The Report: Bahrain 2013

Economy

Despite a number of notable uncertainties in the global economy, Bahrain’s economic outlook remains mostly positive. Largely insulated from international economic turmoil, the kingdom saw more than 6% GDP growth in 2008 and 3% in 2009. In 2012 the economy expanded at a rate of 3.4%, largely due to the robust private sector, which a number of government initiatives are aimed at supporting, such as fostering small and medium-sized enterprise growth and promoting innovation. With forecasts for expansion throughout the Gulf region, particularly in the domestic non-hydrocarbons sector, some expect to see Bahrain's GDP grow by 5% in 2013. This chapter contains interviews with Mahmood Hashim Al Kooheji, CEO, Mumtalakat; Shaikh Mohammed bin Essa Al Khalifa, Chairman, Tamkeen; and Sheikh Khalid bin Abdullah Al Khalifa, Chairman, Mumtalakat.

Banking

With its experienced workforce and historical connections to Saudi Arabia, the Bahrain banking sector has continued to be a key segment of the economy. Although retail banking in the kingdom was largely sheltered from the global economic crisis, the changing international landscape is driving financial institutions to explore new strategies, while the banking regulator is continuing efforts to strengthen the sector by focusing on the new Basel III standards, improving corporate governance and protecting consumer interests. This chapter contains an interview with Ali Moosa, Senior Country Officer for Bahrain, JP Morgan.

Capital Markets

Efforts to boost trading in Bahrain have been focused on corporate structuring, through a plan that includes overhauled regulation and a restructuring of the Bahrain Bourse to allow it to act with greater speed and flexibility. Initial public offerings are set to increase as moves toward privatisation continue, while small and medium-sized enterprises are on course to benefit from new listing procedures such as increased use of online trading and improved regulation and trading rules for the bourse.

This chapter includes an interview with Fouad Rashid, Director, Bahrain Bourse.

Islamic Financial Services

Global Islamic banking assets were pegged at about $1.3trn in 2011 but are expected to rise to as much as $1.8trn by the end of 2013. As such, Islamic banks are seeking to diversify the sharia-compliant financial instruments they offer. Leaders throughout the region are starting to look toward sukuk, or Islamic bonds, for infrastructure finance as an aid to development, and while it is currently a less developed segment of Islamic financial services, takaful, or sharia-compliant insurance, is following the general growth pattern being experienced by Islamic banks across the globe. This chapter contains interviews with Mohammed A Rahman Bucheerei, CEO, Ithmaar Bank; and Aabed Al Zeera, CEO, International Investment Bank.

Insurance

While motor insurance remains the chief source of revenue and claims, accounting for 25.8% of the total $565.5m in gross premiums recorded in 2011, mandatory medical insurance – which has been on the table for several years and is expected to become a law in the short to medium term – has the potential to provide a new and lucrative line of business. There is also an increasing focus on risk-based underwriting as the highly competitive domestic market seeks to ensure profitability continues. This chapter includes an interview with Zakareya Sultan Al Abbasi, CEO, Social Insurance Organisation.

Energy

The hydrocarbons industry is a key contributor to the economy, accounting for around 22% of GDP in 2012 as well as some 75% of government revenues. Efforts to boost production are expected to see output reach 100,000 barrels per day by 2020. The government has pledged to invest $15bn in the hydrocarbons sector over the next 30 years, with energy diversification and a growing focus on solar and wind power set to lessen the kingdom’s dependence on natural gas. Despite current energy production outpacing peak demand, the government is working to encourage reduced power and water consumption through a public awareness campaign, while increasing power production capacity. This chapter includes interviews with Adel Khalil Al Moayyed, Chairman, BAPCO; and Abdul Hussain bin Ali Mirza, Minister of State for Electricity and Water Affairs.

Transport

Plans are afoot from the Ministry of Transport to enhance regulation, improve safety and increase capacity among staff, with infrastructure such as a mass transport system being viewed as not only a necessity caused by population density increases, but also vital to boosting the private sector. Allocations have set aside to refurbish the international airport, plans have been made to link the nation to the GCC Railway by 2018, and a 45-km, $5.5bn causeway to Qatar is also under construction. This chapter contains an interview with Kamal bin Ahmed Mohammed, Minister of Transportation.

