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Business In Bahrain
   About Bahrain

 Middle East, archipelago in the Persian Gulf, east of Saudi Arabia. Coordinates 26 00 N, 50 33 E

Country Name

conventional long form: Kingdom of Bahrain
conventional short form: Bahrain
local long form: Mamlakat al Bahrayn
local short form: Al Bahrayn
former: Dilmun

Administrative Divisions

5 governorates; Asamah, Janubiyah, Muharraq, Shamaliyah, Wasat
note: each governorate administered by an appointed governor

Capital

name: Manama
geographic coordinates: 26 14 N, 50 34 E
time difference: UTC+3 (8 hours ahead of Washington, DC during Standard Time)

National Day

National Day, 16 December (1971); note - 15 August 1971 was the date of independence from the UK, 16 December 1971 was the date of independence from British protection

King

chief of state: King HAMAD bin Isa al-Khalifa (since 6 March 1999); Heir Apparent Crown Prince SALMAN bin Hamad (son of the monarch, born 21 October 1969)
cabinet: Cabinet appointed by the monarch
elections: none; the monarchy is hereditary; prime minister appointed by the monarch

Priminster Minister

head of government: Prime Minister KHALIFA bin Salman al-Khalifa (since 1971); Deputy Prime Ministers ALI bin Khalifa bin Salman al-Khalifa, MUHAMMAD bin Mubarak al-Khalifa, Jawad al-ARAIDH

Political System

constitutional monarchy

Constitution

based on Islamic law and English common law; has not accepted compulsory ICJ jurisdiction

Area

total: 665 sq km
land: 665 sq km
water: 0 sq km

Population

708,573
note: includes 235,108 non-nationals (July 2007 est.)

Climate

arid; mild, pleasant winters; very hot, humid summers

International Dialing Code

+973

Currency

Bahraini dinar (BHD)

Exchange Rate

Bahraini dinars per US dollar - 0.376 (2007), 0.376 (2006), 0.376 (2005), 0.376 (2004), 0.376 (2003)

Language

Arabic, English, Farsi, Urdu

Religion

Muslim (Shi'a and Sunni) 81.2%, Christian 9%, other 9.8% (2001 census)

Natural Resources

oil, associated and nonassociated natural gas, fish, pearls

GDP per Capita

$34,700 (2007 est.)

Real GDP Growth

6.6% (2007 est.)

Non-Oil Sector Contribution to Nominal GDP

Aluminum is Bahrain's second major export after oil. Other major segments of Bahrain's economy are the financial and construction sectors. Bahrain is focused on Islamic banking and is competing on an international scale with Malaysia as a worldwide banking center.

Agricultural Products

fruit, vegetables; poultry, dairy products; shrimp, fish

Industries

petroleum processing and refining, aluminum smelting, iron pelletization, fertilizers, Islamic and offshore banking, insurance, ship repairing, tourism

Oil Production

 

Oil Proven Reserves

124.6 million bbl (1 January 2006 est.)

Natural Gas Production

10.27 billion cu m (2005 est.)

Natural Gas Proven Reserves

88.26 billion cu m (1 January 2006 est.)

Fiscal Year

calendar year

National Holidays

National Day, 16 December (1971); note - 15 August 1971 was the date of independence from the UK, 16 December 1971 was the date of independence from British protection

Exports

Petroleum and petroleum products, aluminum, textiles $13.16 billion (2007 est.)

Imports

Crude oil, machinery, chemicals $9.784 billion (2007 est.)

Flag

red, the traditional color for flags of Persian Gulf states, with a white serrated band (five white points) on the hoist side; the five points represent the five pillars of Islam

Why Investing in Bahrain:

Bahrain set out to be the Singapore or Hong Kong of the Arabian Gulf, and, hopefully, of the whole Middle East and South Asia. Although at present wholly or partially government-owned enterprises dominate the economy, laws and regulations have been overhauled in recent years, particularly since 1990, in an attempt to make the business climate as welcoming as possible for free enterprise and in order to attract foreign companies. Foreign investors are welcome to set up licensed export industries, with 100 percent foreign ownership. Commercial firms are likewise encouraged to set up 100 percent foreign-owned regional offices and distribution centers. With government encouragement, Bahrain has long been established as the principal banking and financial center of the Arabian Gulf region. The Bahrain Promotions and Marketing Board, a special office set up with inter-ministerial, joint public and private sector membership, is responsible for coordination efforts to attract businesses and investments.

Commercial Outlook

By 1995, government revenue was estimated at just US$1.43 billion and expenditures at US$1.39 billion. Per capita GDP has dropped substantially over the last fifteen years, due mainly to a population growth of 3.4 percent per year, one of the highest rates in the world.

Bahrain's 1995 budget deficit reached US$176 million (on spending of US$168 million), and the rate of expansion in 1995 was modest, just 1.5 percent. This is a result of weakness in the economy of Saudi Arabia's Eastern Province, on which Bahrain and its tourism and services sectors, in particular, are largely dependent. Economic growth for 1996 remained under 1 percent.

