The Report: Bahrain 2020
Bahrain pioneered oil production in the Middle East beginning in the 1930s, establishing the region’s initial framework for the petroleum industry. Some 90 years later oil and gas operations comprise 18% of GDP, with the economy well diversified to host established financial services and industrial sectors, as well as unique tourism offerings.
Country Profile
In 1932 Bahrain pioneered oil production in the Middle East, and in doing so established the region’s initial framework for the petroleum industry. The new resource enabled Bahrain to modernise its economy by moving beyond traditional industries such as pearl diving and fishing. Today, the country’s national plan, Bahrain Economic Vision 2030, aims to enhance private sector growth as well as continue government investment in infrastructure, affordable housing, human resource development and digital transformation. The kingdom maintains a developed industrial sector and hosts the world’s largest single-site aluminium smelter. This chapter contains a viewpoint from King Hamad bin Isa Al Khalifa.
Explore chapterEconomy
Benefitting from its robust financial services, industrial and manufacturing sectors, Bahrain’s economy is one of the most mature and diverse in the GCC. Although the kingdom has suffered in the wake of sustained low and volatile international oil prices, its economy is set to benefit from a host of supportive policies, projects and fiscal reprogramming over the near and long term. A $10bn allocation from GCC peers will provide much-needed liquidity and stability to the country’s finances, while also increasing capital expenditure capacity in 2020. The kingdom’s liberal, diverse and incentivised business environment should continue to attract new investment, even as subsidy reforms weigh on investor sentiment and cloud the near-term outlook. This chapter contains an interview with Khalid Humaidan, Chief Executive, Bahrain Economic Development Board.
Explore chapterBanking
A powerful driver of economic and non-oil growth, Bahrain’s banking sector plays an important role in ongoing diversification and development efforts. Furthermore, the kingdom has maintained its status as a regional financial centre, even with increasing competition from GCC neighbours. With financial technology developing rapidly, and profits, soundness indicators and asset growth remaining healthy, Bahrain’s banking system is well positioned to continue leading non-oil growth and diversification in the kingdom. Assets and profits have risen in recent years, with listed banks recording strong lending growth. The percentages of delinquent and non-performing loans have declined, even though overall mortgage and credit card lending has increased. This chapter contains an interview with Jean-Christophe Durand, CEO, National Bank of Bahrain.
Explore chapterCapital Markets
Despite facing challenging macroeconomic headwinds, in addition to illiquidity and limited levels of free-floating shares, Bahrain’s capital markets have been among the best-performing in the GCC in recent years. Indeed, the Bahrain All Share Index reached a nine-year high in mid-2019. Benefitting from lively trading activity, increasing market capitalisation and an expanding debt market, Bahrain’s capital markets are set for a strong performance in 2020. Although illiquidity and sluggish macroeconomic growth continue to pose a challenge, the Bahrain Bourse’s proactive and progressive approach to regulatory reform and digital innovation will help the bourse maintain its competitive edge against a backdrop of rising regional competition. This chapter contains an interview with Sheikh Khalifa bin Ebrahim Al Khalifa, CEO, Bahrain Bourse.
Explore chapterIslamic Financial Services
As both a regional and global leader in Islamic finance, Bahrain benefits from supportive regulation, capable human resources, and a reputation for diversified and mature offerings. Demonstrating this, the Islamic banking and insurance segments have recorded elevated growth rates compared to their conventional counterparts in recent years, even as the industry faced macroeconomic headwinds. Islamic banks are well positioned to implement new accounting standards despite some anticipated near-term pains. The government’s efforts to promote and expand financial technology could bring additional benefits to Islamic financial services. From a sharia-compliant, blockchain-supported cryptocurrency exchange to open banking initiatives, Islamic offerings will continue to benefit from policies aimed at maintaining Bahrain’s competitiveness.