Real Estate and Construction

With instability in the real estate sector largely stabilised after a slump in the property market, the government and private firms are focusing on the issue of affordable housing for nationals, with a plan to provide housing to 54,000 Bahrainis waiting for a subsidised government home. In the construction sector, plans are also in place to improve transport infrastructure, with roads and bridges set to receive the greatest share of funding. There has also been a renewed commitment to ensuring greener building regulations, and while the current emphasis in Bahrain is on affordable housing, this could open up new opportunities for green initiatives that also reduce costs for the construction sector. This chapter contains interviews with Essam bin Abdulla Khalaf, Minister of Works; Mohammed Khalil Alsayed, CEO, Ithmaar Development Company; and Christopher Sims, CEO, Naseej.

Industry

Projects aimed at expanding the metals and petrochemicals segments are underway, with the current aluminium production of 2m tonnes set to increase to 10m tonnes by 2020 and plans from the Gulf Petrochemicals Industries Company to triple output of ammonia related products. There has also been a drive to create favourable conditions for foreign investment, including numerous business parks and revamped regulation. Considerable efforts are also being made to aid small and medium-sized enterprises, with greater integration of regional supply chains and further expansion of downstream industries seen as offering them a potential boost. This chapter contains interviews with Chris Potter, CEO, Arab Shipbuilding & Repair Yard; and Tim Murray, CEO, Alba.

Tourism

Events have been planned to celebrate Bahrain’s year as the Capital of Arab Tourism in 2013. MICE venues, such as the Bahrain Exhibition and Conference Authority’s complex at Sanabis, seek to offer a diverse range of meeting spaces, often in conjunction with hotels. Cruise ships are expected to further boost visitor numbers: the kingdom saw a record number of cruise ship arrivals for Bahrain in the 2011-12 season, and an estimated 70,000 cruise tourists are expected during the 2012-13 season. The authorities are also looking to upgrade the quality of accommodation on offer at the lower end of the market to broaden appeal to families.

Health

Bahrain offers both citizens and residents a wide range of care provided by the government and the private sector. The government spent almost $557.86m on health care in 2011, which was an increase of close to 8% over 2010. Since that year it has been implementing a strategy to improve health care provision, which has focused, in large part, on integrating medical services and providing greater preventive care. The Supreme Council for Health, established in 2013, will set medical training standards, develop a range of policies on insurance and medical staff recruitment, and work to improve the effectiveness of coordination within the medical sector.

Telecoms & IT

The Third National Telecommunications Plan, unveiled in 2012, lays out the goals of developing a national broadband network and providing the regulatory framework necessary for implementing fourth-generation long-term evolution (4G LTE) technology. A considerable improvement in the country’s ICT capabilities, represented by a jump of five places from 45th to 40th between 2011 and 2012 in the ICT Development Index, is forecast to continue. The Telecommunications Regulatory Authority (TRA), which regulates the industry, has pursued policies to encourage market liberalisation and fair competition among operators, which has been a very positive force in the market. In a small, but highly competitive market, the main telecommunications companies within Bahrain have worked to carefully position themselves over the past few years toward the unveiling of the 4G LTE spectrum, which, due to a high level of ICT interconnectedness and the tendency of the kingdom’s population to be early adapters of new technologies, will most likely be very popular and profitable. This chapter contains a roundtable discussion with Sheikh bin Isa Al Khalifa, CEO, Batelco Group; Ulaiyan Al Wetaid, CEO, VIVA Bahrain; and Mohammed Zainalabedin, General Manager, Zain Bahrain.

Legal Framework

New regulations from the Central Bank of Bahrain that seek to target the marketing of unauthorised financial services have recently been introduced. This new regulation is intended not only to regulate all the financial services and products that are offered in Bahrain, but also to safeguard the interests of the foreign financial institutions who wish to offer or market financial products and services. A new labour law conforms more closely to international standards and is generally seen as expanding the rights of employees. This chapter contains a viewpoint with Qays H Zu’bi, Senior Partner, Zu’bi & Partners.

The Guide

This chapter features a rundown of the island’s leading hotels and contact information for various institutions, including government ministries, foreign consulates and embassies, emergency services, tourism companies and local media. It also includes information on society and etiquette, language, transport and visas for both business visitors and tourists.

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