Bahrain on Tour
Following a period of sustained growth, Bahraini officials are touring the world on the hunt for new trading partners. But without investment in education and jobs for nationals, the efforts could be undermined. Logistics News ME reports
By keeping a keen eye on business, Bahrain has cultivated a robust and lucrative logistics industry over the last decade. Ranking 18th freest economy in the world, Bahrain is also the first in the MENA region to appear on the Heritage Foundations Index of Economic Freedom. The kingdom is also keen to incubate new businesses and provides free and easy access to neighbouring countries from its seaport, airport and logistics processing zones, offering value for money on operating costs. In 2015 KPMG confirmed the cost of doing business in Bahrain to be 35% and 43% lower than that of Dubai and Qatar respectively.
Further benefits exist in the form of Bahrains trade deal with the US. The Free Trade Agreement (FTA) enables GCC countries to sign FTAs with the EU, China, Japan, Iraq, and Australia in order to expand into the region and trade internationally. Further to this, and in addition to other factors, in 2014 the logistics sector contributed 7% to the kingdoms GDP.
Supporting infrastructure includes the $360m Khalifa Bin Salman Port, which started operations in April 2009 and has since offered world-class services to shipping lines, freight-forwarders and beneficial cargo owners facilitating growth for the local economy and enhancing supply chains for the Northern Gulf. It is positioned between the airport and King Fahad Causeway.
Bahrain International Airport (BIA) hosts 27 commercial airlines and 11 cargo airlines, and provides sophisticated facilities for logistics operators. Located in close proximity to the Bahrain Logistics Zone (BLZ) and the Khalifa Bin Salman Port, it can handle 27 large cargo planes at any time and is the Middle East hub for DLH in the region.
Salman Industrial City, which opened in January 2010 includes the Bahrain International Investment Park (BIIP), Bahrain Investment Wharf, and the Hidd industrial Zone. Located adjacent to the Khalifa bin Salman Port, BIIP is also host to a number of leading international companies, including Mondelez International, MTQ Corporation, BASF and Siemens.
The final piece of the jigsaw is the Bahain Logistics Zone (BHZ) occupying 100 hectares of prime real estate close by Khalifa bin Salman Port (KBSP) Bahrains newest and biggest. It is the regions first boutique logistics zone offering a high quality environment to companies that meet its tenancy requirements, according to its website.
The result of such infrastructure is resilient economic performance. Bahrain EDB reports that in Q2, growth was once again led by non-oil sector whereas the oil sector actually experienced a small 1.7% YoY contraction. This followed an unusual Q1, when growth was to a large extent attributable to one-off oil output gains. Headline growth in Q2 was 2.6%, down from the oil-led 4.5% in Q1. This translated to 3.5% YoY during 1H16 as a whole
Bahraini growth normalised in Q2 and non-oil growth picked up significantly. The pace of growth in the non-oil economy accelerated markedly from 2.7% YoY in Q1 to 3.6% in Q2. This figure was ahead of the preceding three quarters and reflective of the continued activation of a large infrastructure pipeline. The fastest growing sectors in Q2 were Social and Personal Services, Construction, and Financial Services
The summer months have been characterised by relative continuity for the global economy while the GCC region has faced renewed oil price volatility and fiscal consolidation efforts. While this has exerted some downward pressure on growth, the non-oil drivers appear generally resilient and several indicators point to some increase in activity, the organisation said in a statement.
According to Bahrain EDB $694 million has been pledged to ongoing investment to infrastructure projects, which included the reconstruction of the Sitra crossing (completed in 2011) and the Shaikh Khalifa Bin Salman Highway, adjacent to Mina Salman intersection project. In August 2014, the Minister of Works, H.E. Engineer Essam bin Abdullah Khalaf, announced the Ministrys plans to study the construction of a fourth causeway to link Muharraq and Manama.
Bahrain continues to position itself as the premiere logistics hub in the Northern Gulf due to its location and superb infrastructure opportunities that will continue to improve as part of Bahrain Economic Vision 2030, Vivian Jamal, the executive director of business development at the Bahrain EDB told Oxford Business Group.
However, for a tiny island to sustain such growth, efforts must be made to reach out to major powers.
Global ties
Owing not only to its strong and immediate links to neighbouring countries, but also the number of foreign business that have adopted Bahrain as their regional base, the kingdom enjoys strong links to major global economies.
These relationships are driven by Bahrain EBD, which works to attract investment to sectors that offer competitive advantages for investors such as financial services, ICT, tourism, manufacturing, transportation and logistics services and to create high-quality jobs for Bahrainis.
