Bahrain has been praised in a new report for its resilience to international developments and managing to attract foreign direct investments (FDI).
The GDN reported earlier this month that FDI inflows to Bahrain surged to a record $6.8 billion in 2023, nearly 150 per cent higher than the previous high set in 2022, according to the United Nations Conference on Trade and Development’s World Investment Report 2024.
The US State Department’s 2024 Investment Climate Statements (ICS) report added that rising global oil prices continue to support Bahrain’s budget.
This is further backed by the new policies to address its debt burden, such as increasing the value added tax from 5pc to 10pc in 2022.
Furthermore, the report states there is currently no corporate income tax, but the government has said that it expects to present a draft of the corporate tax law this year.
The report states that inflation has increased moderately, but local prices continue to resist more significant global pressures.
“Bahrain has weathered the knock-on effects of Russia’s war in Ukraine through diversified supply chains of food and other raw materials essential for critical economic functions, including manufacturing and construction.
“Rising shipping costs and logistics issues related to the Israel-Hamas conflict and Houthi attacks in the Red Sea have impacted shipping flows related to certain products from Europe but have yet to show macroeconomic impact on local prices and availability given Bahrain’s diversified supply chains.”
The report highlights that due to the ongoing Israel-Palestine conflict since last October certain franchisees and distributors of American brands in Bahrain “have reported drops in revenue following calls to boycott brands perceived to be supportive of or linked to the United States and/or Israel”.
The document highlights government’s long-term development plan that focuses on five pillars:
- Creating quality jobs for citizens.
- Streamlining commercial procedures to attract $2.5bn in yearly FDI by 2025.
- Launching $30bn in major strategic projects.
- Developing strategic priority sectors.
- Achieving fiscal sustainability and economic stability, including by extending Bahrain’s Fiscal Balance Programme.
It also mentions Bahrain’s Vision 2030 which outlines measures to protect the natural environment, reduce carbon emissions, minimise pollution and promote sustainable energy.
This includes the national renewable energy 2025 targets of 6pc and increasing to 10pc by 2035.
In February this year, His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, launched a consultative process for Bahrain’s Vision 2050 that is expected to be completed by the end of the year.
“The government of Bahrain is increasingly looking to collaborate with private sector companies through Public-Private Partnerships (PPPs), which are emerging as a key financing mechanism for large-scale infrastructure projects in the construction, transportation, and climate sectors,” according to the report.
In addition, the report states that to strengthen Bahrain’s position as a regional start-up hub and to enhance its investment ecosystem, the government launched:
- Bahrain FinTech Bay in 2018.
- Issued new pro-business laws.
- Established several funds to encourage start-up investments including the $100 million Al Waha Fund of Funds and the Hope Fund to support start-up growth.
The assessment highlights that the US-Bahrain Free Trade Agreement (FTA) came into force in 2006. Since then, bilateral trade has more than tripled from $780 million to nearly $3 billion in 2022.
Under the agreement, Bahrain agreed to eliminate or reduce tariffs on most goods and services, create a more predictable and transparent trading and investment environment, and commit to world-class intellectual property rights protection.
However, the report claims that despite transparent, rules-based government procurement system, US companies sometimes report operating at a disadvantage compared with other firms.
It states that several ministries require firms to maintain a local commercial registration or pre-qualify prior to bidding on a local tender, often rendering firms with no prior experience in Bahrain ineligible to bid on major tenders.
Statistics:
- The Financial Crimes and Money Laundering Prosecution Office reported 23 cases of money laundering and 56 cases of tax evasion, and 11 money laundering cases last year.
- Four additional cases involving money laundering were referred by the National Audit Office, which is responsible for disclosing acts of embezzlement, negligence and financial violations in the public sector.
- The total confiscated money amounted to BD16m ($42.4 million).
The US established official relations with Bahrain in 1971, but America’s cultural and social ties with Bahrain go back to the 19th century and the arrival of American missionaries who built a school, hospital, and church – all of which are still in operation today.
Since then, Bahrain has become one of the closest US partners in the Middle East region and home to its Navy’s Fifth Fleet. Direct Gulf Air flights between Bahrain and the US could take off as soon as in November as reported in the paper.
sandy@gdnmedia.bh
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