Trade and investor reforms boost Bahrain’s business environment

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Reforms to improve trade and protect investor rights have bolstered Bahrain’s standing on the World Bank’s most recent ease of doing business index, with newly ratified legislation set to further boost its investment appeal.

Released at the end of October as part of its “Doing Business 2019” report, the index ranked Bahrain 62nd out of 190 global economies in terms of its business environment, up four places on last year’s ranking and the country’s best result since 2014.

The annual report, which provides a comparative analysis of quantitative indicators on business regulation and the protection of property rights, assesses the regulatory environment in each subject country and the impact of recent reforms on business activity. Bahrain scored 69.85 points out of 100, placing it second in the GCC and above the MENA regional average of 58.30.

The strengths identified in the report included the ease of paying taxes, for which Bahrain was ranked fifth globally; registering property, with a ranking of 26th; and regulations protecting minority investors (38th). Investors will be watching this ranking in 2019, when Bahrain is due to introduce a 5% value-added tax on most goods and services.

In particular, the report highlighted two key reforms that have improved the business environment in the last 12 months.

The first relates to protecting minority investors by strengthening shareholders’ rights in major decisions, clarifying ownership structures and requiring greater corporate transparency. Secondly, the report claimed the deployment of portal scanners and the upgrade of the single-window system has helped improve Bahrain’s cross-border trade efficiency by reducing bureaucratic processes and speeding up the import and export of goods.

Ongoing legislation to further improve business ecosystem

The improvement in the business environment comes amid the approval of a series new laws in October designed to further boost the country’s investment appeal.

Key amongst these was legislation regulating the processing and transfer of data for commercial purposes, which should help reinforce Bahrain’s standing as a regional ICT centre.

The changes look set to bolster Bahrain’s already strong ICT business environment, which was ranked as the most liberal and competitive in the region, according to KPMG’s “Cost of Doing Business in the GCC” report, issued in early November.

Another of the reforms covers bankruptcy, with the new law containing provisions for cross-border insolvency, and special provisions providing a higher threshold of protection against the insolvency of small and medium-sized enterprises. Furthermore, the law also introduces provisions under which a company’s management is allowed to remain in place and continue business operations during the administration of a case.

These measures should directly address one of the weak spots in the country’s otherwise solid business environment, as identified by the World Bank. Bahrain was ranked 93rd for resolving insolvency – which includes the strength of the legal framework covering bankruptcy – with a score of 44.57, the lowest out of the 10 pillars against which it was assessed.

A third reform added to the statute books is a new competition law, which prevents the formation of monopolies or the practice of anti-competitive behaviour, with officials saying it will make it easier for new businesses to enter existing markets and compete with significant players. This in turn is expected to facilitate innovation, broaden the base of the economy and improve productivity.

Reforms coincide with increased investment

Government officials are confident the raft of new legislation will further improve Bahrain’s profile as a destination for international business.

The improving business climate is already having an impact, with Bahrain attracting $810m in foreign investment in the first three quarters of 2018, $77m more than the 2017 year-end total, according to data issued by the Economic Development Board on October 31. Some 77 overseas companies launched operations in Bahrain over the period, compared to 71 across 2017 as a whole.

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