Investment opportunities in Bahrain (Part 2)

Bahrain's economy is the most diversified in the GCC region, with particular strengths in the financial services, ICT, manufacturing, logistics and tourism sectors.

Sectors for Investment

Construction and Infrastructure

As part of Vision 2030, Bahrain has announced more than 22 strategic infrastructure projects worth over US$30 billion, including the construction of five artificial islands. These projects will be largely funded through public-private partnerships. The strategy aims to improve infrastructure, industry, housing and communications, and this requires a more diverse economic base with greater privatization, industrialization, training and education of Bahrain’s national workforce.

Large-scale public infrastructure projects continue to stimulate the sector and have positive spillover effects on supply industries. Key projects:

• The US$7 billion Bahrain Petroleum Company (BAPCO) modernization and expansion project;
• The US$3.5 billion King Hamad Causeway transport infrastructure project;
• The US$2 billion Bahrain Metro project;
• The new US$355 million gas processing plant;
• Major housing and resort projects ($2.2 billion);
• Power and water delivery projects ($1.1 billion);
• Roads and sewerage infrastructure projects ($900 million);
• The development of five coastal cities off the coast of Bahrain.

A number of other ongoing projects focus on education, health, social development, industry, many of which which will be financed by grants received from Bahrain’s richer neighbours through the GCC Development Fund.

Demand for small housing units for low- and middle-income families has increased sharply in recent years. There are some 60,000 Bahraini families on the government’s waiting list for subsidised housing. The government is pursuing an ambitious programme to build 40,000 housing units over the next decade. Some 20,000 units are under construction. Major housing projects include East Hidd City, Diyyar Al Muharraq, Tubli Gardens, Argan, East Sitra and the Naseej project in Northern City. The Ministry of Housing has also launched a social housing finance programme to support home purchases by Bahrainis.

In the private sector, major new freehold property projects have been launched in Diyar Al Muharraq, Dilmunia and Durrat Al Bahrain. Among others, the 3,000-unit Deerat al Oyun project in Diyar al Muharraq has been launched. Government-funded energy, industrial and transport projects have also been major drivers in the construction sector.

Opportunities

One of the largest projects is the US$1.1 billion Bahrain International Airport Modernization Program. The main contract was awarded to the Arabtech Construction consortium. A number of foreign companies won smaller subcontracts as part of the overall expansion project. The first phase was completed in early 2021 and almost doubled the airport’s passenger traffic to 14 million passengers per year. Subsequent phases and new project opportunities include the construction of a maintenance and overhaul hangar, the renovation of the VIP terminal and, as part of the Bahrain Metro project, the installation of a passenger station connecting the airport to central Manama.

In May 2022, Bahrain’s Ministry of Transport and Telecommunications prequalified 11 international and Bahraini companies for the first phase of the US$2 billion Bahrain Metro project. The project will deliver a 109-km light rail system that will carry more than 43,000 passengers per hour and will include four separate lines with two interchanges and more than 20 passenger stations.

Bahrain plans to build the King Hamad Causeway. This new rail and road causeway project connecting Saudi Arabia and Bahrain will run parallel to the existing 25 km King Fahd Causeway and will provide new lanes to support additional passenger and freight traffic, as well as a rail link that will link Bahrain to the GCC main rail network and the existing Saudi Arabian rail network.

State-owned companies continue to build critical economic infrastructure and landmark heavy industry projects in the hydrocarbon and aluminum downstream sectors, including BAPCO’s modernization and expansion program. Aluminium Bahrain BSC (Alba) has begun a feasibility study for its Line 7 expansion project. The company estimates that the Line 7 project will have a similar production capacity to the Line 6 expansion project, in the range of 540,000 metric tons per annum.

Bahrain's tourism and real estate development strategy also extends to medical tourism projects such as the US$300 million King Abdullah Medical City Hospital, which is expected to open in the near future, and the launch of mixed-use real estate projects in Bahrain Bay, Bahrain Marina, Diyar Al Muharraq, Water Garden City, Dilmunia, Thai Mart Bahrain, El Balcon Mall and Marassi Al Bahrain. The US$66 million King Hamad American Mission Hospital opened in January 2023.

Other key tourism projects expected to be completed in the near future include:

• The US$120 million Muharraq (Saada) Waterfront project, comprising retail outlets, a marina, entertainment venues, a 4-star hotel, a multi-storey car park and a traditional souk.
• The Bahrain Marina mixed-use development in Manama, comprising a 5-star hotel and guestrooms, apartments, villas, a shopping mall, entertainment and educational facilities, retail space and a 250-boat yacht club.
• The multi-million dollar Bijlaj Al Jazair mixed-use tourism and leisure project on the beachfront in Zallaq, comprising public beach access, food and beverage outlets, entertainment and hospitality facilities, as well as a 4-star hotel, branded boutique hotels and residential apartment buildings planned for later stages.

