While oil and gas may be the first industry that many people associate with the Gulf, the non-oil sector is by far the most dominant component of Bahrain’s economy. In 2023 the non-oil sector was responsible for a record 83.9% of the kingdom’s GDP, and industry accounted for around 14% of the overall economy that year. This category stretches from the giant aluminium plants of Aluminium Bahrain (Alba) to the small and medium-sized enterprises (SMEs) present in the kingdom’s many industrial estates and workshops.
For many years the kingdom has prioritised manufacturing and other industrial activities, while also developing a broad and sophisticated financial and governmental support network for the sector. As it continues with its long- and short-term development plans, Bahrain is embracing the potential of the Fourth Industrial Revolution (4IR) as it expands smart factory infrastructure. This dovetails with the kingdom’s prowess in robotics and artificial intelligence-driven enterprises. At the same time, Bahrain’s government is keen to boost local value-added and the Made in Bahrain trademark, while also seeing industry as a key sector for its future employment and diversification needs.
Structure & Oversight
The main government body responsible for the sector is the Ministry of Industry and Commerce (MoIC). This ministry is divided administratively into a number of specialised directorates, with responsibility for segments such as industrial areas, SMEs, testing and consumer protection, and foreign trade. As of August 2024 the minister heading the MoIC was Abdulla bin Adel Fakhro. The MoIC’s Industrial Development Directorate issues industrial licences, which businesses can apply for and renew via the Sijilat online portal. Bahrain’s Industrial Services System also acts as a one-stop online shop for licence information, details of tax and tariff exemptions and requirements, and a variety of other services for industrial enterprises.
The MoIC works alongside a series of other key institutions in the pursuit of industrial development. These include the Labour Fund (Tamkeen), a semi-autonomous public agency that was founded by the government in 2006 to support private sector business development. Since then, it has dispensed some BD2bn ($5.3bn) in direct and indirect support for training, employment and funding enhancement for private sector outfits, with a particular emphasis on SMEs and labour development. Many recent initiatives are in the IT and cybersecurity world, with a major effort under way to reskill and enhance the industrial sector’s IT competencies.
Catalysing Investment
The Bahrain Economic Development Board (Bahrain EDB) is Bahrain’s main investment promotion agency, working to bring foreign direct investment (FDI) into the kingdom, as well as to ensure that capital inflows target priority sectors – including industry. As of August 2024 the Bahrain EDB was headed by Noor bint Ali Alkhulaif, who is also minister for sustainable development. Since April 2023 the Bahrain EDB has issued the Golden Licence, a business licence granting extra incentives for firms that invest over $50m in the kingdom, or create 500 local jobs. This scheme has been successful, with a record $6.8bn FDI inflow into Bahrain in 2023, of which $2.4bn was invested in nine Golden Licence projects.
The MoIC also works closely with Export Bahrain, the government’s dedicated support arm for companies selling overseas. Since its establishment in November 2018, this entity has promoted Bahraini exports abroad through the Made in Bahrain trademark, while also encouraging local businesses to internationalise their offerings. SMEs benefit further from the SME Development Board, which brings together the MoIC, Tamkeen, the Bahrain EDB, Bahrain Development Bank (BDB) and the Bahrain Chamber of Commerce and Industry (BCCI). Micro-, small and medium-sized enterprises (MSMEs) make up some 93.3% of all commercial registrations in the kingdom, with 81% of them owned by Bahrainis, according to MoIC figures from June 2023. Of the total, 39% were owned by women and 23% by youth, demonstrating their importance in broadening private sector economic activity across the population. Start-ups are able to take advantage of the Bahrain Business Incubator Centre (BBIC), initiated and owned by BDB, and supported by the MoIC and the UN Industrial Development Organisation. The BBIC provides entrepreneurs with a range of support services, from mentoring to assistance with new regulations.
The BCCI is one of the oldest chambers of commerce in the Gulf. Founded in 1939, it brings together private sector leaders to discuss matters of joint interest. It is also well integrated into government consultative procedures and provides the ATA Carnet, a document permitting tax-free and duty-free entry of goods.
