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Factory buildings of Indian polyester filmmaking company JBF are seen at the Bahrain International Investment Park (BIIP) in Al-Hidd, Bahrain. The park houses production facilities or regional headquarters of over 100 foreign firms. / Courtesy of BIIP |
Island nation striving to serve as gateway to Middle East, North Africa
By Park Yoon-bae
MANAMA — Bahrain is striving to attract more foreign investments in its bid to transform itself into a business and financial hub in the Middle East. It boasts of economic freedom, openness and diversity.
"Bahrain has a long history of openness. It is the most diversified economy in the Gulf Cooperation Council (GCC) region," said Dr. Jarmo T. Kotilaine, chief economist at the Economic Development Board (EDB).
He pointed out that the country has a very long history of being a regional hub of trade and investment, although it is a small country. Bahrain is a nation of 1.3 million people, and is roughly the same size as Singapore.
Kotilaine stressed that Bahrain is aiming to serve as a gateway to the Middle East and North Africa, adding that it has advocated regional integration.
He said one of the key advantages of Bahrain is its high degree of economic freedom.
Bahrain is ranked the 12th-most open economy worldwide by the Heritage Foundation and the Wall Street Journal's 2013 Index of Economic Freedom. Its economy is the freest among the 15 countries in the Middle East and North Africa.
Bahrain was the first among the GCC member states to discover oil. It is also the first Gulf economy to diversify away from oil as its primary driver of economic growth.
According to the Central Informatics Organization (CIO), the financial sector accounted for 17 percent of the real GDP in 2012, followed by manufacturing with 15 percent and government services with 13 percent. Crude oil and natural gas represented 19 percent of the GDP.
The island nation's strategic location provides unrivaled access to the markets of the GCC, which is comprised of Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates (UAE). The GCC economy is worth $1.5 trillion and it is expected to reach $2 trillion by 2020.
Bahrain welcomes foreign investors who want to establish their production bases or regional headquarters here.
"Foreign businesses can advance to other countries in the GCC region through Bahrain," Kotilaine said. "They can go out and seek opportunities in the region."
He also said that foreign investors are able to take advantage of not only Bahrain's favorable business environment, but also its strong human capital base and well-developed education and training system.
Among other incentives is 100-percent foreign ownership. In Bahrain, foreign investors can retain whole ownership of a business. In addition, they can freely repatriate capital, profits and dividends. Besides, there is no corporate or income tax.
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The 50-floor twin tower structure is the Bahrain World Trade Center in Manama, the capital of Bahrain. The island nation seeks to emerge as the trade and investment hub in the Middle East. Courtesy of the Economic Development Board (EDB) |
International Investment Park
Bahrain's effort to attract foreign investments culminated in 2006 when it created the Bahrain International Investment Park (BIIP) on a 2.5-million-square-meter site in Al-Hidd.
"The park is designed to attract export-oriented companies in manufacturing and internationally traded services," said Paddy Gallagher, marketing manager of BIIP.
He said foreign investors in the park can expand their business and make inroads into the Middle East and North African markets.
He explained that the park offers benefits such as no corporate tax, duty free access to the GCC market and 100-percent foreign ownership of a business.
He said investors can go beyond the region to the world, noting that Bahrain is the first Middle East country to have a free trade agreement (FTA) with the United States.
Currently, BIIP hosts 103 businesses from 16 countries, which invested a total of $2 billion. Among them are Mondelez (formerly Kraft Foods) of the U.S., BASF and Siemens of Germany, polyester company JBF of India, MTO Corporation of Singapore and Abahsain Fiberglass of Saudi Arabia.
Gallagher believes that the park will provide good business opportunities for Korean investors, adding that BIIP officials are contacting several Korean companies and encouraging them to set up their production base or regional headquarters in the industrial complex.
He said that operating costs and wages in the park are low with a highly educated workforce available. The park also runs a training center.
According to the CIO, the net inflow of foreign direct investments to the Middle Eastern country increased by 14 percent from $780.85 million in 2011 to $891.22 million in 2012. The sum marked a significant increase from $155.77 million in 2010.
Bilateral relations with Korea
Bahrain has maintained a close diplomatic relationship and strong economic and trade connections with South Korea since the two countries established their ties in 1976.
Korean companies present in Bahrain include Hyundai Engineering and Construction, Hyundai Heavy Industries, Samsung Engineering, Dm Puretech Co., Woongjin Development, Woori Bank and Korea Exchange Bank.
Bahrain is now active in further promoting business cooperation with Korean firms and drawing their investments.
In May 2013, S-1 Corp., a Samsung affiliate and Korea's leading security advisory business, signed an agreement with AJM Kooheji Group, one of Bahrain's leading family businesses. Under the deal, AJM Kooheji will act as S-1's representative and market the Korean firm's services in the kingdom.
Also in that month, the eGovernment Authority of Bahrain signed a memorandum of understanding (MOU) with the Korea Trade Investment Promotion Agency (KOTRA) to help Bahrain attract more investments from Korea.
In April 2003, H-Plus Eco, a leading environmental consulting, engineering and construction services company in Korea, signed a service agreement with the Yusuf Bin Ahmed Kanoo Group of Companies, one of the Gulf's largest independent, family-owned companies. Kanoo will act as H-Plus Eco's representative in Bahrain.
The Korean firm is to offer soil and groundwater remediation consultancy, smart farm services, environmental technologies and environmental consultancy to companies and institutions in Bahrain.
In May 2012, LG CNS formed a partnership with the eGovernment Authority. LG CNS is setting up Bahrain's Business Licensing Integrated System (BLIS), a turnkey integrated solution for electronic application and renewal of Commercial Registrations (CR) and related licenses.
"Korea is one of our targets for inducing foreign investment," said Vivian Jamal, executive director of business development at the EDB. She added that Korean businesses can use Bahrain as a hub for a wider market.
She called on Korean companies to invest more in such sectors as manufacturing, food, logistics, information and communication technology (ICT) and financial services.
Financial services
Bahrain is widely recognized as the global leader in Islamic finance, playing host to the largest concentration of Islamic financial institutions in the world.
A. Rahman Moh'd Al Baker, executive director of financial institutions supervision at the Central Bank of Bahrain, said that the Islamic finance and banking sector has grown 15 to 20 percent annually over the past 20 years.
He said Bahrain now hosts 408 financial institutions, compared with 190 in the 1980s, adding that its resilience has helped the country become the financial center of the region.
Kim Kwang-seok, general manager of Korea Exchange Bank's Bahrain branch, said his branch has been taking advantage of Bahrain's financial hub status to cover the Middle East, India and Africa in its offshore banking service.
He said Bahrain's strength lies with openness, easy access to regional and global markets, and freer business operations with few restrictions.