Oil and Gas

Despite the success of economic diversification, the oil and gas sector remains a strong component of Bahrain’s economy. A small non-OPEC Gulf oil producer with approximately 124.6 million barrels of proven reserves, Bahrain derives its oil revenues from two fields: the onshore Bahrain field and the offshore Abu Safah field, which it shares with Saudi Arabia. In April 2018, the Bahraini government announced its largest oil and gas discovery since the 1930s. A vast reservoir discovered off the west coast of Bahrain is estimated to contain around 80 billion barrels of tight oil in place, although the find requires further study. Bahrain also announced the discovery of 10-20 trillion cubic feet of onshore deep gas reserves called "Pre-Unayzah" beneath the old Bahrain field; forensic analysis of this find is ongoing.

With revenues from oil exports, the Bahraini government is seeking to diversify the economy and sources of income from other sectors. Target areas for production include plastics, fiberglass, chemicals, petrochemicals and food processing. The government is particularly focused on developing the petrochemical industry. Five petrochemical subsectors have grown rapidly in recent years: construction chemicals, water treatment chemicals, polymer and plastic additives, paint and coating additives, and oil field chemicals.

Opportunities

Following a series of reforms in 2021 to restructure the oil and gas sector, including the merger of the National Oil and Gas Authority into the Ministry of Oil, the Bahraini government has published a National Energy Strategy that outlines changes to state-owned oil and gas enterprises and outlines strategic priorities in the energy sector.

With a concentrated industrial area and an abundance of mature oil and gas fields, Bahrain is actively exploring carbon capture and storage (CCS) technology for its implementation in the oil, gas and industrial sectors.

Efforts to delineate and derisk the Khaleej Al-Bahrain field continue (KAB) and the Pre-Unayzah deepwater gas reservoir, offering opportunities for both international oil companies (IOCs) and oil field services companies. Bahrain has engaged foreign companies to drill two offshore appraisal wells to assess the commercial viability of the KAB field and has a memorandum of understanding with Chevron to act as a knowledge partner. The government is inviting companies to formally register their interest to gain access to the field’s virtual data room.

Bahrain is undertaking a $7 billion upgrade of its BAPCO refinery. The project is more than 80% complete. The expansion will increase BAPCO’s refining capacity to 400,000 barrels per day (bpd) from 267,000 bpd upon completion, and will also improve energy efficiency and emissions. In August 2021, BAPCO was awarded a $250 million catalyst management contract by Advanced Refining Technologies (a Chevron-Grace joint venture) in connection with the upgrade project.

Bahrain LNG, jointly owned by Bapco Energies and a consortium comprising Teekay LNG Partners, Gulf Investment Corporation (GIC) and Samsung C&T (Samsung), has completed construction of Bahrain’s first LNG import terminal. The terminal is located offshore approximately 4km east of the Khalifa Bin Salman Port onshore reception facility. The terminal, which was commissioned in February 2020 but remains idle, is seen as a strategic asset that can be used to complement Bahrain’s local gas production and provide capacity to meet peak seasonal gas demand and future industrial growth, if required. The project has a capacity of 800 million standard cubic feet per day.

Petrochemicals

In an effort to further diversify its economy, the Bahraini government has worked to identify alternatives to the oil and gas sector to generate exports. Developing Bahrain's petrochemical industry has been a top priority. The Bahraini government established the Gulf Petrochemical Industries Company (GPIC) in 1980 to produce ammonia and methanol. By 1988, GPIC was producing 1,700 tons of petrochemicals daily, leading to the creation of new industries in the country. The petrochemical sector has seen rapid growth in five sub-sectors in recent years: construction chemicals, water treatment chemicals, polymer and plastic additives, paint and coating additives, and oil field chemicals.

The leading industries in Bahrain include aluminum, iron, petrochemicals, plastics, glass, food and pharmaceuticals, shipbuilding and repair, and iron pellets, among others. BAPCO processes 267,000 barrels of crude oil per day to produce gasoline, kerosene, jet fuel, low sulfur diesel, heavy distillates, fuel oil, asphalt, liquefied petroleum gas, propane, and butane.

Gulf Petrochemical Company (GPIC) converts natural gas into ammonia chemical fertilizers and methanol with a production capacity of about 1.5 million tons per year. Aluminum Bahrain (Alba) produces liquid aluminum (molten), as well as rolling and drawing molds and standard alloys for the local industry and cast wheels with a production capacity of over 1 million metric tons per annum, of which 50% is distributed to local customers, supplying them with various types of products such as liquid metal, rolling molds and draw bars.

