Bahrain: Busi­ness friendly and build­ing mo­men­tum

Hospitality News Middle East - - CONTENTS - H.E. Khalid Al Ru­maihi Chief Ex­ec­u­tive of Bahrain Eco­nomic De­vel­op­ment Board (EDB) Jerad Bachar Ex­ec­u­tive Di­rec­tor, In­vest­ment De­vel­op­ment, Tourism, Real Es­tate, Ed­u­ca­tion and Health­care, Bahrain EDB

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.

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