This year it has been links with China bringing good fortune to the kingdom. Non-oil trade between the nations was valued around $1.8m in 2015 with the import of mechanical and electrical equipment and export of chemicals, the strongest sectors.
The China High Trade Fair was attended by Bahrain at the invitation of His Excellency Xu Qin, Mayor of Shenzhen. In September of this year, Qin visited Bahrain to meet with Chinese businesses and discuss cooperation on a number of sectors of mutual interest, including financial services, transport and logistics. Shaikh Hesham bin Abdulrahman Al Khalifa, Capital Governor and Head of Bahrains Business Delegation was quoted as saying at the time:
High-level visits such as this one between our two countries emphasise the continuous efforts of officials to strengthen bilateral relations and to encourage mutual cooperation, which will in turn be of great benefit to the people of both Bahrain and China. The visit reflects our mutual desire to expand cooperation on all levels. Our long-established bilateral relations are based on strong and solid foundations, and this visit gives us the opportunity to increase the level of cooperation between the cities of Shenzhen and Manama. It also allows us to share experiences and establish a prosperous partnership between Bahrain and China, which will flourish due to the shared strategic visions of our two countries.
2016 marked the third consecutive year a Bahraini delegation has visited China and Hong Kong to strengthen business ties. Last year Bahrain was the guest country of honour at the China International Fair for Investment and Trade, and the delegation visited several of Chinas commercial centres, signing a total of 15 agreements. In 2014, a trip to China resulted in the signing of 13 MOUs in 10 days. In addition, Bahrains inward investment agency has signed numerous deals with Chinese companies to establish operations since.
Chief executive of Bahrain EDB, Khalid Al Rumaihi, said in a statement last year: Huge opportunities can be made possible by closer cooperation between China and the GCC, two of the worlds fastest growing emerging markets.
Bahrain has some of the most competitive operating costs in the region, minimal restrictions on foreign investment and ownership and a tried and tested regulatory environment, all of which has created a highly favourable environment for international businesses.
The EDB looks forward to assisting many more Chinese companies to set up in Bahrain and take advantage of the benefits on offer here.
Another country of significance is Germany. Also visited by Bahrain EBD the kingdom is keen to promote its business friendly environment to German firms. In November 2015 Bahrain and Saudi Arabia welcomed a delegation of five German companies, mostly SMEs. The trip was organised by GESALO and Mena Projektpartner and funded by the German Federal Ministry for Economic Affairs and Energy (BMWi) as part of their market access program for SMEs on the basis of a decision of the German Federal Parliament.
Iran and Iraq are also closely tied to Bahrain by sea, air and land and both countries are positioned to provide economic benefits to Bahrain as global trade expands.
Bahrain EDB says: Investing in Bahrain means major commercial opportunities; GCC members increasingly trade with each other and cargo volume in the Gulf is steadily growing. More and more international companies are establishing here, creating a critical mass. The UNCTAD World Investment Forum ranks the Kingdom sixth globally for inward investment on a per capita basis, rising from 15th in 2012-2013. Bahrains transport and communications sector grew annually 9.8% 2000-2012, while its contribution to GDP in 2012 was 7%, up from 6.8% in 2011
The road ahead
Not only in its domestic relations, but international affairs too, Bahrain is looking to make doing business as easy as possible, an approach not always favoured by its neighbours in the Gulf.
The kingdom aspires to become a hub for innovative and agile start-ups, as well as the most forward thinking of the larger companies who have established a base there.
Shaikh Hesham bin Abdulrahman Al Khalifa, Capital Governor and Head of Bahrains Business Delegation told the media earlier this year: Bahrain is aiming to operate as the start-up hub for the GCC region, and with more Chinese businesses on board, as one of the worlds fastest growing nations, it will drive robust growth for the tech sector in the GCC.
Oxford Business Group explains: Between 2000 and 2012 the transport and communications sector was one of the three fastest-growing sectors in Bahrain, along with the service sector and construction sector. The transportation industry is seen as vital to the kingdoms goal to both double oil production and develop a more diversified economy with growth driven by the rise in the kingdoms population, which between 2001 and 2010 grew from 660,000 to 1.2m inhabitants. Still, Bahrains transport industry is mostly run by locals as part of the countrys Bahrainisation process, which seeks to raise the number of Bahrainis in the local workforce
And it is in striking the perfect balance between international trader and provider of economic stability for Bahraini nationals that Bahrain will see a strong return on its investments. If however, it fails to utilise the opportunities created by the global economy and its own proximity to major trading nations to create jobs for its nationals, problems could arise. What the kingdom must invest in next is the wide ranging and future focussed education of its Gen Y nationals to ensure they have the right skills to step up to the challenge.
