An introduction to Bahrain 2008
Bahrain Economic Development Board
EDB Chairman
The Crown Prince
Board of Directors
Comprised of public and private sector officials spanning all areas of economy
Business Development and Investment Promotion
Dedicated to facilitating foreign direct investment into Bahrain Provides sector-specific information for investment appraisals Provides information and assistance with commercial licensing and government approval processes Coordinates land selection and access to natural resources Dedicated investment officers and cross-ministerial support teams to ensure coordination Brings technology know-how, capital base, and capable management team together to set up new business ventures and projects in Bahrain Dedicates an aftercare program to ensure the long tern business success of foreign investors
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A modern Gulf economy
Introduction to Bahrain
Capital: Manama Head of state: H.M. King Hamad bin Isa Al Khalifa Population: 1,000,000 Area: 770 km2 Languages: Arabic, English (used as business language) Currency: Bahraini Dinar (BD) (USD 1 = 0.376 BD) Time zone: GMT+3 Religion: Islam (85%, state religion); Christian, Hindu, Jewish and other minorities enjoy freedom of religion Governmental system: Constitutional monarchy with a bicameral parliament
Source: Central Informatics Organisation 2007
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A modern, stable country
Bahrain has been a regional pioneer, with a constant drive for further improvements. It was first in the Gulf … 1919 to start male education 1928 1931 1960s 1970s 2001 2002 to start female education to discover oil to start an economic diversification strategy that favoured non-oil industry sectors to establish a banking sector to introduce democratic reforms to embark on privatization programs
2004
2006 2008
to fully liberalize the telecoms sector
to sign an Free Trade Agreement with the USA co-founded GCC Common Market
5
One of the top 20 free economies of the world
Rank Country Hong Kong Singapore Ireland Australia United States United Kingdom Japan Bahrain Germany Kuwait South Korea Oman France Saudi Arabia UAE Qatar India China
Important reforms and regulatory improvements have made Bahrain the freest economy in the Arab world, for 14 consecutive years Index based on assessment of independent economic variables that describe the adverse effects on companies and their entrepreneurial freedom 162 economies assessed for 2008 rankings
1. 2. 3. 4. 5. 10. 17. 19. 23. 39. 41. 42. 48. 60. 63. 66. 115. 126.
Source: The Heritage Foundation / Wall Street Journal Index of Economic Freedom 2008
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Key indicators of Bahrain’s economy
Sovereign rating*:
S&P: AAMoody’s: A3 Fitch: A Bahrain is the financial centre of the Middle East with more than 400 financial institutions.** Bahrain was placed at 11th globally in the UNCTAD performance rankings in the 2007 World Investment up from 23rd the previous year.*** Real GDP Bahrain*** US$ billion
CAGR 5.7%
6.9 7.2 7.6 8.1 8.6 9.2
2000
2001
2002
2003
2004
2005
Rate of inflation 2006 ****:
10.1
11.3
2.2
3
3.2
3.9
Saudi Bahrain Arabia
Oman
Kuwait
UAE
Qatar
Sources: * S&P Credit Rating 2007, Moody’s Credit Rating 2007, and Fitch Issuer Rating 2007 ** Central Bank of Bahrain Report2007 *** UNCTAD Report 2007 **** Central Informatics Organisation 2007 7 *****IMF Annual Report 2007
The most diversified economy in the Gulf
Non-oil vs. oil GDP contribution* %, 2006
Bahrain
100%
Contributors to GDP %, 2006 **
85
15
Other sectors, Hotels & 9.2 restaurants, 2.8 Construction, 6.2 Telecoms and transport, 8.2 Trade, 8.4 Manufacturing , 15.9 Financial sector, 25.5
UAE
62 54
38 46
GCC overall Oman Saudi Arabia
52 45
48 55
Kuwait Qatar
41 38
59 62
Real estate and business services, 9.3
Oil & gas, 14.5
Sources:* IMF Annual Report 2007 ** Central Informatics Organisation 2007
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Opportunities in a range of sectors
Financial sector
Project finance Asset management Fund Administration Islamic banking (Re-)Insurance
High value manufacturing
Aluminium downstream Automotive Product assembly Food processing Light manufacturing
Business Services
Business consulting Executive search Marketing and advertising Logistics services and consulting
ICT
IT systems development and support Telecommunications Global contact centres ICT consulting
Healthcare
Pharmaceuticals Specialized medical centres Rehabilitation & geriatric
Education and training
International schools Specialized training centres Education management education consulting
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An attractive regulatory environment
Businesses can be 100% foreign-owned
Companies allowed 100% foreign ownership In more than 95% of private sector activities No ‘free zone’ restrictions Individuals may purchase landfreehold in prime locations for residential usage and accordingly obtain permanent residency Companies may purchase landfreehold throughout Bahrain for commercial usage.
