Jan 2020 Cover Story – Business Friendly, Bahrain
Logistics News ME explores the latest initiatives taken by the Bahrain Economy Development Board that is making Bahrain one of the world’s most competitive logistics centres
The Bahrain Economic Development Board (EDB) is an investment promotion agency with overall responsibility for attracting investment into the Kingdom, supporting initiatives that enhance the investment climate and creating employment opportunities for the domestic market.
The EDB works with the government and both current and prospective investors to ensure that Bahrain’s investment climate is attractive, to communicate the key strengths, and to identify where opportunities exist for further economic growth through investment.
The EDB focuses on several economic sectors that capitalise on Bahrain’s competitive advantages. One of these include boosting the logistics sector in the country.
Global Logistics Boom
Visitors to Bahrain are often awestruck by the third-century Qalat Al Bahrain fortress on the island’s northern coast. This archaeological treasure, dating back to 2300BC, demonstrates the depth of the island’s history – but also testifies to the region’s importance in the evolution and development of the ancient Silk Road. The GCC was a key stop on ancient trade routes that connected China and India with the rest of West Asia, as well as beyond to East Africa and Europe. In recent years the region has once again established itself as one of the world’s most competitive logistics centre.
According to a recent 2019 Agility Emerging Markets Logistics Index report, GCC nations have climbed up the rankings significantly.
Business-friendly conditions and core strengths position several Gulf countries near the top of the index of 50 nations, a direct result of a wider strategy to help diversify the Kingdom’s economy away from hydrocarbons and respond to the demands of our globalised, interconnected world. The UAE and Saudi Arabia both ranked in the top 20, and Bahrain climbed six places to rank 16th. The country’s ranking was enhanced by strong investments in transport and logistics infrastructure, steady progress in streamlining regulation and its strategic development of digital capabilities.
These factors have enabled the region to take advantage of the global logistics boom fuelled by the global growth of e-commerce as economies expand and demand patterns change. GDP growth is set to expand across the region – the World Bank expects GCC economies to expand by 2.7 per cent by 2020, up from negative 0.3 per cent in 2017. Meanwhile trading partners such as India and Ethiopia expanded by 7.3 per cent and 9.6 per cent respectively with robust consumption predicted, and consequently more demand for goods and services.
These levels of growth are expected to raise consumption and modify demand routes in both consumer and industrial markets. Mordor Intelligence values the GCC e-commerce market to have quadrupled to an estimated $20 billion in the five years to 2020 – as warranted by the Gulf’s high disposable income coupled with strong internet penetration and deep social media reach. In concert, India’s logistics industry is expected to have posted a growth CAGR of 12.9 per cent over the last three years, according to data from research firm Crisil.
Taken together, these two data sets alone indicate the potential of the GCC markets as a vital transshipment node for 2.1 billion people in the Middle East, North Africa and South Asia. With reforms slower in many target markets, Gulf nations have built infrastructure capacity and strengthened their operational capabilities in breakbulk, port facilities, warehousing and transportation. They are now augmenting that competence with state-of-the-art digital solutions.
The Khalifa Bin Salman Port and its Bahrain Logistics Zone, where annual tonnage has increased 10.9 per cent over the last decade, already functions as a principal provider of goods to Saudi Arabia and Iran the wider Middle East. Now the nation is improving its systems and procedures to ease the transit of goods and services. Bahrain Customs Affairs is modernising various eCustoms initiatives to improve procedures and increase pre-clearance capabilities. Bahrain is already the most cost-effective logistics hub in the region, with other Gulf countries being 7 to 8 per cent higher in set up cost and 61 to 75 per cent higher in operating cost according to KMPG Cost of Doing Business Report. As one of the world’s first countries to roll out a 5G telecoms infrastructure, it will present a compelling case for superiority in logistics infrastructure.
Similar moves to varying degrees are being undertaken by the UAE, Saudi Arabia and other countries in the Gulf. Coupled with intra-network expansion such as the $250-billion GCC Railway, these strategic developments will ensure the region remains a global supply chain centre in the years to come – as it was thousands of years ago.
5G Connectivity and Smart Ports
In June 2019, Bahrain rolled out their 5G networks, one of the first countries globally to provide commercial 5G services
All of the regulatory hurdles to full 5G implementation have been resolved and mobile operators in the Kingdom have already begun rolling out the necessary network infrastructure.
This positions Bahrain as one of the globe’s leading 5G-ready countries and increases its attractiveness as a destination for companies trialing next-generation technologies such as autonomous vehicles and virtual/augmented reality products as the Kingdom continues to encourage investment in world-class telecommunications infrastructure and services. These products and services will also be ably supported by the National Broadband Network (NBN) which will offer ubiquitous high-speed fibre-based products to operators and consumers throughout the Kingdom.
