The cost of setting up a business in Bahrain is up to 35 percent cheaper compared to the rest of the Gulf region. Examples include improvements to the regulatory environment, including updating the bankruptcy law, introducing the data protection law, adopting a cloud first policy, and reducing the minimum capital requirements for starting a business. All the above are important steps the Government has taken to enable a thriving digital economy. Ali Al Mudaifa, Director- Manufacturing, Transport and Logistics Business Development, Bahrain Economic Development Board (EDB), in an extensive interview with Ritika Arora Bhola, discusses more on how the country’s highly competitive cost of doing business is complemented by several other sector-leading developments, increasing productivity and enabling businesses of all sizes to scale faster.
How is the Kingdom of Bahrain handling the pressure during these times of emergency?
With the safety of its citizens and long-term sustainability of its economy as the top priority, Bahrain responded to the pandemic quicker than most, and was one of the first countries in the world to ground flights until quarantine facilities were in place.
Now, as the world begins to tentatively reopen, the priority is adjusting to the ‘new normal’ while maintaining health and safety.
A number of initiatives are introduced to take the pressure off the country. Bahrain Tourism and Exhibitions Authority (BTEA) launched ‘WeWillMeet,’ a digital campaign that promotes the Kingdom as a destination through online channels with a particular focus on the Saudi market. Bahrain International Airport also introduced a dedicated medical protocol for dealing with COVID-19 cases amid preparations to re-open borders. Moreover, new online services have been revealed by Bahrain’s Port and Maritime Affairs division to ensure cargo clearances and its smooth flow.
Moving ahead, Bahrain’s parliament is discussing a proposal for all government services to be moved online by the end of this year.
Bahrain’s advanced digital infrastructure has done pretty well to cushion Bahraini logistics firms from the impact of COVID-19. Kindly give us a sense of the technology initiatives that the kingdom has rolled out like 5G and cloud-based platforms.
Bahrain is home to the region’s first Amazon Web Services (AWS). The country is also the first in the world to roll out hyperscale data center nationwide commercial 5G and is in the process of shifting its entire government to the Cloud. This digital hyperconnectivity and embracing of new technologies has served the Kingdom well – and the logistics firms that operate within it – in the face of COVID-19 disruption.
AI and IoT are being utilised, developed and trialed to streamline customs processes, from payments to pre-clearance approvals. AI-powered high-tech portal scanners have been installed along the length of the King Fahd Causeway that connects Bahrain and Saudi Arabia as well as Khalifa Bin Salman Port. The scanners increase efficiency by automatically uploading information about shipments online. This allows information on the shipment to be checked before the truck has even reached the border, significantly boosting speed of processes as well as featuring significantly enhanced risk management systems. This automated system has increased the capacity for commercial trucks passing through the border and can comfortably screen 120 per hour – almost 3,000 per day.
The use of technology is being seen elsewhere as well. APM Terminals, which manages Khalifa Bin Salman Port, is set to launch a blockchain shipping platform that will enable businesses to digitally connect, share information and collaborate across the maritime trade. More broadly, Bahrain Customs Affairs is planning to develop an upgraded state-of-the-art single window customs clearance system that will integrate into one platform features such as e-payment, pre-clearance, advanced ruling as well as approvals from government authorities for all product groups along with full-fledged blockchain functionality being embedded into the interface.
Additionally, Bahrain Customs have recently introduced a mechanism for the remote monitoring and surveillance of custom-bonded warehouses across the Kingdom thus lessening the need for direct physical contact.
Could you tell us on the production, logistics, delivery and distribution and EXIM opportunities that Bahrain offers to the global pharmaceutical industry?
With a growing regional population and a clear unmet need in many disease areas, pharmaceutical manufacturers can take advantage of excellent market access opportunities through Bahrain. Pharma manufacturers can enter the US, GCC and other markets duty free, through Bahrain’s 22 bilateral free trade agreements with countries across the world. Moreover, the COVID-19 pandemic has boosted demand for efficient regional distribution of pharmaceuticals, which manufacturers and distributors operating in Bahrain are already taking advantage of.
Bahrain’s MVC Global – providers of one of the leading supply chain track-and-trace platforms for pharmaceuticals and medical devices has recently announced a strategic partnership with Cox Logistics Group – a Bahrain-based logistics provider – to launch a first-of-its-kind ‘SmartHub’ logistics warehouse for pharmaceuticals and food, to be headquartered in Bahrain and will serve the GCC market.
This next generation logistics warehouse will utilise emerging technologies to ensure the speedy and efficient distribution of much-needed foods and medicines across GCC, drastically reducing the time required for paperwork, administration and bureaucracy – at a time when global supply chains have been all but decimated. It will be one of a kind in the Middle East to integrate a track and trace system on a blockchain platform with smart contracts for customs clearances and fee payments.
Where do business and investment activities with India stand at this moment?
Today, bilateral trade between Bahrain and India stands at some $1.3 billion and the focus is more on aluminium, iron and steel – a trend driven by Bahrain’s sizeable infrastructure project pipeline. Increasingly, however, this is evolving towards service exports, an area which could see the two countries further enhancing economic ties.
