ICT sector development forms a central element of Bahrain’s economic growth and innovation plans, enabling the development of multiple sectors and enhancing public service provision. Owing to a favourable business environment, advanced digital infrastructure and a deep talent pool, the kingdom has emerged as an attractive proposition for international ICT companies seeking a base in the region. The local sector is now pursuing a medium-term strategy designed to propel it into the next phase of development.
Oversight & Strategy
The Ministry of Transportation and Telecommunications (MoTT) leads sector development, while its Telecommunications Directorate drives sector-specific policy formulation and implementation. The Telecommunications Regulatory Authority (TRA) is the chief regulator under the Telecommunications Law of 2002, which underpins a vibrant and liberalised mobile telecoms market. Meanwhile, the Information & eGovernment Authority (iGA) is the primary source of ICT and e-government-related policies, standards and guidelines for government entities.
In response to the Covid-19 pandemic, the Bahrain Economic Recovery Plan (ERP) listed ICT as a priority sector for enhancing growth, diversification and resilience. The Telecommunications, ICT and Digital Economy Sector Strategy 2022-26 was one of six sectoral roadmaps released to support the realisation of the ERP. Launched in January 2022, the medium-term plan seeks to position Bahrain as a regional centre of digital innovation underpinned by advanced digital infrastructure and investment from global technology companies. Key objectives include enhancing cybersecurity resilience and advancing the digitalisation of government services, including through the use of artificial intelligence (AI). The strategy targets increasing national employment in ICT by 35% by the end of 2023, training 20,000 citizens in cybersecurity, achieving blanket broadband coverage and increasing the number of start-ups by 20% by the end of the plan’s term.
Performance
According to the Ministry of Finance and National Economy, the transport and communications sectors combined contributed 6.8% to real GDP in 2022, and experienced growth of 4.5% that year. Growth drivers included Bahrain’s cost-efficiency advantage over its GCC peers, according to a report released by global consultancy KPMG in August 2022. The firm estimated that Bahrain was 28% more cost-effective than the GCC average in terms of direct ICT operations costs due to cheaper manpower, rental space and internet, not to mention its pool of digital talent. Telecoms, line rental, IT infrastructure and utilities were also considered. Indirect costs such as education, residential utilities and domestic help were the lowest in the GCC, at 24% below the regional average.
Bahrain’s ICT market is expected to grow from $4.3bn in 2021 to $6.3bn in 2026, representing a compound annual growth rate (CAGR) of 8.1%, according to data analytics firm GlobalData. The retail market is the largest vertical, constituting almost one-quarter of total market spending. The retail market value is expected to grow at a CAGR of 8.2% through to 2026, led by vertical-specific and packaged applications, followed by software as a service offerings.
The Bahrain Economic Development Board (Bahrain EDB) reported that the kingdom attracted $98m of foreign direct investment from 14 companies in the ICT sector in the first three quarters of 2022, with this investment expected to translate into 770 jobs.
Telecoms
The domestic telecoms market is forecast to expand at a CAGR of 3.3% through to 2027, supported by an average revenue per user with carrier billing of $28.80. The fifth National Telecommunications Plan (NTP), which ran from 2020-23, aimed to improve fibre optic and 5G infrastructure and coverage. The sixth NTP was in development as of June 2023.
The competitive landscape of the telecoms market features three main players: Bahrain Telecommunications Company (Batelco), the kingdom’s legacy telecoms operator; Zain Bahrain, the local subsidiary of Kuwaiti firm Zain; and stc Bahrain, the local subsidiary of Saudi Arabia-headquartered stc Group. Batelco maintained a narrow lead in terms of market share in mobile subscriptions, according to TRA figures, holding 38% of the overall market in the fourth quarter of 2022, compared to 35% for stc Bahrain and 27% for Zain Bahrain. While the pre-paid market was split evenly across the three main players, Zain Bahrain held a 19% share of the postpaid market in the fourth quarter of 2022, compared to 41% for Batelco and 40% for stc.
