Bahrain: A Business Haven In The Middle East

Bahrain is a small, open economy in the Persian Gulf with a population of approximately 1.7 million people. The country boasts a well-developed infrastructure, a skilled workforce, and a business-friendly environment, making it an attractive destination for foreign investment. Bahrain has a diverse and vibrant business hub, with a range of industries and sectors that are popular among entrepreneurs and investors. The country is also known for its cultural diversity and openness, embracing a cosmopolitan lifestyle and welcoming expatriates from around the world.

Bahrain's economy is well-developed and relatively diverse, with a number of non-oil dependent industries. The country was the first in the Gulf to exploit oil commercially in the 1930s, and energy continues to play a significant role in its prosperity. However, Bahrain has since established itself as the principal financial and banking centre of the region, with a combination of regular and Islamic financial institutions and markets.

The country's success is attributed to its open economy, pragmatic economic and fiscal policies, and alignment with international business regulations. Additionally, Bahrain's liberal attitude towards foreign investment has contributed to its economic growth, attracting many international companies, including numerous banking organisations, to choose Bahrain as their regional base.

With its thriving economy, supportive business environment, and strategic location, Bahrain offers numerous opportunities for individuals and businesses looking to establish themselves in the region.

Foreign investment

Bahrain has a liberal attitude towards foreign investment, which has contributed to the country's economic growth. The country has been ranked among the most economically free countries in the world, and its business environment is constantly evolving through simplified processes, billions of dollars invested in infrastructure and real estate, and improved regulatory initiatives.

The country offers numerous advantages to foreign investors, including a well-developed infrastructure with excellent transport and communication facilities, no personal taxation, and duty-free access to Gulf Cooperation Council (GCC) member states for products manufactured in Bahrain. Additionally, there are no restrictions on capital and profit repatriation, and Bahrain has been ranked 1st in GCC in 2020 for inward FDI stocks relative to GDP.

While Bahrain has a diverse economy with many non-oil dependent industries, energy continues to play a significant role in the country's prosperity. The Central Bank of Bahrain (CBB) regulates and supervises all financial activities, and the country has a well-established financial and banking sector that combines regular and Islamic financial institutions and markets.

For foreign companies, establishing a legal presence in Bahrain is essential. This can be done through a representative office, although it cannot conduct business directly with clients in Bahrain. Non-Bahrainis looking to set up a company in the country typically form a Bahraini limited liability company (WLL), which involves submitting various documents and certificates to the Ministry of Industry and Commerce.

The Bahrain Economic Development Board (EDB) is a valuable resource for those considering investment in Bahrain. The EDB provides assistance with business location, recruitment, and legal requirements, and can help facilitate connections with potential business partners.

When it comes to foreign investment reviews, Bahrain has a limited list of activities that are restricted to companies with a minimum of 51% Bahraini ownership. However, the Minister of Industry and Commerce can grant exemptions to allow foreign investment into restricted sectors if it is deemed beneficial to the country's economy.

Overall, Bahrain offers a business-friendly environment with a simple process for setting up businesses, making it an attractive destination for foreign investors looking to capitalize on the country's competitive advantages.

Business climate

Bahrain has a pro-business environment, characterised by liberal economic policies, low taxation, and minimal government intervention. Ranked 43rd in the World Bank's ease of doing business rankings for 2020, it is a well-established financial centre with a large banking sector, including wholesale and retail Islamic banks. The country is also a founding member of the World Trade Organization and is known for its open economy.

Bahrain's economy is well-developed and diverse, with a number of non-oil-dependent industries. The country was the first in the Gulf to exploit oil commercially in the 1930s, and energy continues to be important to its prosperity. However, other sectors such as financial services, tourism, technology, manufacturing, and logistics are also key.

The country has a liberal attitude towards foreign investment, with no personal taxation and no restrictions on capital and profit repatriation. All types of foreign investment are welcomed, except for a few prohibited activities, mainly concerning alcohol, tobacco, waste products, and firearms.

Bahrain offers a well-developed infrastructure, with excellent transport and communication facilities, and a highly-skilled and educated local workforce. The country also provides support to businesses through various agencies, such as the Bahrain Economic Development Board (EDB), which offers advisory services, market intelligence, and access to networks.

The process of setting up a business in Bahrain has been simplified by the EDB team into three easy steps. These include preparing the required documents, initiating the application process, and obtaining initial and final approvals. The country also offers 100% foreign ownership for most activities and lower operating costs compared to its regional neighbours.

Overall, Bahrain's business climate is favourable, with a supportive government, skilled workforce, and strategic location, making it an attractive destination for foreign investment.

Market size

Bahrain is a small, open economy with a population of approximately 1.7 million people. The country has a well-developed infrastructure, a skilled workforce, and a favourable business environment, making it an attractive destination for foreign investment. Bahrain's small population and economy mean that the market size is relatively small, making it ideal for niche businesses. However, its strategic location in the Persian Gulf region makes it a gateway to the wider Gulf Cooperation Council (GCC) market, which has a population of over 50 million people.

Bahrain's real gross domestic product (GDP) rose by 4.9% in 2022, with a positive real GDP growth rate of 6.2% in the non-oil sector. Bahrain is considered one of the most open economies in the Middle East and North Africa (MENA) region, with several free trade agreements, excellent infrastructure, and strong financial institutions. It is well-positioned to provide traders and investors with access to regional and international markets.

Bahrain's retail market is growing, with new store openings, acquisitions, and e-commerce driving the industry. The country's household spending, essential and non-essential expenditure, and tourism expenditure are all expected to increase. Bahrain's retail market is estimated to be a part of the global retail market, which is estimated at $4.8 billion, with North America, Europe, and Asia Pacific as the top regions.