In particular, there is potential for collaboration in FinTech and ICT; recent Bahraini delegations to India have focussed on bringing Indian technology companies, scale-ups and startups, and investments to those sectors of its rapidly diversifying economy.
In December 2018, an EDB-led economic delegation to Maharashtra saw the signing of an agreement to create a framework for cooperation in FinTech innovation and knowledge-exchange. Now, Indian cryptocurrency exchange Belfrics is one of several FinTechs testing innovative technologies in Bahrain’s regulatory sandbox. In the first half of 2019 alone, eight new projects in Bahrain’s ICT sector were started by Indian companies – more than any other country – bringing investments worth US $3,117,405.
Looking at the current changing environment, what’s most critical to your mind for Bahraini logistics firms to succeed? What factors boosts their operational excellence?
First and foremost, ‘time to market’ and ‘cost to market’ are the two main variables of utmost importance for logistics companies to succeed and remain competitive.
With regard to cost to market, a Cost of Doing Business study conducted by KPMG in 2019, found that logistics businesses stand to benefit from 37 per cent to 43 per cent in annual operating cost savings when operating in Bahrain, compared to other jurisdictions in the region. Maintaining this competitive edge is critical to Bahrain.
With regard to time to market, I would say that just as important as advanced technology, is close collaboration with other countries. To combine both of these in 2018, Bahrain launched the Authorised Economic Operator (AEO) programme. This initiative is considered to be one of the most important tools for facilitating international trade and enhancing customs procedures by the World Customs Organisation. It brings Bahrain in line with global supply chain security standards.
Accordingly, Bahrain signed a mutual recognition agreement with the Kingdom of Saudi Arabia in January 2020 that facilitates close cooperation on the flow of goods between the two countries. The agreement allows AEO-certified AEO exporters (manufacurers or logistics companies) in both countries to leverage a fast-track lane on the King Fahad Causeway (provided that certain criteria and conditions are met). The AEO programme further strengthens Bahrain’s hinterland connectivity, lead times and access to the largest market in the GCC.
As far as Bahrain Airport is concerned, plans have already been announced by Bahrain Airport Company to develop a US$ 50 million new cargo and logistics area, which will be situated on the northern apron of the airport to cater to the growing needs of existing tenants as well as new business in the field of courier and express logistics, contract logistics, e-commerce fulfilment centers and value added logistics operations.
What is the main goal of Bahrain and where do you see yourself in the years to come.
Our ambition is to serve as the regional manufacturing, distribution and operational hub of choice for those businesses seeking access to the fast-growing US $1.5 trillion GCC markets and beyond. In fact, Bahrain has served as a regional trading hub linking East and West for millennia.
Today, our airport’s US$1.1 billion modernisation programme is creating new opportunities for logistics and e-commerce companies seeking distribution and fulfilment centers/hubs with quick, cost-effective access to GCC and global markets.
Owing to our geographical location and connectivity, the Kingdom has become home to all the major logistics players – including Agility, UPS, FedEx, and Aramex – and has been the primary distribution hub for DHL in the region, as well as acting as its Middle East and North Africa HQ for over 40 years now.
A number of major, global manufacturers have also chosen Bahrain for their regional hub, including Mondelez, Arla Foods, Reckitt Benckiser, and Olayan Kimberly Clark. It is here that we want to continue our growth.
The economic situation of Bahrain and GCC countries will be in better shape by 2021, says reports. As such, what are the credit-stimulus programs launched by the Kingdom to sail through this difficult hour?
The government has introduced unprecedented economic stimulus packages, to bolster the economy while protecting small businesses and vulnerable citizens, including US $11.4 billion of economic support for local businesses and residents impacted by the coronavirus. This figure represents almost 30 per cent of the national GDP. The Government has been taking a targeted approach to create sustainable growth by providing ongoing financial support and concessions to the most adversely affected sectors. Over 10,000 businesses across the Kingdom will benefit from the latest decision to fund 50 per cent of private sector salaries for Bahraini employees. A measure taken to prevent unemployment and provide ongoing fiscal stimulation, the move will help protect an estimated 60,000 jobs.
The boost, which is to be extended by the national unemployment insurance fund, has been targeted towards those industries most severely impacted by COVID-19, vis-à-vis travel and aviation, healthcare and media.
In terms of growth areas, we have seen a surge in the uptake of financial technologies, particularly with regard to e-commerce, digital banking and cryptocurrencies, as citizens stay home adhering to quarantine and social distancing measures. Electronic fund transfer systems such as Fawri and Fawri+ have experienced a major surge in use as customers move away from physical services.
Additionally, the demand for FMCG globally, as well as in the region has witnessed a noticeable surge during these extraordinary times. Global players operating in Bahrain have all been reporting positive growth in uptake from their factories in the Kingdom. Many of the manufacturing companies are also adopting smart technologies to not only optimise operations and efficiency, but also as a means to introduce safer, more prudent measures to manage risk associated with the crisis.