Bahrain's non-oil foreign trade deficit widened to US$1.1 billion in 1996 from a deficit of US$832.1 million reported in 1995. Bahrain exported goods worth US$1.2 billion in 1996 and imported goods worth US$2.3 billion. In 1995, Bahrain exported goods worth US$1.54 billion and imported goods worth US$2.37 billion.

A total of 34 percent of GDP was derived from oil in 1980, while in 1994 this sector accounted for only 15.7 percent of GDP. Rising oil prices in 1996 have boosted government revenues. Bahrain's present oil production capacity nearly tripled recently due to added production from the offshore Aba Safa oil field, run jointly with Saudi Arabia. Bahrain's share of the Abu Safa flows translates to a US$200 million injection into the Bahraini economy. These added revenues should do much for Bahrain's ailing economy, although the revenues increase the tiny nation's dependence on the oil sector.

New infrastructure will involve private financing. Public unrest at rising unemployment rates force the government to take further measures to encourage job-creation for Bahrainis. A policy of "Bahrainization" is likely to be expanded, and the Ministry of Labor will take a tougher stance on targets for the employment of nationals, while introducing new legislation to make it easier and cheaper for firms to take on Bahraini workers.

    Bahrain has been on the trade map between India and Saudi Arabia from time immemorial. After it obtained independence in the mid twentieth century, the country has made rapid strides in all walks of life including its non-oil sectors. Though essentially an oil-producing country, with more than 55% government revenues emanating from natural resources such as crude oil and natural gas, today Bahrain does not totally depend upon its petro dollars. Bahrain enjoys a per capita income of nearly 20,000 US dollars, generated by a population of over 600 thousand people each. Its gross domestic product rises close to 15 billion US dollars annually. The non-oil Sector has recorded an 80% growth year over year and is poised to open a myriad of opportunities for the serious investors. Because of such wide-spread diversity, Bahrain is insulated from the many economic busts that engulf other nations in the region.
Being a traditional regional trading hub, Bahrain enjoys a prime place in the mercantile world with access to the products from the entire globe. Import duties are levied at average 10% and the Bahrain Dinar is freely convertible and transferable. There is neither personal income tax nor corporate tax in the country.

Private Sector
The Private Sector has a predominant place in trade and business, while the government's recent focus has been on developing basic industries such as aluminum refining, ship repair and tourism. The Government permits 100% ownership of new industries by eligible investors. Foreigners can establish representative offices or branches without local partners. The country is largely visited by thousands of commodity dealers, financial services providers and global oil industry traders every day.

Financial Services
When it comes to counting on business in a predominately oil- related region, one can not but be amazed at the stupendous growth of the financial services industry in Bahrain, especially its banking sector. It is truly the financial hub of the regions, with premier banks from the world competing for a visible place in the vicinity. Taking over the mantle from Lebanon as the banking hub in the mid '70s, largely owing to Lebanon's internal strife, today Bahrain stands aloft with a plethora of commercials banks, development banks, insurance outfits, consultancy centers and money changers.

Bahrain banks focus on Islamic Banking:

What pays no interest but is expected to grow in value from $1 trillion (£480 billion) now to $2.8 trillion by 2015? The answer – the global Islamic banking business - is central to Bahrain’s strategy for re-establishing itself as a regional financial hub despite surging competition from Dubai and Qatar.
Five years after launching a closely watched political reform process, Bahrain is quietly nurturing its booming Sharia-compliant financial services sector to make up ground lost to its rivals in the past decade. “I think it’s fair to say we were resting on our laurels,” Sheikh Mohammed bin Isa Al Khalifa, head of the kingdom’s Economic Development Board.  

Like the UAE and Qatar, to which it will soon be linked by a causeway, Bahrain is keen to promote growth in everything from international investment banking to tourism. But it lacks Dubai’s breakneck ambition and has no equivalent of Qatar’s gas reserves: it was the first Gulf state to exploit its oil and will be the first to run out of it.  

Islamic banking is an obvious niche to fill. Thirty-three of Bahrain’s 400 financial institutions specialize in Shar-ia-compliant mortgages, insurance and leasing schemes, bonds and other investments with no link to the tobacco, alcohol and gambling industries. Since the Koran outlaws interest, these instruments yield income in the form of agreed profit margins or “administrative fees”.  

Riyadh easily beat Bahrain in terms of share of the Islamic banking market (Bahrain’s is currently worth $10 billion), but the kingdom is a dominant source of highly specialized Sharia compliance expertise and its central bank’s record for transparency and light-touch regulation is the best in the region.

One slogan devised by the Economic Development Board translates roughly as: “David Beckham does not have a house in Bahrain”. The implicit comparison with Dubai is clear. “Our aspirations are just as high,” said Sheikh Mohammed, “but we want to make sure our developments serve all who live in Bahrain.”


Bahrain has very good relaition with all GCC neighbors.  Early December 1996 marked an all-time low in relations between Bahrain and nearby Qatar. In late 1996, Bahrain announced the capture of two alleged Qatari spies in Manama, and subsequently decided to boycott an upcoming GCC leader's summit, scheduled to be held in Qatar's capital city of Doha. Tensions were eased when Bahrain released the alleged spies and accepted the mediation of GCC intermediaries.