Interview: Khalid Al Rumaihi
To what extent can laws be reformed to enable a more attractive destination for foreign investors?
KHALID AL RUMAIHI: Over the next few years we have a number of priorities aimed at driving foreign direct investment (FDI). This includes a new bankruptcy law that introduces measures to allow company reorganisation, where the management can remain in place and continue business operations during the administration of a bankruptcy case. This new law is designed to nurture the start-up and small and medium-sized enterprise (SME) market whilst also increasing our footprint in the financial technology (fintech) space. To that end, we have recently launched Bahrain FinTech Bay, our first dedicated hub for fintech and a regulatory sandbox where companies can get business licences tailored specifically for start-ups. We are also implementing a new data protection law to support the growth of the digital economy, and a new competition law to encourage competition and innovation among companies.
In what areas does fintech innovation have the strongest potential to impact the overall economy?
AL RUMAIHI: Fintech innovation will have a wide-reaching impact on the economy as it will create new jobs, provide necessary training for our already highly skilled workforce and drive FDI in the kingdom. The financial services sector is currently going through an unparalleled period of disruption, and Bahrain already has the soft and hard infrastructure in place to not only handle this disruption, but to allow innovation to thrive. We have been working hard to create the ideal environment for fintech companies to access the vast opportunities across the GCC and internationally.
We see the strongest potential for fintech in the banking sector – we have had a strong history working across both conventional and Islamic banks. In September 2016 the banking sector’s total assets reached $192.7bn. The sector’s growth has been supported by an open market economy, stable and prudent macroeconomic and fiscal policies, a consultative regulatory framework in line with global standards and a strong, well-qualified local workforce.
How do you address investors’ concerns about the kingdom’s current fiscal position and the likelihood that this will lead to a higher level of taxation?
AL RUMAIHI: Bahrain has returned to positive growth territory and has an increasingly diversified economy that is not reliant on the price of oil. The non-oil sector now accounts for more than 80% of GDP, up from just over 50% in 2000. In the second quarter of 2018 our real headline growth rate increased sharply, to an annual rate of 2.4%. Furthermore, 2017 was a record year for the EDB, attracting $733m of FDI – a figure which was bested within the first eight months of 2018, with $810m by the end of August.
These figures should go some way towards easing the concerns of foreign investors. We are very grateful to our fellow nations for their support – the combination of the support package and our fiscal balance programme will ensure long-term fiscal sustainability and low levels of taxation.
How will the role of SMEs evolve as the government decreases its spending and the private sector is given an increasing role in the economy?
AL RUMAIHI: We are looking for significant ways to cut red tape across the business-to-government value chain. This has included reducing the minimum capital required for starting a business and simplifying regulatory requirements. We recently launched the flexible worker permit – a system designed to boost the private sector through a programme that offers employers greater flexibility to pay and source labour. Pair this with the fact that the country has the region’s lowest operating costs, and so we would expect SMEs to have greater autonomy and play an ever-increasing role in the diversification of the economy away from oil.
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