The Kingdom of Bahrain may be geographically compact, but its growing economy offers excellent investment opportunities within a supportive business environment designed to help companies flourish. A governmental agency, Bahrain’s Economic Development Board (EDB) is the first point of contact for investors looking to establish their businesses in the Kingdom. Husain Bin Rajab, Co-Chief Investment Officer at EDB in a tête-à-tête with Ritika Arora Bhola talks extensively about India as an important market and investment destination, business activities at EDB, Bahrain’s logistics sector– its world-class infrastructure and technology and the impact of E-commerce in the country.
Brief us about Bahrain’s Economic Development Board (EDB) and its business activities.
The EDB is a governmental agency chaired by His Royal Highness and Crown Prince. Our board of directors consists of public and private sector officials. EDB covers political and economic reforms. The theme within EDB is structured around various sectors and its functions. We work with multiple government agencies on developing the ecosystem of doing business with ease and to attract foreign investment. We focus on sectors like manufacturing, logistics, financial services, ICT, tourism, education, real estate and healthcare, and across all these sectors, we focus mainly on the traditional business, startups and digitalisation. Internationally, we have representation across all markets from the US to Foreign Exchange (FOREX). Our operations revolve around- how we can develop the wider ecosystem of doing business in Bahrain for each and every sector. We look at the ecosystem in two parts– regulations, manpower and infrastructure– everything related to the framework of doing business in that sector and specific investment opportunities that we can focus on and target to develop the sectors. We maintain a long-term relationship with companies and make sure our customers are happy and satisfied with their investment in Bahrain.
Please throw light on Bahrain’s logistics sector.
There has been tremendous growth in Bahrain’s logistics sector for three and a half years and a lot of it has to do with the reforms that we introduced. In addition, improvement in infrastructure, procedures and policies of customs at all ports of entry has attracted the attention of new companies besides all major existing companies to invest in Bahrain.
Apart from the manufacturing and aluminum industry, there is also a growing focus on the FMCG industry. For instance, we are seeing investments from FMCG firms like Mondelēz International, Arla Foods and a few others. We see many Indian FMCG companies’ heightened interest to expand and grow in Bahrain. Other than FMCG, there is an increasing interest in the industrial plastics business. Bahrain’s steel industry segment is also quite strong. Besides, there is a good level of presence of fiberglass industries in the country. However, the growing focus and interest in components related to the oil and gas, B2B supply business and utility operations remains crucial for the entire region so that the main focus and interest remain within the industrial sector.
How important is the Indian market for your business operations?
India has been one of the most active markets for Bahrain. Historically, Indian companies were mainly interested in investing in the manufacturing and trading sector. The scope is now expanding to all the other sectors such as manufacturing, logistics, ICT, financial services, healthcare and education. In fact, a few private Indian educational institutes are planning to establish their campuses here. One of the establishments/success stories of the Indian market in Bahrain would be of the JBF industries. They have invested some 230 million dollars in Bahrain back in 2012. Apart from that, there are Parle, Ultratech Cement, etc. Indian investors are aware of Bahrain as an investment destination also because of the strong political relationship between India and Bahrain.
Since 2008, we have seen a substantial increase in investments from the Indian market. During 2012 – 2016, when GST was introduced in India, we saw a decline in investments which currently is gathering momentum. From the past 18 months, we have seen the rise of Indian start-ups expanding in the country. Especially for Indian companies who want to diversify, GCC remains an important consumer market because of the size of spending in the market and because of the growing infrastructure spend in the entire region.
Kindly elaborate on how you make the atmosphere so conducive for foreign companies to invest in Bahrain. What are the benefits you offer them?
The way we look at our value proposition, I would say, the first advantage is our location. We are the closest country to the largest market in the Gulf Region– Saudi Arabia. It represents 50 to 60 per cent of the total market share for any given product or service in the industry. The second advantage is the policies and regulations in Bahrain. An individual can have 100 per cent ownership of 98 per cent of his/her business activities in Bahrain, only a very few activities are restricted to specific locations or zones. We have a transparent policy for each and every business activity. The third advantage is the taxation system in Bahrain; we have zero income tax which is applicable to all the industries. Also, we have a strong international tie-ups. We have FTAs with the US, Singapore and Europe. The fourth advantage is the cost of doing business in Bahrain which is quite competitive, savings can reach up to 30 35 per cent and it goes with the cost of living in Bahrain, quite competitive as compared with other gulf regions with substantial savings. The fifth advantage is infrastructure in Bahrain– it’s superior and world-class.
Technology is known to be a game-changer and has transformed the logistics industry worldwide. Please throw light on the technological development In Bahrain.
The world is changing. Today, adopting digitalisation is a must for every industry; it has also become Bahrain’s top priority. Private, public enterprises as well as the government are under pressure to become more efficient. Now, within Bahrain, I would say, the government and private sectors have realised the importance of technology and that is why the country has come up with robust strategies- a list of digital initiatives for each and every sector. In the private sector, we see many companies taking up initiatives to introduce industry 4.O technologies in various aspects of their operations, be it production, optimisation, predictive maintenance and other operational efficiencies. The recently inaugurated ABLA Line 6 for aluminum and the upcoming Bahrain Airport terminal will have world-class infrastructure and technologies that have not been adopted anywhere else in the world.
Please elaborate on the kind of investment been done in the infrastructure and logistics sector in the last few years.
We have roughly $32 bn investment across all sectors. We have invested approximately $11 bn in the industrial sector, while $15 bn has been invested in real estate and tourism. 7 to 8 bn dollars have been invested in social housing and infrastructure.
In Bahrain, the E-commerce segment has been expanding rapidly over the past few years. In 2017, there was an estimated US$ 651 million in online sales. Please elaborate on the impact of E-commerce in Bahrain.
In the past three years, we have E-commerce companies like Souq, Alibaba, e-BAY, Amazon, etc. building their presence here in Saudi Arabia and Bahrain. The only way the E-commerce firms, especially the larger ones, will sustain in the market is by getting closer to their customers in Bahrain. Therefore, E-commerce companies need to focus on the supply side of their operations and how they can optimise their supply chain operations at the back-end. While, on the front-end, E-commerce companies should focus on getting closer to the customer through centralised fulfilment centres, small distribution centres and more efficient last-mile delivery operations. This is the reason we see many E-commerce companies rolling out their operations in the Gulf region.
Bahrain, because of its strongest value proposition and proximity to the largest market in the region tends to get a lot of attention around last-mile delivery and fulfilment centres. You will see more of that happening in the next two to three years. At present, the impact of E-commerce on the traditional retail industry is less; it’s not yet strong enough. In Bahrain, this is mainly because; the purchasing behaviour to a large extent relies on face-to-face transactions, which is gradually changing.