Bahrain is a member of the GCC, giving it duty-free access to the markets of the other five GCC member countries, along with a range of other business advantages. The kingdom is also a member of numerous international organisations, such as the Arab Industrial Development, Standardisation and Mining Organisation and the International Labour Organisation.
The kingdom has a free trade agreement (FTA) with the US, which was strengthened in September 2023 with the signing of the Comprehensive Security Integration and Prosperity Agreement, including a commitment to further grow bilateral trade. In June 2024 Ni Ruchi, the Chinese ambassador to Bahrain, announced that an FTA between Bahrain and China was being explored, in tandem with discussions over a GCC-China trade agreement. With 100% foreign ownership allowed in most sectors, Bahrain was ranked the 68th-freest economy in the world for 2023 by the Heritage Foundation.
Metals
The industrial sector contains a wide range of firms – from large-scale corporations to MSMEs – with the kingdom long famous for its entrepreneurial and trade-oriented inhabitants. On the large-scale side, metals as well as petrochemicals and plastics are two major segments, with the former including aluminium and steel, and the latter a host of downstream products leveraging the kingdom’s oil and gas industry.
Alba has the world’s largest single-site smelter outside China and contributes around 2% to global aluminium production. In 2023 Alba produced some 1.62m tonnes of this metal, a record level and 20,554 tonnes more than in 2022. This produced revenue of $4.1bn and a profit of some $314m. Alba is majority owned by Mumtalakat, the kingdom’s sovereign wealth fund, at 69.4%, and Saudi Arabia’s government-owned petrochemicals company SABIC, at 20.6%.
In steel, Bahrain Steel has a dual plant capable of producing 12m tonnes of iron ore pellets that can be used in either direct reduced iron (DRI) or blast-furnace steel-making. This business contributes some 5% to Bahrain’s total GDP, according to company figures. The company is 100% owned by Foulath Holding, which also fully owns the United Stainless Steel Company and is a majority shareholder in United Steel Company (SULB) – a joint venture with Japan’s Yamato Kogyo and a DRI and heavy steel producer. The company is also a majority stakeholder in SULB’s Saudi sister company, SULB Saudi. A further metals outfit is Bahrain Ferro Alloys, which produces two steel-related products, high-carbon ferromanganese and silicomanganese. The local metals sector was boosted in March 2024 when Bahrain Titanium, a subsidiary of Switzerland’s Interlink Metals & Chemicals, announced a $200m project to develop a multi-phase titanium facility in the kingdom. The company expects this to open in 2025.
Petrochemicals
On the petrochemicals and plastics side, the Bapco Energies-owned Bapco Refining operates a large-scale refinery in the kingdom. By August 2024 it was in the final stages of a modernisation project that will take refining capacity from 267,000 barrels per day (bpd) to 380,000 bpd. Bapco Energies is the major source of feedstock for petrochemical and plastics processes in the kingdom. It also owns a third of Gulf Petrochemical Industries Company (GPIC), which uses natural gas for the production of urea, ammonia and methanol at its complex in Sitra. The other shareholders – each owning a third of the company – are Saudi Arabia’s SABIC Agri-Nutrients Company and Kuwait’s Petrochemical Industries Company. A further industrial spin-off from oil and gas industry is ship repair and maintenance. The Arab Shipbuilding and Repair Yard is Bahrain’s leader in this field, with the enterprise performing conversions of ships and rigs, and providing fabrication and engineering services.
SME Support
Elsewhere, the kingdom has significant industrial segments in furniture and wood products, food and pharmacological products, apparel and textiles, and engineering. Many of the companies working in these areas are SMEs, which make up the majority of the sector’s businesses. SMEs – and other enterprises – are able to take advantage of the kingdom’s industrial zones. There were nine of these as of August 2024, ranging from industrial parks to cities and areas, managed by the MoIC via the Industrial Areas Directorate.
