Plastics consumption in the Gulf region has been growing exponentially over the past decade. According to a report from the Gulf Petrochemicals and Chemicals Association (GPCA), between 2011 and 2015 consumption of plastics in the region is set to grow from 3.3m tonnes per annum (tpa) to 5.5m tpa. The GPCA puts the value of the GCC petrochemicals industry at around $74bn. Plastics pack a high value added, currently accounting for some 20% of total petrochemicals output in the Gulf by volume and constituting about 70% of the value by sales, according to the GPCA. As such, it makes sense for Bahrain to promote its plastics industry and increase the country’s export earnings.
BENEFITS: Many Gulf states, given their status as leading hydrocarbons producers, have set up petrochemicals and plastics industries as a logical first step in the process of economic diversification. However, the biggest vote of confidence in Bahrain as a centre for plastics production came in 2010, when German chemicals group BASF announced it was setting up a plant to produce customer-specific antioxidant blends for plastics manufacturing, which could be exported to the Gulf region, as well as to Asia and parts of Eastern Europe. The plant, which opened in December 2012, produces anti-oxidants for plastics and polymers. Initial production capacity at the factory is 16,000 tpa, with production starting at the beginning of 2013.
Part of the reason BASF chose Bahrain over other possible sites in the region is its good connectivity; the 15,000-sq-metre BASF factory is located at the Bahrain International Investment Park (BIIP), next to Khalifa Bin Salman Port, which enjoys easy access to Saudi Arabia. Ensuring BIIP remains competitive could be key to attracting further investment. Salah Hasan Janahi, the director of industrial areas at BIIP, told OBG, “Due to regional competition and growing interest by Saudi Arabia in the investment park model, it’s important we keep our land leasing prices low and ensure the same business-friendly incentives in order to maintain Bahrain’s competitive edge.”
Another factor is that Bahrain, unlike a number of other GCC countries, allows for 100% foreign ownership of projects across the country, not just in free zones. Given the importance of intellectual property to BASF’s business, the company felt it could keep more control, and thereby preserve its patents, in Bahrain for this reason. As such, BASF’s choosing Bahrain constitutes a significant fillip for the country by sending a signal to foreign investors and should also boost its ability to produce specialised, high-value products.
OPENING UP: Another segment that is flourishing in Bahrain is fibreglass. Bahrain Fibreglass, which specialises in fibre-reinforced polyester, has operations in over seven countries and offers design and manufacturing services. Abahsain Fibreglass, a joint venture between the S&A Abahsain Group of Saudi Arabia and Glass Strand of the US, set up a $64m plant in 2009, producing strand mat and continuous rovings and fabrics, with production capacity of 60,000 tpa. Lauscha Fibre International, a German company, set up a $20m manufacturing facility in 2009. The company produces glass microfibres, chopped strand fibres and high temperature fibres. Gulf Fibreglass produces storage tanks, baths and fits both pleasure and fishing vessels.
Zayani Polymers produces foam and polystyrene products for the packaging, agriculture and construction industries. Opened in 2011, the 5000-sq-metre plant cost $11m and produces 5000 tpa of polypropylene sack and polyethylene greenhouse sheets. Other firms involved in producing material for the packaging industry in Bahrain include JBF Industries, an Indian firm that started work on its 65,000-sq-metre plant in July 2012 and is due to start production by the second quarter of 2013. Capacity at the plant is 90,000 tpa of polyester fibres. According to the UN Food and Agricultural Organisation, packaging is estimated to be the world’s third-largest industry, and for Bahrain in particular, there is a lot of potential in this sector, both in terms of producing packaging material and tie-ups with the country’s large food-processing industry.