Types of 100%-owned commercial operations in Bahrain: Limited Liability Single Person Company Private Joint Stock Company Holding Company
Other means for international investors to register their operations in Bahrain: Public Joint Stock Company (up to 49% foreign ownership in any activity / sector) Branch Office Regional Office
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It is easier doing business in Bahrain than it is in Eastern Europe
Burden of government UAE Japan Bahrain China Germany USA India Eastern Europe Mexico Russia
4.3 3.6 3.4 3.4 3.1 3.1 2.9 2.8 * 2.6 2.2
Starting business (No. days)***
63 23 7** 35 24 5 35 24 - 31 27 28
Registering property (No. days)
6 14 14** 32 40 12 62 123 - 197 74 52
* Average of Czech Republic, Slovakia, Poland ** Source EDB, Time for commercial registration, 3 to 6 month for Industrial registration *** Source: World Bank, Doing Business 2007 12 Source: The Global Competitiveness Report 2006 – 2007, Wikipedia 2007;Complying with administrative requirements (permits, regulations, reporting) issued by government in your country; 1 = burdensome, 7 = not burdensome
The most liberal tax regime in the Gulf
Bahrain tax rates
Corporate income tax rates in GCC countries
Percent *
No corporate income tax No personal income tax No tax on capital gains No withholding tax No restriction on repatriation of capital, profits or dividends Few indirect taxes e.g. 10% municipal tax on rents 0
Bahrain Oman Qatar UAE Kuwait
20–85
0–55 0–55
0–30 0–35
Saudi Arabia
Source: * Ernst & Young Worldwide Corporate Tax Report 2007
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Developing international trade ties
More than 65 trade agreements US-Bahrain FTA signed in 2006 offers huge opportunities Financial, industrial, services and agricultural 96% duty exempt; Tax-free benefits for textiles and garments With 35% value-added manufacturing in Bahrain, products get duty-free access to the US market Opportunity for low-cost operations for American companies and for access by Asian companies 14
GCC Common Market
36 million citizens and a combined economy of more than USD 750 billion, which is half the economy of EU that has a population of 496 million citizens. The main implications of the formulation of the GCC Common Market: The flow of FDI into the GCC region is expected to increase by 20% over the coming 5 years. The GCC inter-state trade is expected to increase by 25% by 2010. International trade is expected to increase by multiples The sectors which will benefit the most from this economic integration include investment, banking, ICT, and logistics, and real estate sectors. Mergers and acquisitions transactions are expected to increase by 50%. The common market offers equal opportunities for all GCC citizens including the right to work in all government and private institutions in member states, buy and sell real estate and make other investments, move freely between the countries, and receive education and health benefits. The common market will allow the GCC citizens the freedom of movement between the member states unobstructed, in search of employment and residency.