As Bahrain has liberalised its overall business regime for foreign entities in recent years, some of these zones’ original advantages – such as 100% foreign ownership and 0% corporate and personal income tax – are no longer unique. However, these zones offer duty-free imports of raw material and equipment, industrial land at competitive rates, one-stop-shop services, transport links and other infrastructure, and the synergies of location within a zone dedicated to industrial production.
The Export Bahrain campaign supports local businesses in reaching out to overseas markets, promoting products and services abroad while also assisting SMEs back home. In 2023 the campaign facilitated exports totalling BD161m ($427m). Manufacturing accounted for the largest slice of this total, with approximately BD46.7m ($124m) worth of exported goods and services. Breaking this down, paper and packaging led the way, with BD16.1m ($42.7m), followed by processed foods, with BD10.3m ($27.3m) and aluminium downstream products, with BD5.9m ($15.6m).
Plans & Programmes
The over-arching development plan for the kingdom is the Bahrain Economic Vision 2030. Launched in 2008 with the Bahrain EDB as its implementing authority, the vision sets out the blueprint for achieving the long-term goal of economic diversification away from hydrocarbons. Manufacturing is identified as a central sector in this process, with a focus given to widening and broadening industry as a means of employment and long term non-oil growth.
In response to the Covid-19 pandemic, a further strategy, the Economic Recovery Plan (ERP), was launched in October 2021. Industry is a key sector in the plan, with specific targets mentioned. These include growing the sector’s percentage of GDP to 14.5%, its contribution to exports to 80.1%, and boosting the number of Bahraini nationals employed in industry by 25.3% by 2026.
Three projects are mentioned in the ERP: the Aluminium Downstream Zone, the Bapco Modernisation Programme (BMP) and the US Trade Zone (USTZ). The first of these widens the existing Alba offering by adding downstream elements to its large-scale complex. This provides a clear opportunity for manufacturers of a range of aluminium products to establish a presence in a cost- and energy-efficient location. In January 2024, UK-headquartered firm Conexsus opened a $100m 32,000-tonne-capacity aluminium rod plant at the site.
Meanwhile, the BMP – one of the largest projects in Bahrain’s industrial history – will make Bapco’s Sifra facility one of the most environmentally compliant refineries in the region and will double Bapco Refinery’s profit potential due to the 42% increase in production capacity. In July 2023 the BMP was reported to be 90% complete, and the project’s control room was energised and inaugurated that same month. In March 2024 Bapco Energies and TotalEnergies began talks for a strategic partnership supporting the BMP.
Elsewhere, the USTZ aims to build on the advantages provided by Bahrain’s FTA with the US to establish a dedicated, US-oriented trade zone. Located on around 1.1m sq metres of the Salman Industrial City, the foundation stone for this MoIC-led BD75m ($199m) project was laid in 2022. The zone is expected to be operational in 2025.
Industrial Sector Strategy
The Economic Recovery Plan also features a series of sector-specific strategies including the Industrial Sector Strategy 2022-26, which the MoIC launched in December 2021. This roadmap is based on five pillars: promoting local industries, investing in infrastructure, improving investors’ experience, providing guidance on careers in industry to Bahrainis and updating industrial legislation.
Particular segments that the plan focuses on include food products, pharmaceuticals, micro-electronics and the renewable energy sector, which encompasses manufacturing for solar and wind, as well as blue and green hydrogen. Further focus areas include SME development. This covers ideas such as encouraging large factories in the country to purchase from local small and medium-sized factories, as well as providing industrial incubation and acceleration opportunities. The strategy includes the establishment of an industrial innovation centre, along with enhancing the ICT infrastructure available to industrial establishments. ICT is also advancing on the licensing and administrative side, with a unified electronic platform for investors and easier application processes also part of the strategy.
In terms of promoting localisation, the Takamul local value-added programme was launched in August 2023 to increase the contribution of local companies to the economy. Participants in this scheme – which was expanded to include Saudi companies in August 2024 – will be able to qualify for a value-added certificate, enhancing their appeal to other companies when making their purchasing decisions.