Bahrain has identified several priority sectors that offer investment opportunities, including financial services, tourism, logistics, manufacturing, and ICT. These sectors benefit from the country's strategic location, well-developed infrastructure, and supportive government policies. The demand for US franchises remains strong in Bahrain, particularly in the fast food, restaurant, and retail sectors, with over 100 US franchise restaurants and outlets operating in the country.

The Bahraini government has launched significant development projects in infrastructure and transportation, including the Bahrain International Airport (BIA) Modernization Program, the Bahrain Metro Project, and the King Hamad Causeway, which will boost overland access to Saudi Arabia and the GCC market.

Sectoral opportunities

Bahrain has a diverse and vibrant business landscape, with a multitude of sectors offering investment opportunities and business potential. Here is a detailed overview of some of the key sectors:

Financial Services

Bahrain has a long-standing reputation as the principal financial and banking centre of the region. The country's financial services sector is well-established and diverse, encompassing both regular and Islamic financial institutions. Bahrain is home to numerous regional and international financial powerhouses, and the government has identified this sector as a priority for investment. The Central Bank of Bahrain (CBB) oversees and regulates all financial activities in the country.

Tourism

Bahrain's rich history, cultural offerings, and natural beauty make it an appealing destination for tourists. The country has been investing in its tourism infrastructure, with luxury hotels, resorts, and entertainment facilities springing up. Additionally, Bahrain hosts world-renowned events, such as the Formula One Grand Prix, further enhancing its appeal as a tourist destination.

Manufacturing

Bahrain has a dynamic and evolving manufacturing sector, focusing on high-value-added industries. The country offers incentives to encourage investment in this sector, including tax exemptions and subsidized land and utilities. Aerospace, electronics, and pharmaceuticals are among the key industries within this sector.

ICT (Information and Communications Technology)

Bahrain has been investing in its ICT infrastructure, developing a high-speed broadband network and technology parks. The ICT sector includes software development, e-commerce, and digital media. The country's commitment to digital transformation presents numerous opportunities for businesses in this sector.

Logistics

Bahrain's strategic location in the Persian Gulf makes it an ideal hub for logistics and transportation. The country's investments in its port and airport infrastructure have attracted several logistics companies, serving the wider Gulf Cooperation Council (GCC) market.

Healthcare

Bahrain boasts a modern and well-equipped healthcare system, increasingly focusing on medical tourism. The government offers incentives to encourage investment in this sector, including tax exemptions and subsidized land and utilities.

Food and Beverage

Bahrain's culinary scene is vibrant and diverse, with a mix of traditional and international cuisines. Cafes, restaurants, and food trucks are prevalent, and the country's dining scene is expected to continue thriving.

Retail

Bahrain has a robust retail sector, with shopping malls and markets attracting local and international shoppers alike. The country's vibrant retail environment provides opportunities for small businesses, such as boutique stores and specialty shops.

Education

Bahrain places a high value on education, and there is a strong demand for quality educational services. This sector includes international schools, universities, tutoring services, and language schools.

Creative Industries

Bahrain is home to a thriving creative scene, with artists, designers, and other creatives. The country presents opportunities for small businesses in graphic design, art galleries, music studios, and other creative endeavours.

Overall, Bahrain's diverse economy and business-friendly environment make it an attractive destination for investors and entrepreneurs looking to capitalise on the country's sectoral strengths and strategic location.

Government support

The Bahraini government is dedicated to creating and maintaining a business-positive environment, and helping foreign investors achieve success. The country's laws and regulations are designed to empower business, not restrict it.

Bahrain has a liberal attitude towards foreign investment, and actively seeks to attract foreign investors and businesses. The country offers a well-developed infrastructure with excellent transport and communication facilities, no personal taxation, and no restriction on capital and profit repatriation.

The Bahrain Economic Development Board (EDB) is a great resource for those considering investing in the country. They provide assistance with business location, recruitment, and legal requirements, with ongoing support. The EDB can also provide helpful information on sector-specific opportunities and assist with introductions to potential business partners.

The country has a simplified process for applying for construction permits, with an official Building Permit Portal where businesses can apply for new permits, track ongoing applications, and access an interactive map of the Kingdom to view regional property requirements.

Bahrain also makes it easy to get credit, with multiple recent business reforms aimed at improasing the availability of credit information and increasing access to credit.

The country offers 100% foreign ownership of business assets and permits foreign companies to establish a regional office without the need to hire a local agent or partner.

Bahrain has a strong and long-standing bilateral relationship with the United Kingdom, and many senior Bahraini business and political figures were educated in the UK. This has resulted in strong business ties between the two countries and a strong appetite for continued bilateral trade and investment.

The Bahraini government has implemented new policies to address its debt burden and has a positive and stable investment climate. The government focuses on attracting foreign direct investment (FDI) in sectors such as manufacturing, logistics, infrastructure, information and communications technology (ICT), financial services, tourism, health, and education.

To further strengthen its position as a regional startup hub, the government launched Bahrain FinTech Bay in 2018, issued new pro-business laws, and established several funds to encourage startup investments.

The country also offers low establishment and operational costs for businesses, few indirect taxes for private enterprises and individuals, and a highly skilled bilingual local and global workforce.

The government is determined to support the economy through advanced digital technologies, as evidenced by the Al-Tajir app, which enables business owners to carry out essential transactions with ministries and authorities in one place.

Additionally, the Commercial Registration System (Sijilat) is an integrated electronic gateway that provides a robust investment environment, simplifies the establishment of commercial projects, and fulfills requirements related to various commercial activities.

Overall, the Bahraini government provides strong support for businesses, with a range of initiatives and policies designed to attract foreign investment and make it easy for companies to establish and operate in the country.

Frequently asked questions