Bahrain: Business friendly and building momentum
No free-zone restrictions, 100 percent foreign ownership in most sectors and operating costs that are on average 50 to 55 percent lower than Dubai and Abu Dhabi according to KPMG'S latest Cost of Doing Business report. No wonder several global surveys have rated Bahrain as one of the top places to live and operate a business. Two senior officials from the Bahrain Economic Development Board (EDB) discuss the latest developments in the kingdom and highlight the opportunities that it has to offer
What is Bahrain’s value proposition and how does this set it apart from other GCC countries?
With a long and successful history as a global trading nation, the Kingdom of Bahrain has always offered a warm and open welcome to international visitors and businesses. The GCC is undergoing a significant economic transformation, and Bahrain was the first country in the region to begin its diversification decades ago. We continue to diversify our tourism sector, building on our value proposition and expanding our offerings. Over 12.7 million international tourists visited the Kingdom in 2017, fueling a thriving tourism industry around Bahrain’s wide range of 4- and 5-star hotels and resorts. Bahrain lies in the heart of the GCC and acts as a natural gateway to Saudi Arabia, with efficient and reliable access to the region’s biggest market and a constantly expanding stream of visitors. The kingdom is within a four-hour drive from 75 percent of Saudi Arabia’s market and connects to a USD 40 billion market with a one-hour flight. From an investment perspective, ongoing reforms and regulatory improvements have made Bahrain one of the region’s freest economies for over 20 years, and the Kingdom has an established track record of prioritizing these reforms to benefit and grow the private sector and streamline investment into the country. Bahrain also offers some of the region’s lowest operating costs and an attractive tax regime, which in turn is supported by the most skilled workforce in the region: over 60 percent of the Bahraini workforce is employed in the private sector. This allows for sustainability of operations, because having an educated, hardworking, local talent pool minimizes staff turnover and reduces overall labor costs.
How does Bahrain benefit from both intra-regional tourism and international visitors coming to the Gulf?
Bahrain is a highly popular tourist destination among GCC residents and citizens: nearly two-thirds of our visitors are from within the GCC, with a growing number visiting from outside the region. The sector witnessed rapid growth in 2017, with over 12.7 million tourists visiting Bahrain, facilitated by the country’s wide range of 4- and 5-star hotels and resorts. Tourism has thus become one of the key investment sectors that provides Bahrain with a strong competitive advantage.
Bahrain’s Tourism and Exhibition Authority (BTEA) has been set up to increase the contribution of tourism to the country’s GDP and specifically to grow the number of inbound GCC tourists, as well as visitors from key source markets within a short-haul flight distance. Bahrain’s cruise industry has also been taking off. The country hosted 70,000 cruise passengers over 43 visits during the 2016/2017 GCC cruise season, and a growing number of international cruise liners are adding Bahrain as a new port destination for the 2018 and 2019 seasons. As well as being an established recreational tourism destination, Bahrain’s advanced and liberal regulatory system – united under a single regulatory authority – leads to lower operating costs for healthcare service providers and patients. This is fueling the growth of medical tourism from the GCC region.
In what way will the new developments in Saudi Arabia compete with or complement Bahrain’s position as the gateway to the region?
As Saudi Arabia’s Vision 2030 opens up new opportunities for international investors, Bahrain has an important role
to play in facilitating that growth. Bahrain and the Kingdom of Saudi Arabia enjoy a longstanding close relationship, and we see Saudi Arabia’s growth as highly complementary to our own. Saudis make up a large percentage of our visitors, and many global companies service the large Saudi market from Bahrain. For example, Mondelez manufactures food products in Bahrain for the Saudi market. We believe our logistical, infrastructure and manufacturing strengths offer an advantage point for companies looking to capitalize on Saudi Arabia’s growth. Bahrain’s existing infrastructure provides easy access to all markets by road, sea and air, and extensive investment is set to further enhance this advantage. Plans are nearing completion for a USD 3 billion investment in a second causeway linking Saudi Arabia to Bahrain, incorporating both road and rail services. The causeway will also connect Bahrain to the proposed USD 200 billion GCC rail network, which will improve logistical and travel links between the six countries.
How do you believe the smallest country in the GCC can make the biggest impact in terms of diversification strategies?
Bahrain has a long history of diversification, and decades ago, became the first GCC country to make the move away from a hydrocarbon-based economy. Indeed, Bahrain’s own Economic Vision 2030 was launched back in October 2008. Bahrain boasts a resilient and diversified economy with the non-oil sector now accounting for more than 80 percent of real GDP. In 2017, real GDP grew by 3.9 percent, with the non-oil economy expanding by 5 percent, making Bahrain the fastest growing economy in the GCC. Tourism and leisure already contribute to 6.3 percent of the country’s GDP, and this figure is set to grow significantly as the number of visitors and leisure activities increases. Economic growth in the GCC and the diversification of the region’s economies are therefore creating exciting opportunities for international investors across a number of sectors. We are a natural gateway to access the GCC’S dynamic economies, with an efficient logistical connection to the largest market. Our people form a highly engaged workforce and reaffirm the high quality of life offered to expatriate residents. As one of the GCC’S freest economies, Bahrain uniquely offers 100 percent foreign ownership across almost all sectors, and we have a consistent track record of diversification, leading to further opportunities for investment. Bahrain is also able to adapt quickly to new opportunities. The kingdom has, for example,
Bahrain offers some of the region’s lowest operating costs and an attractive tax regime, which is supported by the most skilled workforce in the region
an established and supportive ecosystem for technology-focused entrepreneurship and offers a sandbox to test and develop new technologies and products..
