Foreign direct investment (FDI) is when an entity from one country contributes significant financial resources to a company or government of another country. A high FDI inflow indicates a healthy and growing economy and illustrates increases in employment, exports, capital flow, finance & technology development, and much more.
Each year, the United Nations Conference of Trade and Development (UNCTAD) issues The World Investment Report, which shows each country’s FDI inflows for the previous year. In the 2023 report, the UNCTAD highlighted that Bahrain’s FDI inflows increased in 2022 by US$1.95 billion, while global FDI fell by 12%.
These foreign direct investments primarily supported Bahrain’s manufacturing, financial services, and mining & quarrying industries. In the coming years, Bahrain is expected to continue to grow exponentially in FDI inflows. Below, we’ll highlight how Bahrain has positioned itself to grow its economy and become a global and GCC leader in FDI inflows.
5 Reasons Why Bahrain is Well-Positioned For Direct Investment
1- Bahrain Is Making Strides to Diversify Its Economy
Bahrain is actively working to build its economy and continue to position itself as a GCC leader in investment-driving sectors.
Bahrain has introduced strategic investment projects worth more than US$30 billion over the next ten years. These investment projects will be centered around Bahrain’s top investment-driving sectors including ICT, logistics, financial services, manufacturing, and more. Growth in these industries will help Bahrain’s economy continue to improve, which will draw foreign direct investors and help FDI inflows increase year-over-year.
Additionally, Bahrain is committed to moving away from oil dependency and growing its non-oil economy. A decrease in oil dependency will help reduce economic vulnerability and set Bahrain up for future stability and growth. For 2024 the Bahrain government is targeting a 3.9% growth in the non-oil sector of the economy. This growth is led by the financial sector which continues to be the largest non-oil sector, contributing to 18.1% of Bahrain’s GDP in 2023. .
2- Bahrain Provides High-Government Responsiveness
A responsive government reacts quickly to its citizens’ needs, encourages and promotes greater citizen participation in governance processes, and advances peace implementation. Bahrain is known for having a highly responsive government and as a result, high quality of life. According to the World Happiness Report, Bahrain is the happiest country in the Arab community. Additionally, Bahrain offers a tolerant and welcoming society, flexible visa policies, a rich cultural heritage, and much more. This includes Bahrain’s recently launched Golden License which will provide a wide range of privileges and benefits to qualifying companies. Companies that have investments that create 500 jobs, or invest over $50 million USD will be eligible for the Golden License. The license allows companies certain privileges. These include prioritised allocation of land for investments, infrastructure and utilities, as well as support for their efforts from Tamkeen, Bahrain’s Labor Fund, and Bahrain Development Bank.
3- Bahrain Has the Best Cost of Doing Business Compared to Regional Hubs
Bahrain is located right in the center of the Arabian Gulf and provides quick access to many strong markets such as New Delhi, Mumbai, Jedda, Cairo, and many more. Bahrain is known as the Gateway to the Middle East due to its central Gulf location and unique ties to the entire MENA region.
Additionally, Bahrain’s transportation system allows easy access to the surrounding areas, whether by air, road, or sea, creating a hub for logistics and manufacturing in the MENA region. These factors, and more, make Bahrain’s operating costs for business an average of 20 to 56% lower than its peers in the surrounding GCC area.
Plus, Bahrain offers several perks that provide ease of business not afforded by surrounding economies. Bahrain supports a no-free zone restrictions policy, which supports investment objectives across all industries. Additionally, Bahrain offers a favourable tax regime that supports no restrictions on the repatriation of capital, dividends, or profits. Both policies support the growing manufacturing and logistics sectors and encourage FDI inflows to Bahrain.
4- Bahrain Gives the Right to 100% Ownership in Most Sectors
Many countries have policies regarding the amount of foreign ownership allowed within corporations. Often, foreign ownership is restricted by governments to better control the economy, and maintain local control of resources. However, allowing greater freedom around foreign ownership helps grow the economy and attract FDI inflow.
Bahrain gives the right to 100% foreign ownership in most of its booming non-oil sectors, allowing foreign entities to have 100% control over their company without any restrictions from the government. This foreign ownership policy continues to draw investors and companies to Bahrain and grow its economy.
5- Bahrain Has the National Strategy to Promote a Digital Economy and a Talented Workforce
Bahrain’s Economic Recovery Plan has helped grow its big tech supporters, establish a world-class digital infrastructure, and attract a talented workforce. Bahrain’s partnership with Citi alone will pull from local recruitment to create over 1,000 coding jobs in the next ten years, and Bahrain has the talent to meet the challenge. To achieve this, Bahrain’s growing talent has turned to two technical institutes. They are Reboot01 and General Assembly. The opening of the Reboot01 Coding Insititute in Bahrain has accelerated the ability to build and keep top coding talent. In the first cohort over 160 students graduated. They have grown to over 300 students per cohort, and are working to grow the talent needed to expand. General Assembly is a tech boot camp that boasts a 70.1% success rate for its graduates. This success can be attributed to the General Assembly’s partnerships with organizations such as Zain Telecom, Bahrain Islamic Bank, and HP Spring Studios. The growth of ICT corporations in the country will continue to push the digital economy and challenge the workforce to improve.
Invest in Bahrain
Interested in seeing how you can expand your business to Bahrain to take advantage of the growing economy? Contact the Bahrain Economic Development Board to guide your new or expanding company.
