Economic Update

Published 16 Feb 2017

An improved business environment in Bahrain could significantly enhance the economic contribution of smaller-scale enterprises, as local start-ups continue to ink deals with international companies, though weaknesses in key areas risk hindering entrepreneurial development.

In its analysis of international entrepreneurship for 2017, published in November, the Global Entrepreneurship Development Institute (GEDI) ranked Bahrain 34th out of 137 countries and fifth in the MENA region. The index, published annually, measures the ability of economies to nurture and promote entrepreneurial activities through a series of indicators.

Mixed results

Bahrain performed strongly in several areas of focus in the GEDI report, including opportunity perception, networking and cultural support. The kingdom’s strongest assets were its human capital and high growth aspirations.

However, perceived weaknesses in some core areas viewed as central to entrepreneurial advancement dragged down its overall score. While the analysis gave Bahrain an above-average ranking for product innovation, the kingdom fared poorly for process innovation – the application or creation of new technology – scoring 0.11 out of 1.

Importantly, entrepreneurs were viewed as being somewhat risk-averse and less adept at adopting technology than their competitors in other markets.  

More promisingly, the GEDI said Bahrain had already established a solid institutional base to support entrepreneurial development, giving it a 59% rating in this segment, well above its overall score of 45%. In conclusion, the institute said a 10% enhancement of conditions for entrepreneurship had the potential to add $6bn to the economy.

Recent moves from the private sector, too, look likely to contribute significant improvements to the business environment for aspiring entrepreneurs.

Nurturing the business environment

Towards the end of 2016, US-based tech giant Microsoft inked a partnership agreement with Bahraini start-up CH9, a business accelerator aimed at assisting new ventures within the small and medium-sized enterprise (SME) segment.

The deal will see CH9 work with Microsoft to help start-ups in areas such as best-practice support, mentoring and access to software resources. It will also develop cloud solutions for start-ups less than five years old, and help SMEs link up with industry players, thereby raising their marketing visibility.

Mohamed Altawash, CH9’s founder and managing director, sees Microsoft as a good fit for the company in its drive to expand start-up support in the kingdom.

“CH9 was formed to help business flourish… So when we encounter like-minded organisations such as Microsoft – organisations committed to the furtherance of innovation – it makes sense that we join forces”, he told local media.

Sherif Tawfik, country general manager of Microsoft Bahrain and Oman, said he was confident the partnership would open doors for local SMEs.

When announcing the CH9 deal, he said that with expectations running high for Bahrain to become a location of choice for up-and-coming entrepreneurs, this was an “ideal time” for a collaboration that would “provide start-ups in Bahrain with the right tools and services needed to boost their businesses”.

As most firms and start-ups operating in Bahrain fall into the SME category and account for more than 30% of both GDP and employment, the partnership could be a boon to the kingdom’s economy.

Long-term benefits

Having multinationals such as Microsoft on board to support local service providers could help Bahrain address some of the weaknesses identified in the GEDI survey – such as process innovation and technology adoption – while also convincing SMEs to become less risk-averse.

Ebrahim Mohammed Janahi, chief executive of Tamkeen, a partly state-run organisation tasked with promoting private sector development, believes that exposure to best business practices and help with developing essential skill-sets could set entrepreneurs on the path to success.

“It is important that Bahrain builds a solid foundation with the necessary expertise, knowledge and, most importantly, the attitude to pursue new ideas,” he told OBG.

As part of this, Tamkeen has an ongoing collaboration with the Supreme Council for Women to create, support, and implement programmes specifically tailored for women, who account for around 33% of private sector workers in the kingdom, according to the International Labour Organisation’s “Women in Business and Management” report published last year.

Tamkeen initiatives in this regard have included facilitating micro-loans for female-owned businesses and providing training in basic work skills to enable Bahraini women to find gainful employment.

Since its launch in 2006, Tamkeen has assisted more than 130,000 Bahraini firms and individuals with funding support and skills training, while also connecting entrepreneurs with coaching and mentoring services. Of more than 7000 companies assisted over the past decade, 60% were classified as start-ups.

Janahi views this assistance as an investment with far-reaching benefits and knock-on effects.

“By supporting businesses and individuals,” he said. “Tamkeen makes Bahrain’s market more attractive and creates an entrepreneurial economy that increases the long-term stability of the market.”