Opportunities

Bahrain has a well-developed aluminum industry, with aluminum recycling accounting for a significant share of the secondary sector of the economy. There are several investment opportunities in the aluminum value chain, including the production and supply of components for the GCC railway network.

To optimize the use of output from the smelters in Bahrain, several manufacturing plants have been established using Alba output as the main source of raw materials. The establishment of Alba has led to the establishment of small and medium-sized factories using aluminum for the production of doors, windows, kitchens and other products. Major local manufacturers include Midal Cables Co., a manufacturer of aluminum cables and electrical connectors; Gulf Aluminum Rolling Company (GARMCO), a manufacturer of rolled products, sheet metal products, and aluminum circuits; Bahrain Aluminum Extrusions Company (BALEXCO), which produces aluminum extrusions, metal coatings, melting, and fabrication; Bahrain International Metal Spray Company, a manufacturer of powder and aluminum granules used in the production of paints and spare parts.

There are opportunities for foreign companies in the production of basic chemicals, fertilizers, nitrogen compounds, plastics and synthetic rubber in primary forms, as well as in the production of pesticides, cosmetics and synthetic fibers.

Bahrain has manufacturing opportunities in the following subsectors: construction chemicals, water treatment chemicals, polymer and plastic additives, paint and coating additives, and oil field chemicals.

The Bahraini government is planning several new manufacturing facilities that may present potential opportunities for foreign companies. These include:

• GPIC Urea Plant Expansion Project;
• GPIC Ammonia Plant Expansion Project;
• Nogaholding Aromatics Plant Project;
• Nogaholding Polyethylene and Polypropylene Plant Project;
• Nogaholding Naphtha Cracker Plant Project.

Renewable Energy

Bahrain Vision 2030 outlines measures to protect the environment, reduce carbon emissions, minimise pollution and promote sustainable energy. Bahrain is committed to developing energy efficiency policies and promoting renewable energy technologies that support the country’s long-term climate action and environmental ambitions.

According to official sources, Bahrain’s energy efficiency will improve primarily through a new green building permit for all new construction. Bahrain will need to produce 710 megawatts by 2035 to meet the country’s renewable energy targets. According to official sources, Bahrain will rely primarily on solar and wind energy to reduce carbon emissions and meet national renewable energy targets.

Opportunities

Some of Bahrain’s key solar initiatives include: a planned solar farm project at Askar Landfill to supply 100 megawatts of renewable energy; a 50 megawatt initiative to install solar panels on the roofs of hundreds of government buildings; and the potential installation of “floating solar” technologies that would be deployed to generate electricity in Bahrain’s territorial waters to address the lack of land for larger solar farms.

Marine renewable energy development offers the opportunity for large-scale generation and the achievement of higher renewable energy targets. Bahrain has sufficient wind strength and intensity, as well as shallow waters, which are conducive to the installation of onshore or offshore wind farms. Other options for offshore renewable energy include connecting Bahrain and its GCC neighbors through an integrated network of renewable energy infrastructure such as dams and rail systems.

Bahrain is planning a pilot waste heat recovery program in which excess heat generated by Aluminum Bahrain (Alba), the world’s largest single-site smelter, could be captured and converted into electricity. Like other GCC states, more than half of Bahrain’s annual electricity consumption is driven by the extensive use of air conditioning due to the warm Persian Gulf climate. As a result, Bahrain is seeking to use the practice of “district cooling” to improve air conditioning efficiency by as much as 50%.

Bahrain produces about 2.6 kg of solid waste per person per day. Bahrain’s Ministry of Public Works is currently overseeing a project with an international consultancy to analyse and identify waste that can be recycled, converted into agricultural products or incinerated to generate electricity. Bahrain is also exploring international investment opportunities in plasma gasification, a process that converts waste into reusable by-products including hydrogen, electricity and construction materials.

Financial Sector

Bahrain has the most developed financial services sector in the GCC, comprising 367 local, regional and global institutions.

The regional market is valued at US$1.67 trillion, and Bahrain’s financial services companies are at the heart of the GCC as well as the wider MENA region. Whether you are an international or Bahraini financial services, financial services, banking or exchange company, the Kingdom’s progressive regulatory environment ensures that the region’s oldest financial centre remains the most innovative.

The financial sector is the largest non-oil contributor to Bahrain’s real GDP.

FinTech and Payments

Bahrain is also home to the MENA region’s leading fintech hub, Bahrain FinTech Bay, which provides dedicated co-working space, innovation labs, advisory services and more.

The transformation of the FinTech ecosystem has been driven by regulatory reform, paving the way for new industries, including robo-advisory and crypto-asset platforms. FinTech institutions can expand their industry offerings thanks to the country’s flexible markets and strong technology infrastructure.

