Bahrain

The Kingdom of Bahrain (translated from Arabic as "two seas") is the only Arab island state, the pearl of the Middle East. It is the smallest Arab country. Here centuries-old traditions are combined with modern values. The natural beauty of Bahrain, including a hot desert, sand dunes and unique flora and fauna, cannot be found anywhere else in the world. It was here, according to biblical legends, that the Garden of Eden was located.

General information

The official name of the country is the Kingdom of Bahrain. The state occupies an area of ​​766 km² (174th in the world). The population is about 1.6 million people (as of the beginning of 2025).

Bahrainis (belong to the Arab peoples) are the main population of the state, making up about 53% of the population of Bahrain. Other Arabs also live in the country. These are mainly refugees from Palestine and Iraq, whom Bahrain accepted. Persians are the second most populous people in the Kingdom, about 13%. About 45% of the population are immigrant workers and their families.

The majority of Bahrainis are Muslims 73.7%. Most of them are Shiites. There are also Christians - 9.3%, other faiths - 16.9%.

The official language in Bahrain is Arabic, English, Farsi and Urdu are also used.

The official currency of the country is the Bahraini dinar.

Manama is the capital and main economic center of the Kingdom of Bahrain. The basis of the economy of Manama - as well as the whole of Bahrain - is the financial market, the construction of coastal vessels - dhows, fishing and pearl diving.

The commercial port of Mina Salman with an annual turnover of 1.5 million tons is one of the most important in the Persian Gulf. The port provides conditions for docking and repair of large ocean-going vessels, modern warehouses and refrigeration units.

The enterprises of the financial sector of Manama (including the Bahrain Stock Exchange) account for approximately 20% of the country's GDP.

The tourism business is developed: every year, Manama and its environs are visited by over 5 million tourists, mainly from the Persian Gulf region. The city has hotel complexes of the largest international chains - Radisson, Sheraton, Novotel.

Manama is also a major center for educational services, which it provides mainly to neighboring countries, information and telecommunications services - the largest satellite radio and television station in the region is located here.

The city is home to regional offices of large international corporations doing business in the Persian Gulf countries. Outside the city limits, but within the agglomeration, there are manufacturing plants: the Bahrain Petroleum oil refinery, the Aluminum Bahrain aluminum plant, the Gulf Investments Company metallurgical plant, desalination plants and others.

Manama is also gradually strengthening its position as a regional tourist center among the Persian Gulf countries.

Muharraq, Al-Muharraq is the second largest city in Bahrain. Until 1923, it was the capital of the country. Muharraq serves as the headquarters of Gulf Air, and the Al-Muharraq football team is also based here. The city is adjacent to the artificial archipelago of Amwaj, which contains many villas and other buildings

In administrative and territorial terms, Bahrain is divided into 4 governorates.

History, geography, culture, mentality

In Bahrain, archaeologists have discovered traces of Paleolithic man. In the 3rd century BC, a developed civilization was widespread there, characterized by fortified settlements. The ancient state, which bore the name Dilmun, was a major center of maritime trade, through which the Sumerians and other peoples of Mesopotamia communicated with the peoples of the Indus Valley.

Written information about Bahrain is found in Assyrian, Persian, Greek and Roman sources. In the 4th century AD, Bahrain was conquered by the Persians, and in the 7th century by the Arabs during the spread of Islam. From this point on, Islam became the predominant religion on the island.

In the 16th century, Portugal became interested in Bahrain due to its strategic location in the Persian Gulf. The island was occupied by the Portuguese, who held it for several decades.

In 1602, the Persians took over the island again. They were expelled in 1783 by Ahmad ibn al-Khalifa, a member of the dynasty that still rules today.

The British first landed in Bahrain in 1820 and attempted to establish their rule there throughout the 19th century. From 1861, the islands were under British protectorate.

Since gaining independence in 1971, Bahrain has undergone significant changes. It has become one of the most developed economic centers in the region, thanks to its oil wealth and strategic location.

Bahrain is an island state in the Bahraini archipelago, which consists of 32 islands located in the Persian Gulf off the coast of the Arabian Peninsula. The state is bordered by Saudi Arabia, Qatar and Iran. Bahrain is connected to the Arabian Peninsula by a 25-km road bridge. At the other end of the highway is the city of Al-Khobar (Saudi Arabia).

The area of ​​the largest island, which has the same name as the state, is 590 km².

Natural resources are represented by a small amount of fossil fuels - oil (125 million barrels) and natural gas (92 billion m³). Also, fish are found in the coastal waters of the islands and pearls are mined.

The culture of Bahrain has absorbed elements of various influences, creating an original cultural mix. The country is known for its literary achievements, among which works on Arabic themes stand out.

The art of Bahrain is also noteworthy: it contains the full spectrum, from expressionism to traditional Arabic calligraphy.