What was behind the decision to launch the Gateway Gulf Investment Forum?
Gateway Gulf came from a very simple idea. Every day we speak to businesses and investors and we have seen that the opportunities in the GCC market are really catching the world’s attention. What we have also seen is that while investors are interested in the GCC, they want to know more about how to access the opportunities provided by the region. Gateway Gulf was designed to answer that question – bringing together 500 global decisionmakers with expert sessions and showcasing projects worth USD 26 billion across multiple sectors.
What is the role of the EDB? How does it facilitate the investment process?
The role of the EDB is to attract investment in order to create sustainable growth and high-quality jobs. To do that, we aim to help businesses access the opportunities across the GCC from Bahrain, working with them from their first contact with the country all the way through the set-up process. We also continue to work with them once they are established in Bahrain through our dedicated aftercare team. Alongside this, we also work with companies to help ensure the business environment is able to support their ambitions, whether that is through regulatory reform or, say, working with partners in Bahrain to obtain investment in particular vocational training programs.
What have been the biggest challenges and successes of the past year?
The last year has been a highly successful one for EDB – we had a record year for investment in 2017, attracting USD 733 million of FDI. A particular highlight was the announcement made by Amazon Web Services - the cloud computing platform of Amazon.com – of the provider’s plans to open an infrastructure region in Bahrain, its first in the Middle East. As countries in the GCC look to transform their economies for generations to come, technology will play a major role, and cloud computing will be in the middle of that transformation. In the tourism and leisure sector, in particular, we attracted major investments, for example, from Action Hotels and taxi services app, Careem.
I think the biggest challenge is to find ways of connecting investors with the opportunities that are being created in the region. The GCC is going through an economic transformation – and this is impacting the tourism sector, particularly as Saudi Arabia opens up to international visitors. We see this as a great opportunity for the region, but in order to realize it, we need to make it as easy as possible for businesses to invest and grow.
What planned developments and tourism-related projects feature in the current investment pipeline?
We have USD 13 billion being invested in 14 major tourism projects, so the pipeline is very strong. As part of these developments,
What is Gulf Hotel Group’s market share in Bahrain in terms of hotel operations?
It is difficult to establish the exact market share as there has been a huge expansion of the hotel sector in the last two years. This has created an over-supply of hotel rooms, resulting in falling occupancies and a drop in room rates. However, in the 5-star market the Gulf Hotel still sells the most Bahrain International Airport is undergoing a USD 1.1 billion modernization program, which is set to increase annual passenger capacity from 9 million to 14 million by 2020. This will go hand in hand with the new 5- and 4-star hotels and resorts in the tourism development pipeline that will cater to current and future demand. For example, the recently announced Al Sahel Resort will be the kingdom’s first 5-star retreat in southwest Bahrain, which will
Amazon Web Services - the cloud computing platform of Amazon.com - plans to open an infrastructure region in Bahrain, its first in the Middle East
number of rooms and in the 4-star market, the K Hotel leads the ways and sells the most rooms. As a home-grown hospitality company, this is something we are proud of, especially with all the major hotel chains now represented in Bahrain.
After the recent opening in Dubai, is the company going to further its reach outside of the kingdom?
Last year we updated our strategic plan and we are aiming to expand operations into GCC countries and beyond. In addition to the commencement of operations in Dubai, we also opened a division of Gulf Brands International in Sri Lanka called GHG Colombo. We are actively looking to expand our hotel, restaurant and laundry operations into KSA.
What kind of innovation can we expect to see from Gulf Hotels Group going forward?
High on the agenda is the upgrade of our restaurant and banqueting portfolio. We have completed the renovation and expansion of our Al Waha Restaurant in Gulf Hotel and have just launched ‘La Pergola by Perbellini’. La Pergola is one of the longestablished restaurants in Bahrain, but to take it to a whole new level, we signed an agreement with multi-michelin starred chef, include the Jumeirah Al Sahel Resort, with a distinct, secluded beachfront ambiance. The southwest will also be home to the Bilaj Al Jazayer development, including the Al Jazayer Beach, an unchartered new tourism destination. Durrat Dawn and Durrat Crescent megaprojects, worth USD 2 billion, are in southeast Bahrain, with Hawar Island set to become a world-class eco-friendly destination. Giancarlo Perbellini, whose design team created a bold, modern interior.
By the end of September we will have completed the BD 5 million refurbishment of the Gulf Convention Centre with an expanded meeting room inventory, stunning new design and built-in digital presentation screens and in early October we will open the Gulf Executive Residence in Juffair, with 109 apartments of one, two and three bedrooms.
Our final project in 2018 will be Fusions Restaurant, which will be given a complete overhaul, an outdoor terrace, a trendy interior and will reopen as ‘Fusions by Tala’, being headed by our young, talented Bahraini chef, Tala Bashmi. We expect further outlets to come under the scalpel in 2019.
What opportunities do you see for foreign investment in the kingdom?
BTEA has an ambitious target to drive visitor numbers to Bahrain so there are many opportunities to invest in the tourism sector. Gulf Hotels Group, as the leading homegrown hospitality company, is committed to being part of the tourism expansion and is currently considering a number of expansion opportunities, including wholly owned projects, joint ventures and management contracts.