The Kingdom welcomes investments
Almost every country in the world that maintains an open market is competing for foreign investment.
Foreign Direct Investment (FDI) is often viewed as an indicator of a country’s potential, as they are normally high in countries with high potential. Consistently high levels of foreign investment in a country show the potential and the growth trajectory that its economy is in.
And the growing economies in the Middle East recognise this, as they draw up policies and regulations meant to facilitate foreign investment.
The United Arab Emirates was the largest recipient of FDI in the region in 2019, with nearly $14 Billion received in investments from abroad. Other large countries like Turkey and Saudi Arabia received significant investments as well, although quite a bit less than that of UAE.
As investors from around the world look toward growing economies for investment opportunities, countries in MENA have their work cut out for them. Countries in the region that relies on oil for much of their wealth are making changes to their policies and actions to diversify and strengthen their economies for the future.
Saudi Arabia has its ‘Vision 2030’ with goals of strengthening investments and activities in industries other than oil. The UAE already performs well in this regard, as evidenced by its high levels of FDI.
Bahrain has solid plans to achieve similar goals as well. While its goals for attracting need not be as high as that of its much larger counterparts, it is still taking significant action to attract investors and businesses from around the world.
As the countries in the region all move toward more diversified economies as the power of oil begins to wane, there is an opportunity for each of them to capitalise on.
Bahrain’s economic policies to drive FDI
Internal Policies in Bahrain
The efforts of Bahrain’s leadership to drive foreign investments in the country is spearheaded by the Bahrain Economic Development Board (EDB). They help guide businesses of all sizes through their journey into investing in the country.
They help with the whole investment process, from registration and licensing to finding an office for your business. They also act as a directory of important information that businesses and investors can use to learn and understand the business environment and regulations in the country.
Of course, none of these efforts would be fruitful if the country’s policies were not conducive to investments. The good news is, they are.
Unlike its neighbours like the UAE, Bahrain doesn’t offer free zones. Instead, it promotes investments into its mainland economy itself, with policies allowing full-foreign ownership in many industries, a rarity in the GCC.
It also promises minimum hurdles for creating and operating a company, aimed at presenting itself as a sensible and affordable entry point into the $1.5 Trillion GCC market.
It also allows foreign ownership of residential and commercial properties in several major locations, making it an attractive option for real estate investors as well as businesses who wish to own their premises.
All these factors and more have contributed to the country’s increased recognition as an ideal location to conduct business. It moved up 19 places to rank 43rd out of 190 countries in the Doing Business Report for the year 2020.
External policies from Bahrain
Bahrain performs well when it comes to trade agreements with other countries as well. It is one of only 12 countries in the world to have a unilateral trade agreement with the US. This makes it an attractive location for businesses that wish to trade with the US or US-based companies.
There is also the strong relations it enjoys with its neighbouring countries. It is a member of the GCC, which means trade with other countries in and around the Arabian Gulf is especially free of barriers. It also maintains strong relations with several major economies like China and India.
Tax Policies of Bahrain
For the vast majority of businesses in Bahrain, there will be no obligation to pay any kind of corporate income tax.
While companies in some strategic industries like oil and gas are taxed, most businesses do not incur any kind of income tax at all. And for the most part, there is no capital duty or real property tax, helping reduce the liability on businesses operating in the country.
How businesses are responding to Bahrain’s economic policies
All these policies would not be worthwhile unless they convince businesses to invest and operate in the country.
While FDI did decrease significantly in 2020 as a result of the adverse effects of the pandemic, it had seen a steady stream of improvements in the years prior. Bahrain saw $942 million of FDI in the year 2019, driven by several new businesses opening in the country.
It was the year that Bahrain saw the region’s first Amazon Web Services (AWS) servers being established in the country. The country was also recognised as the fourth-most improved country in the Doing Business Report for the year.
It has also begun seeing improved investments into the manufacturing industry as a result of the strong trade relations. Over the past few years, several companies that trade their products internationally have shifted their manufacturing to Bahrain.
Bell Racing, a sports helmet manufacturer from Belgium, moved its global operations and manufacturing to Bahrain, driven in part by the country’s successful record in motorsport events. General Electric, the renowned energy company, has a technology centre in the country as well.
All these investments are despite the fact that manufacturing is not an industry that the country was actively promoting. In fact, its primary focus has been on tourism, technology, finance and other related industries lately.
With strong leadership in place and with a plan that has been in place as early as 2008 underlining its goals for 2030, Bahrain is in the right position to grow. It continues to attract investors, entrepreneurs and professionals from around the world with the many advantages it presents.
What should your Bahrain business do next?
Of course, taking advantage of these benefits is easier said than done. As it would be a new market with unique characteristics for most of the investors from around the world, it would not be a bad idea to seek qualified help.
Al Wasel has been making business happen in Bahrain for 3 decades and counting.
With our unmatched track record of serving the needs of businesses of all sizes, we are well equipped to meet all your businesses’ needs. Contact us now, and rest assured that you have the guidance of a firm that knows how to do business in Bahrain and in the GCC.