Music plays an important role in the cultural life of the country. Folk genres such as sawt (town songs) and fijri (pearl divers' work songs) reflect the historical interaction of different cultures.

The architecture of Bahrain is a combination of traditional Islamic motifs and modern solutions.

The life of Bahrainis is strongly influenced by the traditions of tribal society and Islamic religious norms. The term "mujahid" or "one who strives" refers to the process of moral and religious self-improvement. This concept usually includes following the norms of Islam, respecting parents and the elderly, helping close relatives and other members of the community. As in other Islamic countries, pork and alcohol are prohibited in Bahrain.

Power

Bahrain is a dualistic monarchy. The head of state is the king (until 2002 - the emir). The government is headed by the prime minister. The cabinet consists of 23 ministers.

The king and almost all officials are members of the Al Khalifa dynasty.

The parliament is bicameral. The lower house - the Chamber of Deputies is elected by popular vote, the upper house - the Consultative Council (Majlis ash-Shura) is appointed by the king. Both houses have 40 members (appointed by the king). Political parties are prohibited.

Executive power in Bahrain belongs to the king, who appoints the prime minister and the cabinet of ministers. The prime minister is responsible for overseeing the day-to-day operations and administration of the government.

Economy

Bahrain's economy is heavily dependent on oil and gas. Bahrain has invested heavily in the banking and tourism sectors. Oil production and refining account for about 60% of foreign exchange earnings from foreign trade, 60% of the state budget and 30% of GDP. Thanks to its well-established communications and transport system, many transnational companies have chosen Bahrain as their residence. The country's major economic problem is the depletion of oil and water resources and high unemployment (15%).

The services sector is large in the GDP structure (47.2%), the share of industry is 52.4%, and agriculture is 0.4%.

In addition to oil, Bahrain has huge reserves of natural gas, which is used as a raw material for the petrochemical industry and the production of butane and propane. Gas also serves as fuel for an aluminum plant that processes Australian raw materials (alumina) and produces up to 450 thousand tons of aluminum per year. Bahrain is the largest aluminum producer in the Middle East.

The ship repair industry is developed on the basis of one of the world's largest dry docks, adapted for repairing supertankers.

Fossil fuel power plants generate about 11.34 billion kWh of electricity per year, which exceeds the country's domestic consumption.

Only 4% of Bahrain's territory is suitable for agriculture. Date palms, citrus fruits, grapes, peaches, papayas, walnuts, pistachios, vegetables, grains (wheat, corn, barley) are grown in the oases. Sheep, goats, zebu cows, and donkeys are bred. Self-sufficiency in crop products is no more than 20%, and in dairy products - about 50%. Pearl mining, fishing and shrimp fishing are carried out. There are three main sea ports in Bahrain: Salman (the most modern), Manama and Sitra. The country's ship repair industry is represented by the Arab Shipbuilding and Ship Repair Company (ASRY). The world's largest dry dock operates in Bahrain, which is capable of receiving supertankers with a displacement of 500 thousand tons.

Bahrain is an active participant in international trade. The main export items are oil, oil products and aluminum. The main export partners are India, Japan, Saudi Arabia, and the UAE. They import food, consumer goods and crude oil for subsequent processing.

The main import partners are Saudi Arabia, the USA, Great Britain, Japan, and Germany. Bahrain is actively engaged in the re-export of American and European goods to Asian countries.

Bahrain's highly developed communications and transport have made it extremely attractive to numerous transnational companies doing business in the Persian Gulf.

Another major economic activity is aluminum production (Bahrain's second-largest export after oil). The Bahrain Aluminum Smelter (ALBA) is one of the largest aluminum smelters in the world and makes a significant contribution to the economy.

Banks and construction play a very large role in the country's economy. Bahrain competes with Malaysia as the world's banking center for the Islamic world.

Bahrain is a member of the Gulf Cooperation Council (GCC) and a member of the Arab League. The country is also part of the Greater Arab Free Trade Area (GAFTA), an Arab League pact that entered into force in January 2005, the purpose of which is to form an Arab free trade area.

Russia and Bahrain

In 2007, the Russian-Bahraini Business Council was established, and the creation of an Arab-Russian bank was discussed. The Roscongress Foundation and Albayan Media Group signed a cooperation agreement to develop mutual integration in the field of convention and exhibition activities.

This year (2025) will mark the 35th anniversary of the establishment of diplomatic relations between the countries. As part of the celebration of this anniversary, Russia will host the Days of Bahrain with the support of the Roscongress Foundation.

There is also a simplified visa regime between the countries, which contributes to the development of tourism ties.

Business climate

Bahrain has an open and attractive economic and regulatory environment for international companies seeking access to the Gulf and Middle East markets. The country has the lowest corporate and personal taxes in the Gulf, with no restrictions on free trade zones.

