent.
What is the outlook for investment inflows, and what are the short-term challenges in attracting foreign direct investment (FDI)?
HUMAIDAN: Despite a global landscape characterised by rising interest rates and inflation, Bahrain continues to demonstrate high levels of growth and moderate inflation. Our efforts remain focused on attracting investment from local, regional and global sources across six priority sectors identified in the ERP: manufacturing, logistics, ICT, financial services, tourism, and oil and gas. As of 2021 Bahrain’s inward FDI stock represented 86% of GDP, the highest in the GCC and above the global average of 47%.
Over the past two decades Bahrain transitioned from being an oil-reliant economy to one of the most diversified markets in the region. By the end of 2022 the oil and gas sector had become the second-largest contributor to the economy, at 16.9%, whereas the financial services sector stood at 17.5%. GDP growth in the non-oil sector that year reached 6.2%.
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