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Planning for the future
Business centre
(financial services, business services, business tourism)
Bahrain International Airport Logistics services, industrial area Port Heavy industry
Causeway to Saudi Arabia
Manama
Education and technology corridor
(in proximity to Bahrain University and Bahrain International Circuit)
Qatar Causeway (planned)
´
Tourism
(currently undeveloped)
Tourism
(Durrat Al-Bahrain)
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Competitive factor costs
A cost-efficient business base
Average monthly salaries for General Manager- Multinational Company, US$*
16,500 12,750 2,722 18,500 4,089 3,741
Average business class return ticket to Frankfurt, US$**
Bahrain
Dubai
Doha
Bahrain
Dubai
Doha
Average monthly lease rates for new prime office space, US$ / sq m***
76 64
Average monthly lease rates for 3 bedrooms apartments in prime locations, US$***
4,300 2,450 3,846
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Bahrain
Dubai
Doha
Bahrain
Dubai
Doha
Sources:* Annual Salary by Gulf Business 2007 ` ** Gulfairco.com, Qatarairways.com, and emiratesair.com 2007 *** Global Investment House Real Estate Report 2007
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Competitive factors of production
Gas Very competitive prices in the region of USD $1.50 per mmbtu
Industrial Land
Flat rental rate for industrial land ranging between USD 1.33 and 1.75 per m2 per year
Electricity
Electricity prices of about USD 0.043 per kWh
Water prices of about USD 1.05 per m3 Water
Construction Cost
Industrial building cost (one-story hanger type structure) USD 333 per m2
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Location and transport infrastructure
Bahrain’s infrastructure is better than in low cost countries,
Overall infrastructure quality* Germany
6.6 6.3 6.1
Rank**
Port
Airport
3 8 11 31 37 - 72 60
6.6 6.0 5.7 5.3 3.3 - 3.5 3.4 3.7 3.5 3.4
6.7 6.4 6.2 5.4 3.8 - 5.1 4.7 3.7 5.1 4.3
Japan USA Bahrain
4.9
Eastern Europe*** Mexico
3.1 - 4.7
3.6
China India Russia
* ** *** Source:
65 69 85
3.4
3.3
1 = underdeveloped, 7 = as extensive and efficient as the world’s best Worldwide Czech Republic, Slovakia, Poland 21 The Global Competitiveness Report 2006 – 2007
A centre-point between East and West
Flight time to major business destinations
in hours
1 3.5 7.5
Bahrain
Location advantage Easy access to a large regional market More than 36 million people living in the Gulf region Around 440 million people living in the MENA region (comparable to the size of the population of the European Union)
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Strong transport infrastructure
Dense network of domestic highways after huge infrastructure investments Connection with neighbouring countries 25 km King Fahd Causeway linking Bahrain and Saudi Arabia provides easy access for manufacturers to mainland markets Causeway to Qatar planned (40 km over-sea route) Existing deepwater harbour Port Salman 14 berths (including one roll-on/roll-off berth) Container terminal New Sheikh Khalifa bin Salman Port under construction (completion by August 2008) More than USD 600 million total investment volume The port management is privatized and outsourced to APM Terminals Bahrain International Airport upgrade recently approved Capacity of 15 million passengers per year after first phase and 45 million after final phase Major extensions of the cargo terminal Hub of Gulf Air, Bahrain Air, and DHL
By road
By sea
By air
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High livability
Best value for in the region
156
Cost of living index
%, Manama = 100%
100
124
122
140
124
General Index
171 185 102 131 113 100
Food
204 100
138
147 56
175
Utilities
151
100
121
108
136
145
Recreation
131
100
111
131
132
116
Transport
Manama Dubai Riyadh Kuwait City Doha Muscat
Source: Economic Intelligence Unit 2007
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Entertainment in Bahrain
A wide range of leisure facilities across the island
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Bahrain’s new developments
Bahrain International Investment Park
High quality serviced land (247 Hectors) Fully serviced with utilities 50 years renewable lease Office space and industrial units Office suites available now Industrial rental units available mid-2007
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Bahrain Investment Wharf
A 1.7 million m2 new zoned industrial development comprising: Industrial Park: For medium and small industries (800,000 m2) Logistics Park: For warehousing, storage, cold storage, redistribution, and IT services (190,000 m2) Business Park: For low-rise office blocks, training centre, conference and exhibition halls (70,000 m2) Residential Park and service buildings: For retail units, labor accommodation and hotel (640,000 m2)
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World class commercial developments…
Including Bahrain Financial Harbor, World Trade Centre, and Bahrain Bay
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…and cutting-edge leisure and residential developments
Including Riffa Views , Durrat Al Bahrain, Amwaj Islands and Reef Island
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Investors in Bahrain
World leaders already in Bahrain
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Thank you
Business Development Department Economic Development Board 7th Floor, Seef Tower PO Box 11299, Manama, Bahrain Tel: + 973 1758 9969 Fax: + 973 1758 3330 E-Mail: invest@bahrainedb.com Web: www.bahrainedb.com