Interview: Khalid Al Rumaihi
Which countries and sectors is the EDB focusing on in terms of foreign direct investment (FDI)?
KHALID AL RUMAIHI: Our long-term trading partners remain key targets, including the US, EU countries such as Germany, France and the UK, and our GCC neighbours such as Saudi Arabia and the UAE. However, we are also increasingly looking east, which reflects the broader trend of economic power shifting towards Asia, especially since these markets account for a large proportion of global FDI, as we saw in the UN Conference on Trade and Development’s “2015 World Investment Report”. In addition, we are also focusing on areas in which Bahrain has particular strengths and which support the country’s economic goals to generate non-oil growth and create high value-added jobs. These sectors include financial services; technology, media and telecommunications; tourism; manufacturing; and transport and logistics.
In the wake of the fall in oil prices, what steps are being taken to maintain Bahrain’s attractiveness as an investment destination?
RUMAIHI: We have made strong progress on diversification, with oil now accounting for around a fifth of GDP, down from 44% in 2000. Key to this has been reforms put in place over the last decade, which have created an open economy and one ranked with the greatest level of freedom in the Middle East. However, recent volatility in oil prices serves as a reminder of the need to address wider challenges.
One major focus has been to make the private sector an engine for growth, particularly in the non-oil sector. More than half of Bahrainis in the workforce are employed in the private sector, and in 2014 year-on-year (y-o-y) grew around 5% in the non-oil sector, with overall growth reaching 4.5%. This trend continued in the first quarter of 2015, as private sector employment growth reached 6% y-o-y, with non-oil growth staying at roughly 5%. FDI inflows have also remained robust, at just under $1bn annually in 2013 and 2014, above the levels seen from 2009 to 2012. Firms investing in Bahrain are targeting not only Bahrain but also the $1.6trn GCC market as a whole, and one of our key advantages is that we are a gateway for firms and investors to access the GCC.
To what extent is wider regional conflict detrimental to the local economy?
RUMAIHI: While political risk is an issue for the entire Middle East, it is also a fact of life for emerging markets, and it is even an issue for investors in major established markets. As an investor, you do not look at political risk on its own, you look at the risk versus the reward proposition and whether the long-term returns available are strong enough given the level of risk. In the GCC there is a strong case that, while there may be an element of political risk, long-term returns are underpinned by economic fundamentals, and investors will see this as an acceptable level of risk.
How can greater GCC integration enhance the region’s ability to attract investment? What mechanisms would you like to see developed?
RUMAIHI: In the GCC we have seen the benefits of a free trade zone (FTZ), with the Customs Union also fully implemented at the start of 2015. In 2002 intra-GCC trade was around $15bn, and in 2013 it reached more than $120bn. Further actions to encourage intra-regional trade, alongside investment in transport infrastructure such as the rail network, will help to enhance the region’s ability to attract investment.
Another driver of investment is to realise the vision of an Arab FTZ and an Arab Customs union. While challenges remain, there is a will to achieve this, as highlighted during the Arab League Summit in March 2015. Regional trading blocs are playing a big role in global trade, so the development of the GCC is crucial if we are to maintain our role in international markets.
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