Successful commercial trials for 5G technology in the Kingdom of Bahrain were held in June 2018 and all the operators are ready to provide commercial 5G services as the compatible consumer handsets become more available. The products and services will be in line with the 3GPP standards issued in 2018 and will predominantly utilise bandwidth in the C-Band spectrum (3GHz) and will allow Bahraini companies to tap into the global 5G services market, which is anticipated to grow from an estimated 60 billion USD in 2020 to an estimated 125 billion USD in 2025.
5G technology will also enable ports in Bahrain to be more efficient and productive enabling container transfer efficiency with automated, intelligent solutions, doing away with a dependence on human resources operating container cranes under harsh working environments.
Also, one operator will be able to handle multiple gantry cranes while working in a comfortable central control room, 5G leader Huawei said in a white paper on the subject. In the near future, the technology can be leveraged for multiple applications, such as autonomous driving of automated guided vehicles and Intelligent Guided Vehicle video management in port.
This is hugely beneficial as 90 per cent of global trade relies on maritime transportation, according to industry statistics. Smart ports are seen as a game-changer for the maritime trade and the wider logistics business, boosting trade expansion through operational efficiencies such as automated transaction processing, faster cargo turnaround times, improved staff safety and a reduced carbon footprint. These attributes will stand Gulf nations in good stead as they revive their ancient role as major transit points at the centre of global trade on the new 65-nation Silk Road.
Furthermore, countries in the GCC recognise that digitalisation also represents a major route towards achieving the goal of economic diversification away from hydrocarbons. Accordingly, they have embraced the potential benefits of digital transformation with ambitious plans and strategies.
Bahrain, for example, is actively augmenting its infrastructure to enhance its strengths as a digital economy, with a wide range of organisations within the country having embraced digital transformation. As one of the first countries to roll out 5G technology, the kingdom leads the rest of the GCC in ICT readiness, according to World Economic Forum rankings, and leads the entire MENA region in terms of ICT development, according to the International Telecommunication Union (ITU).
International organisations have responded to these measures by launching new business units in the GCC. Amazon and Microsoft opened public cloud data centres in the region in 2019, with Amazon Web Services launching its first ever Middle East ‘Region’ in Bahrain. Huawei, a global 5G leader, opened a Dubai office in 2016 and has its regional headquarters in Bahrain.
Multi-enterprise software company Infor has been moving from strength to strength after acquiring Middle East channel partner Accentia in 2017: in July, it announced it was helping Al Jazira, a Bahraini retailer and fast-moving consumer goods (FMCG) distributor, to automate its warehouse, while Mumtalakat subsidiary Mazar has tasked it with unifying and integrating the management of government assets. Infor’s new wins, in particular, demonstrate just how quickly the region has embraced industrial digitisation.
As technology begins to show up at every stage of the value chain, one-size-fits-all solutions are increasingly less likely to work for different kinds of industries. The traditional monolithic approach to enterprise software in the GCC is fast giving way to industrial digitisation. Companies will, therefore, need to implement bespoke, industry-specific enterprise software programs with precisely calibrated approaches to be able to move to the next stage of industry 4.0.
Start-up activity has been booming across the Gulf, as local and foreign entrepreneurs capitalise on a highly connected base of young consumers with high disposable incomes to launch products and services that meet the region’s unique needs. Opportunities are only going to increase across the Gulf and particularly in Saudi Arabia as the Kingdom opens its doors to new business.
As a principal import gateway to Saudi Arabia, Bahrain’s Khalifa Bin Salman Port (KBSP) is set to expand its already significant benefits for companies operating within its free zone. The port offers a range of value-added services to entrepreneurs in the manufacturing and logistics sector.
In addition to its excellent capacity, efficient operations and market-leading turnaround times, operators using the port can expect a mere 30-minute journey to the King Fahd Causeway with Saudi Arabia and a short 10 minute-drive from the seaport to airport. Work is now underway on a second causeway – the King Hamad Causeway – that will run parallel to the King Fahad Causeway and will carry passenger and freight trains as well as vehicles. Not only does Bahrain offer 100% foreign ownership for entrepreneurs, but with the lowest setup and operating costs in the GCC, companies save 30-50% compared to neighbouring countries.
Already, the Bahrain Logistics Zone services third-party logistics and freight forwarding services; general and specialised storage and distribution activities in the re-export business; and value-added logistics services such as component assembly, packing and packaging, labelling, testing and repair, mixing, weighing and filling, and other light manufacturing activities.