Explore chapterInsurance
The performance of Bahrain’s insurance sector has reflected national macroeconomic trends in recent years, with premium growth remaining sluggish and, in some cases, declining, even as listed companies’ bottom lines recorded notable growth. Motor and medical insurance dominate the industry, and the recent promulgation of a national health insurance law is set to bring the latter additional growth. With the crowded market ripe for consolidation, digital channels offering customers greater choice among policies and the implementation of mandatory health insurance, the sector could see a return to robust growth in 2020 and beyond, further supported by the government’s infrastructure development agenda and population growth.
Explore chapterEnergy
Domestic oil production has declined in recent years, and Bahrain has increased its efforts to accelerate diversification and realign its economy to non-oil growth. However, the oil and gas sector remains its largest economic contributor, benefitting from a growing petrochemicals manufacturing base, rising natural gas production, and a major potential offshore oil and gas discovery in the Khaleej Al Bahrain basin. Despite facing challenging external conditions and declining domestic oil production, Bahrain’s energy sector is positioned for significant mid-term expansion, supported by the Bahrain Petroleum Company Modernisation Programme and its knock-on benefits to downstream and manufacturing industries, ongoing offshore exploration and production activities that could allow authorities to reap considerable long-term economic benefits. This chapter contains an interview with Pete Bartlett, CEO, Bahrain Petroleum Company.
Explore chapterTransport
With investment rising despite subdued recent growth, Bahrain’s transport sector remains an important and dynamic non-oil growth driver. With passenger and cargo volumes rising across its roads, port and airport, Bahrain’s transport sector is set to benefit greatly from its sweeping infrastructure development agenda. Although many big-ticket projects, including a new airport, metro system and the King Hamad Causeway, are years away from completion, the kingdom has made significant recent progress in launching and resuming critical transport projects to address the issue of congestion. Rising investment across the sector and Bahrain’s efforts to leverage its geographic position will further support long-term expansion, putting sector on track to achieving its 2030 targets. This chapter contains interviews with Kamal bin Ahmed Mohammed, Minister of Transportation and Telecommunications; and Mohamed Yousif Al Binfalah, CEO, Bahrain Airport Company.
Explore chapterConstruction & Real Estate
Bahrain’s construction sector was one of the fastest-growing non-oil sectors. Its expansion was supported by a surge in investment into infrastructure for energy, manufacturing and real estate. Rates of growth and lending have risen steadily on the back of a major oil and gas modernisation programme and a number of big-ticket projects. Real estate in Bahrain has remained resilient in the face of successive macroeconomic challenges, maintaining a positive growth trajectory in recent years even as rental and occupancy rates declined across the residential, commercial and hospitality segments. While developers have struggled with oversupply and weakening demand – particularly for luxury residential space – lower property prices have created new opportunities for businesses in the kingdom, where office space remains significantly less expensive than Abu Dhabi and Dubai. This chapter contains interviews with Mohammed Khalil Alsayed, CEO, Ithmaar Development Company; and Sheikh Mohammed bin Khalifa Al Khalifa, CEO, Real Estate Regulatory Authority.
Explore chapterIndustry
Outside of financial services, Bahrain’s manufacturing sector has grown to become the largest contributor to non-oil GDP. The sector has benefitted from rising foreign direct investment inflows, one of the world’s leading global aluminium industries and increasing diversification into value-added production across several segments. Manufacturers and exporters in Bahrain have long exploited significantly lower operating costs than elsewhere in the GCC, generous investor incentives, and well-connected logistics at a network of free zones offering easy access to regional and global markets. As the kingdom moves forward on implementing a large-scale infrastructure development agenda, local manufacturers are also positioned to benefit from rising domestic demand. This chapter contains interviews with Zayed bin Rashid Alzayani, Minister of Industry, Commerce and Tourism and Ali Al Baqali, Acting CEO, Aluminium Bahrain.
