The Report: Bahrain 2022

After weathering a series of global and regional challenges in recent years, Bahrain is emerging from the Covid-19 pandemic with strong growth, rising government revenue and a new plan for the future economy. As energy and tourism earnings recover, the kingdom aims to generate sustainable long-term growth opportunities through new sector strategies and transformational infrastructure projects. These positive developments build on the country’s robust financial services and manufacturing sectors, which have helped make it one of the most diverse economies in the Gulf.

Country Profile

Bahrain has long taken a liberal approach to international trade and investment policy, which it conducts largely in line with its partners in the GCC, especially neighbouring Saudi Arabia. Historically, its closest foreign relations outside the region have been with the US and the UK. Initially built around the defence industry, these ties have expanded over the years to areas such as electrical machinery and agricultural goods. After a challenging couple of years as a result of the Covid-19 pandemic, several recent developments could open up new avenues of trade for the kingdom, along with the expansion of existing partnerships.

This chapter contains a viewpoint from Sheikh Khaled bin Abdullah Al Khalifa, Deputy Prime Minister and Minister of Infrastructure; Chairman, Mumtalakat.

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A wave of labour and regulatory reform is under way in Bahrain, as is an ambitious programme that aims to attract $30bn in investment in the tourism, transport, health, education, construction and real estate sectors. Meanwhile, the Fiscal Balance Programme launched in late 2018 has been updated – taking into account the Covid-19 pandemic’s impact – with a new target of balancing the budget by 2024. This chapter contains interviews with Zayed bin Rashid Al Zayani, Minister of Industry and Commerce; and Mohamed bin Thamer Al Kaabi, Minister of Transportation and Telecommunications.

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Financial Services

Bahrain is home to one of the region’s most vibrant financial sectors, with financial services rivalling oil and gas in terms of economic importance. Indeed, by late 2021 the financial sector had overtaken hydrocarbons as the largest contributor to the economy. The Islamic finance sector is also strong, with Bahrain ranking fourth out of 135 countries and second in the MENA region in terms of Islamic finance development in a 2021 report by financial analysis firm Refinitiv. Through initiatives such as the launch of the region’s first cross-border innovation centre in 2020, the kingdom is also working to establish itself as a global financial technology centre. This chapter contains interviews with Jean-Christophe Durand, CEO, National Bank of Bahrain; Abdulrahman Ali Saif, CEO, Bank of Bahrain and Kuwait; and Hassan Jarrar, CEO, Bahrain Islamic Bank.

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Capital Markets

Bahrain’s capital markets have faced headwinds in recent years, as the world has confronted the Covid-19 pandemic, volatility in commodity markets and the fallout from Russia’s invasion of Ukraine. Despite these challenges, the kingdom continues to exercise an important influence on regional capital markets, attract international investors and provide a sound platform for listed companies to raise funds. As part of the kingdom’s recovery efforts, the capital markets are courting renewed foreign interest, while a return to domestic economic growth and an enhanced project pipeline also bode well for robust gains in the years ahead. This chapter contains an interview with Sheikh Khalifa bin Ebrahim Al Khalifa, CEO, Bahrain Bourse.

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Energy & Utilities

After several years of stasis due to the Covid-19 pandemic, the kingdom’s energy industry is seeing a renewed pace of activity. Though Bahrain does not produce as much oil as its larger neighbours, the energy industry remains a vital part of the national economy. This has been helped by a large-scale oil and gas discovery in 2018 and the upgrade of the country’s main refinery in Sitra. Bahrain is also beginning to ramp up investment in renewables as it works towards its goal of reaching net-zero carbon emissions by 2060. The spike in oil prices in early 2022 could help to finance Bahrain’s efforts to expand its green energy capabilities. This chapter contains interviews with Mark Thomas, CEO, nogaholding; and Bassem Battisha, Country Chairman, Chevron Bahrain.

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Bahrain has targeted the tourism sector as a top driver of growth and diversification as the economy recovers from the Covid-19 pandemic. Indeed, as the only island nation in the Middle East and home to large-scale events such as the Formula 1 Bahrain Grand Prix event, the country is well positioned to meet these goals. It has long been a top destination for travellers from Saudi Arabia – attracted by its entertainment, dining and shopping options – with the two countries connected via the King Fahd Causeway. Officials are looking to diversify both source markets and offerings, and have implemented a series of measures and projects aimed at meeting these objectives. This chapter contains an interview with Nasser Ali Qaedi, CEO, Bahrain Tourism and Exhibitions Authority.