Batelco saw a net profit of BD16.3m ($43.2m) in the third quarter of 2022, up 4% year-on-year. Revenue rose to BD100.6m ($266.8m) in the third quarter of 2022 from BD98.2m ($260.5m) in the same quarter of 2021 alongside improvements across fixed broadband, adjacent services and wholesale revenue. December 2022 saw the launch of Beyon, billed as Bahrain’s largest ICT enterprise, to serve as a parent company for Batelco and four new publicly owned digital firms: Beyon Money, Beyon Solutions, Beyon Cyber and Beyon Connect.
Zain Bahrain booked full-year 2022 revenue of BD67.4m ($178.8m), up 4% from 2021, helping to lift annual net profit by 2.6% to BD5.7m ($15.2m). While stc Bahrain’s results are packaged up as part of the parent company’s earnings from all subsidiaries, it has spent about $2bn on digital infrastructure since entering the market in 2010, including on self-service terminals and a cybersecurity training academy.
As of the fourth quarter of 2022 TRA data indicated that mobile penetration in the kingdom reached 137% across 2.1m subscribers. Meanwhile, fixed-line telephone subscriptions continued their prolonged decline, with 217,171 subscriptions at the end of 2022, representing a 13.9% penetration rate – compared to 227,133, or a 15% penetration rate, at the end of 2021.
5G & Network Upgrades
Bahrain was among the first countries in the region to embark on commercial 5G rollouts, beginning in 2019 with stc Bahrain, operating under its former brand name VIVA, partnering with Chinese firm Huawei. As of 2022 stc Bahrain had achieved 5G coverage of roughly 50%, focusing on the area in and around Manama in the north of the kingdom. In December 2022 stc Bahrain successfully demonstrated 5G Voice over New Radio (VoNR). Moreover, the company is investing to launch 5.5G services within the kingdom by the end of 2025.
Both Batelco and stc Bahrain are working on cloud-native 5G core offerings, with the latter having launched an initial service in May 2022, enabling enhanced mobile broadband, ultra-reliable low-latency communications and massive machine-type communication services. In April 2022 a memorandum of understanding between Batelco and Sweden’s Ericsson was signed to facilitate the development of 5G smart city applications, VoNR and real-time convergent charging. Batelco’s coverage currently lags behind stc Bahrain’s and is concentrated around Manama.
Zain Bahrain has also teamed up with Ericsson, and in 2022 implemented 5G time division duplex carrier aggregation on a commercial device to use on mid-band frequency, opening the door to faster data rates. The two companies are working to introduce 5G lowband and mid-band carrier aggregation. Zain Bahrain is deploying network upgrades that incorporate the latest generation massive multiple-input/multiple-out radios, which help reduce network energy consumption by about 15%. In April 2023 it expanded its network to provide stable 4G and 5G services to businesses and residences in seven new areas: Dumistan, Al Hidd, Seef, Salmabad, Al Hajiyat in Riffa, Al Lawzi and Qalali.
Internet
Broadband coverage is near universal, and is set to be so at the end of the sixth NTP, which runs through 2026. BN et, the wholesale fibre-optic broadband service provider that separated from Batelco in 2020, plans to connect all Bahrain’s businesses, including public radio-communication stations, submarine cable landing stations, data centres and other network nodes – as well as 95% of households – in 2023. About 83% of households were connected to fibre-optic broadband as of April 2023, amid an effort to lay 6000km of fibre-optic cable nationwide.
In a boon for consumers, in April 2023 the TRA approved BN et’s reference offer, or the prices it intends to charge for broadband access, which amounts to doubling the speed of fibre entry packages at the same price as the previous package. The offer included price reductions up to 27%, allowing internet service providers to offer consumers new broadband services.
At the end of 2022 mobile broadband subscriptions in the kingdom totalled 2.3m, representing a 148.5% penetration rate, while fixed broadband subscriptions totalled 173,101 for a household penetration rate of 67%, according to the TRA. Widespread broadband access underpinned the 2017 Cloud First Policy, which allowed 32 public and private organisations to migrate to the cloud in 2021. This has helped cut government expenses by 82% and transaction wait times by 76%. Early adoption of cloud services also helped Bahrain weather the pandemic, allowing employees to work remotely and health authorities to monitor Covid-19 cases via the BeAware Bahrain app.