Foreign business ownership is fully permitted in most economic activities, eliminating the need to resort to a local partner in most cases. There are no restrictions on the repatriation of capital, profits or dividends, with the exception of income earned by companies in the oil and gas sector, which is subject to a 46% corporate tax.

The country’s superior logistics infrastructure is also a major factor in its appeal. Moreover, Bahrain offers a large, highly skilled pool of financial workers, a regulatory framework that is both advanced and internationally recognized, and a physical link to Saudi Arabia – by far the largest economy in the Gulf.

Bahrain is an important economic hub in the Gulf Cooperation Council (GCC) area and offers one of the most favorable investment climates for attracting foreign companies. The national currency is freely convertible and pegged to the US dollar.

On 17 October 2024, Bahrain amended its foreign ownership conditions, effective 18 October 2024. Decision No. 53 of 2024 allows foreign companies to sell certain products without a local partner and fully own their business if they operate in at least ten countries or earn more than €750 million per year.

Companies dealing in high-value products still need government approval. In addition, companies with foreign partners must have at least 51% Bahraini ownership to be authorized distributors.

The minimum capital requirement for foreign companies in Bahrain has also been reduced from BHD 2 million (~€5 million) to BHD 100,000 (~€240,000). In addition, Bahrain has introduced a 15% domestic minimum additional tax (DMTT) on profits for large multinational enterprises (MNEs) with consolidated revenue exceeding €750 million, which will come into effect on 1 January 2025. This measure brings Bahrain in line with international tax standards under the OECD Base Erosion and Profit Shifting (BEPS) Framework. The Kingdom ranks 72nd out of 133 economies in the 2024 Global Innovation Index and 55th out of 184 countries in the latest Index of Economic Freedom.

Investment climate

The Kingdom of Bahrain is very open to foreign investment and has one of the highest FDI stock to GDP ratios in the region.

The Bahraini government has a generally liberal approach to foreign investment and is actively seeking to attract investors and foreign companies in the competition to be the most attractive country in the Middle East. Various measures have been taken in this direction, such as the formation of the Supreme Council for Privatization in the spring of 2001, the establishment of the Bahrain Mumtalakat Holding Company in 2006, whose role is to manage all government investments, and the establishment of the Bahrain Investors Center (BIC), designed as a one-stop shop for all business services, licensing and registration.

Bahrain has all the necessary components for investment in terms of modern infrastructure and up-to-date labor laws. Bahrain's Economic Vision 2030 is rich in opportunities aimed at increasing the competitiveness of the economy and creating new jobs.

The Bahrain Economic Development Board is the body responsible for attracting foreign investment as it seeks to support initiatives that contribute to the improvement of the investment climate. The Board focuses its interest on some key sectors that have comparative advantages such as financial services, manufacturing, IT and communications, tourism, logistics and transportation. Moreover, the local, Arab and foreign private sector can benefit from the many opportunities available in Bahrain, given that the government is currently implementing several major projects worth a total of US$32 billion. Among these projects, it is worth mentioning the ALBA (Aluminum Bahrain) Line 6 expansion project, the new power plant, the Bahrain International Airport expansion project and the new Banagas gas plant. All these projects will contribute to the continued growth of the non-oil sector.

Business and investment support structures

There are various public and private structures in Bahrain aimed at supporting business and attracting investment. The main ones are:

Bahrain Economic Development Board (EDB) — Bahrain Economic Development Board

• The main body for attracting investment.
• Provides assistance to foreign and local investors.
• Provides information on opportunities in key sectors (finance, ICT, industry, tourism, etc.).
• Assistance in registering businesses and obtaining permits.

Ministry of Industry and Commerce (MOIC) — Ministry of Industry and Trade

• Company registration (via SIJILAT portal).
• Business licensing and regulation.
• Support for small and medium enterprises.

Tamkeen - Human Capital Development Fund

• Provides financial and non-financial support to the private sector.
• Wage subsidy programs, training, digitalization, grants for SMEs.
• Works in partnership with banks to facilitate access to credit.

Bahrain Chamber of Commerce and Industry (BCCI) - Bahrain Chamber of Commerce and Industry

• Represents the interests of the private sector.
• Organizes business events, fairs, seminars.
• Helps in developing export potential.

Bahrain International Investment Park (BIIP) — Bahrain International Investment Park

• A special economic zone offering tax and administrative incentives.
• Infrastructure for industrial and logistics companies.
• Ideal for foreign investors in the manufacturing sector.
• Managed by the Ministry of Industry and Commerce.

Bahrain FinTech Bay

• A hub for innovation in financial technology.
• An incubator and accelerator for fintech startups.
• A platform for cooperation between regulators, investors and developers.

Other forms of support:

• Free Zones / Free Zones: including Bahrain Logistics Zone (BLZ) — for logistics companies.
• Invest Bahrain is an online platform for starting and managing a business.
• Startup Bahrain is a government initiative to develop entrepreneurship.