Explore chapterTourism
Home to one of the region’s most unique island geographies, UNESCO World Heritage sites and the popular annual Formula 1 Bahrain Grand Prix event, Bahrain already has much to offer visitors. The capital Manama has a long-established reputation for its high-end retail and hospitality offering, providing tourists from neighbouring states, notably Saudi Arabia, with a convenient getaway destination via the King Fahd Causeway. The kingdom has also continued to benefit from its long-established reputation as a more culturally liberal state in the region, which has proven to be a draw for its leading source market Saudi Arabia. However, as the neighbouring kingdom opens up and the region becomes more competitive, further developing the country’s niche markets and attracting arrivals from further afield will prove essential.
Explore chapterEducation
Bahrain’s public education system marked its centenary in 2019, making it the longest-running institution of its kind in the GCC. Since its inception, a range of primary, secondary and higher education institutions have evolved in the country, delivering strong student outcomes. In addition, the government is working closely with universities and the private sector to increase research and development, and improve connections between academia and the business community. The major challenge ahead will be ensuring the sector is able to incorporate emerging technologies and methodologies, so that students at all levels of the education system have the skills and knowledge needed to support the country’s economic diversification strategy and competitiveness.
Explore chapterHealth
With its first hospital dating back to the 1890s and a universal health care system in place since the 1960s, Bahrain has long had solid fundamentals for care provision. The coming years will be characterised by the continued rollout of Sehati national insurance system. Further infrastructure development will also remain a focus as the King Abdullah Bin Abdulaziz Medical City takes shape. The kingdom is enhancing its research and development capabilities with initiatives from the Ministry of Health to establish the Bahrain Genome Project, a specialised centre for genetic analysis, and plans to open the $1bn King Abdullah Bin Abdulaziz Medical City in 2021.
Explore chapterICT
With developed ICT infrastructure, high penetration rates, a tech-savvy population and a business-friendly ecosystem, Bahrain has much to offer investors. The kingdom’s geographically and demographically compact market provides an ideal sandbox for tech companies and start-ups to experiment and roll out pilot programmes, giving it a well-established research and development pedigree. Telecommunications companies in Bahrain face many of the same challenges as providers in other countries, with a decline in demand for voice services, accelerating data consumption and higher investment costs, particularly as infrastructure spending is disproportionately allocated to the rollout of the 5G network. Nevertheless, tech firms and start-ups will continue to benefit from the kingdom’s relative ease of doing business and government support in the form of funding, accelerators and incubators. This chapter contains an interview with Mikkel Vinter, CEO, Batelco.
Explore chapterLegal Framework
Recent years have seen the promulgation of various laws to position Bahrain as a competitive regional jurisdiction. This chapter reviews these new laws, including Bahrain’s new Law for the Encouragement and Protection of Competition, which came into effect on February 1, 2019. The first dedicated Personal Data Protection Law (PDPL) came into force on August 1, 2019. Prior to the implementation of the PDPL, there was no single codified data protection law in force in Bahrain. The Protected Cells Company Law, designed to further develop Bahrain’s financial sector, facilitates local and foreign investment, and promotes the country as a simple, secure and cost-effective place to do business in the Middle East. This chapter contains a viewpoint from Hatim Q Zu’bi, Zu’bi & Partners, Attorneys & Legal Consultants.
Explore chapterThe Guide
The guide contains listings of some of the leading hotels and resorts in Bahrain and contacts for important government offices and services. It also contains useful tips and information for first-time or regular and business and leisure visitors alike.
Explore chapterTable of Contents
To view the Table of Contents for this report, click the "View in online reader" link above.
Sheikh Khaled bin Abdullah Al Khalifa, Deputy Prime Minister and Minister of Infrastructure
Zayed bin Rashid Al Zayani, Minister of Industry and Commerce
Mohamed bin Thamer Al Kaabi, Minister of Transportation and Telecommunications
Jean-Christophe Durand, CEO, National Bank of Bahrain (NBB)
Sheikh Khalifa bin Ebrahim Al Khalifa, CEO, Bahrain Bourse