The Central Bank of Bahrain (CBB) has been quick to embrace open banking, providing banks with a robust and evolving regulatory framework to meet demand for digital payment and credit services. In 2020, CBB launched FinHub 973, the region’s first cross-border digital innovation platform that connects and facilitates collaboration between financial institutions and finTechs under the supervision of the central bank.

Logistics

Bahrain offers a wide range of transportation and logistics business opportunities for international companies looking to establish a cost-effective distribution and fulfillment base in the region.

The Kingdom offers the lowest costs in the GCC to set up and operate transportation and logistics businesses. The country offers competitive and attractive land lease rates in the logistics zone with no additional fees or service charges. As well as lower port charges compared to all other Gulf ports. Businesses and their employees relocating to Bahrain can expect a lower overall cost of living than in most other GCC countries.

Strategically located in the heart of the Gulf, Bahrain offers transportation and logistics businesses access to a growing regional customer base across the Middle East. The country offers the shortest transit time between the seaport, airport and industrial zones within the GCC.

Tourism

Of all the places to visit, tourists choose the Kingdom of Bahrain for its stunning island location, rich history and culture. The tourism sector offers investors world-class infrastructure and a wide range of investment opportunities in retail, leisure, food and hotels in the region.

Bahrain has three UNESCO World Heritage Sites offering visitors a unique experience: the Dilmun Mounds, the Pearling Route and Qal’at Al Bahrain.

To ensure the best results for investors, the government is taking a focused approach to tourism in Bahrain. The focus is on the development and growth of three major consumer sectors in tourism and hospitality. The food and beverage, retail and leisure sectors offer lucrative investment opportunities in the Kingdom as the tourism industry continues to expand. Additionally, as part of the National Economic Strategy, the government ensures that digital technology will be at the heart of the industry to enhance and transform every sector.

Bahrain and the surrounding region have a young population hungry for unique experiences. Events such as Formula 1 racing and Ramadan attract crowds of tourists to the country. With several annual events already organized, this sector is expected to grow rapidly in the future.

The beaches in Bahrain are like no other. From spa resorts and activities such as jet skiing and wakeboarding to exploring the natural environment, Bahrain’s beaches offer it all. As an island nation, it is the perfect place for companies specializing in beach and marine services to grow.

The country’s retail sector continues to thrive. There is a wide range of concepts located in special settings, including traditional souks, modern shopping and entertainment centers and leisure malls.

Bahrain's rich culture and history combined with modern amenities create a world of opportunities for the leisure and entertainment industry. Boat rentals, museum tours, theatre performances and festivals are just a few of the many successful leisure services offered here. A combined consumer base of locals and visitors provides a strong audience for leisure and entertainment companies.

ICT Sector

As the first Gulf country to adopt a nationwide cloud policy, Bahrain is ideally positioned to exploit the ICT opportunities this trend creates in areas such as business services outsourcing, cybersecurity, digital entertainment, gaming and e-commerce.

Bahrain offers internet bandwidth to connect to regional hubs in the Middle East and North Africa, Europe, the Americas, Asia and Australia. With strong market conditions created by high mobile penetration, commercial 5G network rollout and a business-friendly regulatory environment, Bahrain offers an ideal testing ground for communications technology companies looking to take advantage of a region undergoing rapid digital transformation and technological advancements. There are over 190 shared service centres in the MENA region.

Bahrain offers ICT and communications technology companies a ready talent pool from which to build diverse and talented teams. Bahrain’s liberal business environment and visa system allow companies to hire teams of local and expatriate staff to better serve their regional clients.

Tamkeen, a parastatal that supports the private sector, offers wage and training subsidies, as well as grants to cover other expenses such as equipment, IT infrastructure and marketing.

Bahrain aims to promote and implement a progressive approach to data and cloud services through its Cloud-First policy in both the public and private sectors. It is based on four key principles of cloud computing: public cloud adoption; preference for cloud IAAS and SAAS in government IT departments; training opportunities for Bahrainis to gain cloud skills; and provision of credit support for businesses moving to the cloud. With its Cloud-First policy, Bahrain is an ideal testing ground for cloud infrastructure companies to launch innovative products across the region.

Bahrain has 6 land and submarine cables (FOG, FALCON, GBI, TGN-Gulf, KFC and GCCIA) and offers backup routes to Europe and the Far East, which help maintain a competitive advantage in e-business services. More cables are under development. Investors are available to license additional stations and cables in Bahrain.

Along with its Cloud-First policy, Bahrain is backed by a robust regulatory framework that is constantly evolving to meet business needs. Most recently, this has included the provision of cloud computing services to foreign parties and an innovative data jurisdiction.

Cybersecurity services for businesses, government and other organizations are a global necessity. As cybersecurity companies work to protect assets, information and data from cybercriminals, confidence in the market is growing. This, in turn, makes Bahrain more attractive to investors and security companies.