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Bahrain is an archipelagic nation, with most of its economic activity taking place across its four main interconnected islands: Bahrain, Al Muharraq, Sitra and Umm Al Nasan. In the planning stages as of mid-2022, a number of big-ticket transport infrastructure projects are set to facilitate a better flow of people, goods and services between – and across – the country’s borders. Looking ahead, the transport sector features prominently in the government’s post-pandemic economic recovery and development strategies, which aim to bolster transport infrastructure and transport-related revenue and increase the kingdom’s traversable landmass. This chapter contains an interview with Mohamed Yousif Albinfalah, CEO, Bahrain Airport Company.

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Construction & Real Estate

The construction and real estate sectors are important contributors to Bahrain’s GDP, yet in the years preceding the pandemic both sectors displayed erratic growth due partly to oil price instability and the government’s fiscal consolidation programme. However, recent legislative amendments and strategic announcements are expected to reinvigorate the closely linked sectors and support the central goals of Bahrain Economic Vision 2030, the overarching policy framework guiding the country’s development through to the end of the decade. A major infrastructure development drive, which includes a plan to expand Bahrain’s land mass by as much as 60%, alongside ongoing and recently announced upgrades to the industrial base, should drive construction and real estate growth. This chapter contains an interview with Mohammed Khalil Alsayed, CEO, Ithmaar Development Company.

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The manufacturing sector is the second-largest contributor to non-oil GDP, behind financial services. Some of the kingdom’s key industrial players have expanded their production capacity in recent years, significantly bolstering heavy industry and downstream potential, most notably in the aluminium segment. Aluminium is Bahrain’s biggest non-oil export, and Aluminium Bahrain is integral to overall industrial performance. Strong logistics infrastructure is integrated with a network of industrial and free zones, where foreign and local investors enjoy a range of regionally competitive incentives. This chapter contains interviews with Ali Al Baqali, CEO, Aluminium Bahrain; and Abdulwahab Al Sadoun, Secretary-General, Gulf Petrochemicals and Chemicals Association.

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With a relatively small but sophisticated market, Bahrain’s ICT sector is an important driver of export growth in the country, thanks to the scalability of software and services and supportive government policy. As the kingdom looks to capitalise on the digitisation gains made before and during the Covid-19 pandemic, economic recovery plans centre around further ICT development and cybersecurity preparedness. The authorities are seeking to attract regional and international investment not only in the sector itself, but also in other industries with sizeable IT requirements that Bahrain is well placed to serve. This chapter contains an interview with Mohammed Ali Al Qaed, Chief Executive, Information & eGovernment Authority.

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Education & Health

Education and health care are important policy priorities in Bahrain’s wider drive to develop a knowledge-led economy. As the first country in the GCC region to introduce government-sponsored education, in 1919, Bahrain has a long track record of public instruction and a robust private education ecosystem that has developed in the subsequent years. Fostering the next generation of local talent and innovation is a key government objective that will continue to shape the sector in the coming years, from primary through to the higher and vocational levels. The kingdom is working to build on successive decades of gains in terms of health care outcomes, while at the same time evolving its services in response to the shifting burden of care towards lifestyle-related diseases.

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Bahrain is now home to a rapidly evolving tax landscape, with several notable tax and reporting regulations introduced since 2017. The country is well established as a financial centre in the region, and in recent years the authorities have diversified the economy to include technology, manufacturing and logistics. Bahrain welcomes overseas investment, allowing 100% foreign ownership in many sectors. Adding to its draw, the kingdom is consistently ranked as one of the best places in the GCC for expatriates to live and work. This chapter contains a viewpoint from Mubeen Khadir, Head of Tax and Corporate Services, KPMG Bahrain.

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The Guide

The Guide contains listings of accommodation options throughout the capital city for both business and leisure travellers. Helpful information is provided on visa regulations and business etiquette, as well as public and private transport options for navigating the country during your stay.

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