Meanwhile, Tamkeen has been following the fifth cycle of its development strategy since 2021, which is set to conclude in 2025. The current cycle focuses on private sector and labour initiatives. Regarding labour initiatives, Tamkeen has supported a wide range of training and professional development programmes, along with wage and employment support for businesses. In terms of the private sector, Tamkeen has funded initiatives such as a programme to encourage the establishment of start-ups – along with schemes targeted at bringing women into the workforce.
Ifactories & Industry 4.0
In August 2023 the MoIC launched its iFactories initiative. The national programme is designed to accelerate Bahrain’s participation in the 4IR, the technology-driven process that is enabling further automation and the reworking of a wide range of industrial and work processes. The strategy aims to convert 300 factories into smart facilities by 2026, encouraging the use of technologies such as robotics, the internet of things, big data analytics and 3D printing to enhance productivity.
Tamkeen is also participating in this scheme, with grants of up to 50% of the required investment for factories that wish to achieve Industry 4.0 levels of automation. A multi-stage process is planned, under which the MoIC will initially provide guidance for factories to self-evaluate their needs and their potential for conversion into smart factories. This will be followed by external surveys, the design and development of a digital transformation plan, grants and incentives, and the development and implementation phase. The target is to boost productivity in factories significantly, as well as to enhance competitiveness, quality and cost efficiency. For workers, the scheme aims to upgrade skills and competencies, with Bahrain Polytechnic already offering courses in cybersecurity, robotics and automation in support of the initiative.
Performance
Information & eGovernment Authority figures show that manufacturing contributed 13.6% of the kingdom’s GDP, at constant prices, in 2023. This was down on the figure of 14% for 2022, and 13.9% in 2021. These figures put industry into third place in terms of contribution to GDP, behind financial services and crude petroleum and natural gas. In terms of FDI, manufacturing receives the second-highest volume of inward investment. In the fourth quarter of 2023, some BD2.3bn ($6.1bn) of inward FDI flowed into the sector, behind the BD10.6bn ($28.1bn) that went into financial and insurance activities.
The first half of 2023 saw a contraction in manufacturing growth, following a robust overall increase of 4.3% in 2022. In the third quarter of 2023, however, it rebounded to positive territory, at 0.6%, followed by a 0.7% rise in the fourth quarter of 2023. Breaking this down into types of industry, the strongest performers in 2023 were large enterprises and petrochemicals firms. GPIC saw its annual output climb by 10.8%, while Bapco Refining’s production went up 2.1%. In metals, Alba also increased production, by 2.2%.
Government figures for the first quarter of 2024 show a 5% rise in non-oil exports, with metals the top export segment. Unwrought aluminium alloys recorded BD250m ($663m) out of the BD1bn ($2.7m) total of non-oil exports from the kingdom that quarter. This was followed by agglomerated iron ores and alloyed concentrates, with BD240m ($637m) in export revenue, and unalloyed aluminium wire, with BD51m ($135m).
Outlook
As with industrial sectors elsewhere around the world, future industrial performance in Bahrain depends greatly on the degree of global economic growth over the next few years. International uncertainties will likely continue, but Bahrain finds itself positioned as a regional growth hotspot in the GCC. Inflation is also falling locally and internationally, while the Central Bank of Bahrain lowered interest rates in September and November 2024, making credit cheaper.
At the same time, the kingdom has a firm base of innovative and well-educated citizens whose culture of entrepreneurship is set to benefit manufacturing and other industries. The iFactory initiative in particular should boost competitiveness and productivity, while Bahrain’s offering of tax and investment incentives should continue to make it an attractive FDI destination. Bahrain’s positive relations with its neighbours should also benefit it, with major potential for exports of metals and processed goods to fast-developing Saudi Arabia a notable opportunity for the kingdom’s industrial sector. The years ahead should therefore be productive, with Bahrain’s manufacturers – whether SMEs or large-scale enterprises – ready for further growth.
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