“Initiatives like the Cloud-First Policy have yielded tangible results,” Rashid Al-Snan, CEO of Etisalcom, told OBG. “Government institutions have embraced cloud services. While the private sector keenly observes growth prospects in the digital economy, the government remains the primary catalyst, having responded with tenders tailored to the private sector, and small and medium-sized enterprises (SMEs) to foster their participation in the digital economy.”
Near-universal broadband access has sparked intense competition, with Zain Bahrain offering users who switch to its service six months of free fibre broadband rental in 2022, providing download speeds of 1 Gbps and upload connections of 500 Mbps. Batelco, meanwhile, is targeting SMEs by partnering with the Bahrain SME Society (BSMES) to provide members with special rates for mobile and broadband packages and devices. The BSMES operates four start-up incubators: Medical Gulf, Pro-Sky, Bahrain Gate and Alwani. Elsewhere, the Bahrain Technology Companies Society is working with Tamkeen, the government agency responsible for private sector and labour development, to promote SME adoption of digital technologies.
Technological Development
Bahrain has embarked on a plan to establish a large-scale technology park, with stc Bahrain pairing up with MoTT to lease 55,000 sq metres of land in Al Qurain. The park aligns with the three national guiding initiatives in the sector, namely Bahrain Economic Vision 2030, the NTP, and the Telecommunications, ICT and Digital Economy Sector Strategy 2022-26. The new data centre will add to the kingdom’s advanced data and cloud infrastructure, which includes three cloud availability zones launched by international cloud computing platform Amazon Web Services (AWS) in 2019. As one of the most advanced data centres within an integrated digital complex in the Middle East, it will enable Bahrain to become a digital infrastructure pioneer in the region.
Meanwhile, stc Bahrain is supporting cybersecurity development in the kingdom. At the 2022 Arab International Cybersecurity Summit, co-hosted by the National Cyber Security Centre, stc Bahrain demonstrated data and application security, end point security, network security, and web and email security, and hosted a live hackathon to raise awareness of digital vulnerabilities.
Start-ups
Bahrain has one of the fastest start-up ecosystem growth rates in the region, boasting a 46.2% CAGR in the number of new companies from 2020-23, according to the Bahrain EDB. This growth is tied to a range of benefits for founders, including 100% foreign ownership, zero taxes and targeted regulatory support. Moreover, almost 60% of the workforce is under 30, translating into a tech-savvy pool of native talent.
Start-up enterprises benefit from wide-ranging government support under various ICT promotion schemes. Under the ERP, for example, Tamkeen is rolling out new initiatives to upskill digital talent, including a partnership with the Bahrain EDB and US Citibank to develop a global technology centre that will create 1000 coding jobs by 2031 – a significant boost to digital talent supply in the banking sector. As of January 2023 the facility comprised 110 Bahraini employees.
Funding for start-ups is available from a range of sources, including the Bahrain EDB, which launched the $100m venture capital fund Al Waha in 2018. Other avenues for financing include a new incubator launched by Tamkeen in partnership with Riyadat Mall; Tenmou, a technology-focused angel investor ecosystem; and 500 Global, a global venture capital firm with $2.7bn in assets under management. Other supporting entities include the Ministry of Industry and Commerce (MoIC) and the UN Industrial Development Organisation.
Entrepreneurial activity revolves around 28 licensed incubators and accelerators, which focus on specific high-potential areas such as financial technology ( fintech). For example, Bahrain FinTech Bay (BFB) spearheads the development of digital financial services, including cryptocurrency-based platforms. BFB hosts 120 local and regional partners, including governmental bodies, financial institutions, corporations, consultancy firms, universities, associations, venture capitalists and start-ups. Build for Bahrain, a BFB initiative to promote health and business solutions, is backed by the US State Department’s Middle East Partnership Initiative.
One notable result of this ecosystem is Rain, the first licensed crypto-asset service provider in the Middle East, which received a license from the Central Bank of Bahrain (CBB) in 2019. The CBB’s regulatory sandbox provides a regulation-free environment for start-ups to test new solutions before scaling, serving as a site for innovation in the fintech space. Other notable accelerators include Level Z, Flat6Labs, Brinc and Brilliant Lab. Batelco, Microsoft and Zain Bahrain are key supporting companies. In November 2022 Zain Bahrain signed a strategic partnership with Tamkeen to train Bahrainis in the CODE2030 employment programme, with courses in data analytics, robotic process automation, fintech, cybersecurity, user interface design, user experience design, AI and machine learning.
One high-potential segment is gaming, where revenue in the mobile market was estimated to grow from $12.3m in 2022 to $21.3m by 2027. UAE-based marketing agency Power League Gaming co-sponsored a number of e-sports events in the kingdom. Top studios include Regnum Studios and The Stories Studio, the latter of which is female founded.
Bahrain’s start-up ecosystem has made progress in terms of gender inclusivity in the region and globally, with the highest share of female founders in the world. Some 18% of homegrown start-ups were founded by women, compared to 15% in London and 16% in Silicon Valley, according to a 2022 report by the Bahrain EDB and regional business intelligence firm MEED.
Bahrain ranks first globally in Meta’s Inclusive Internet Index sub-indices, including national female e-inclusion policies; female digital skills training and science, technology, engineering and maths (STEM) education; and open data policies and privacy regulations. Women accounted for 42% of students enrolled in STEM-related academic degrees in 2022, ensuring a strong pipeline of new female talent for the kingdom’s ICT sector.
E-Government
Digital government is another policy priority, and the Telecommunications, ICT and Digital Economy Sector Strategy 2022-26 targets an additional 200 automated government services, with an eye to elevating the kingdom’s position in the UN’s e-participation and e-government indices. In 2022 the UN ranked Bahrain 54th out of 193 countries in its e-Government Development Index, and 89th for e-participation, down from 38th and 51st, respectively, in 2020.
Chaired by Sheikh Rashid bin Abdulla Al Khalifa, the minister of interior, the Ministerial Committee for ICT is guiding the enhancement of government ICT services alongside the iGA. The committee is charged with rebuilding public services with digital delivery at their core, incorporating an assisted digital approach to widen inclusivity through government service centres.
Notably, Bahrain operates a national portal that hosts multiple e-services, such as passport and visa issuance, utility bills payments, licence renewals and many others. In January 2023 the iGA said that the government had cut the cost of providing services nearly in half the year before as a result of its digital transformation. It said that citizens had access to some 600 e-government services, with 50 new channels launched in 2022, paving the way for 3.7m annual digital transactions. Some 450 e-services were accessible via the national portal, with a further 125 on mobile and 10 through e-kiosks as of early 2023. Taken together, the channels served more than 18m visits in 2022, up 22% from the previous year.
Digital government services include an open data portal and the MoIC’s Sijilat portal, which enables businesses to apply for and renew commercial registrations via an online platform. The iGA and the National Bureau for Revenue operate an online national tax system hosted on AWS, a regional first that provides tax-related services, including value-added tax (VAT), payer registration, filing, payments, refunds, audit and risk assessment, as well as ancillary services such VAT queries and public awareness campaigns. Other programmes focus on the Sehati national health insurance scheme, and platforms to host and integrate digital government. Benayat, Bahrain’s digital building permit approval system – which enables engineering offices to apply for permits, check applications, obtain consultations and pay fees – has cut the average approval wait time to two and a half working days since launching in 2018.
Outlook
Forecasts for ICT sector growth are positive, with good reason. The focus on digital government will continue to drive investment in ancillary products and services, and national economic plans prioritise ICT growth as part of sustainable development efforts. As 5G rollout continues to gather momentum, investors can expect a proliferation of related new services, including those linked to smart city development and improved business networking tools. In addition, the thriving start-up scene will likely be central in the provision of these services as Bahrain continues to act as a regional leader for innovation in ICT and fintech.
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