Bahrain: Reimagining the Economy with less reliance on

Hydrocarbons and Real Estate

The document provides complaint framework to meet the goals and objectives of
Bahrain’s Vision 2030, to maintain Bahrain’s status as a favourable destination for world-
wide investors, and raise the Kingdom’s appeal to international financial and economic
institutions.
Current Business Environment Outlook:
According to the World Bank report for doing business in Bahrain 2018, out of
190 countries indexed, the Kingdom of Bahrain ranks as the 75th easiest country to start
business in; the 47th in dealing with construction permits; the 79th in getting electricity;
the 25th in registering property.
On the other hand, the Kingdom of Bahrain scored low to moderate in getting credit
(105th), protecting minority investors (108th), enforcing contracts (111th) and resolving
insolvency (90th).
Economic growth is expected to moderate over the forecast period. Real GDP
growth projections have been revised down to 1.7 percent in 2018 and 2.1 percent 2019,
as low oil prices weigh on domestic demand and market uncertainties prevent the
economy from performing at its full potential.
Despite efforts to diversify and boost non-oil fiscal revenues, hydrocarbons account
for approximately 75 percent of government revenues in Bahrain. Delays in implementing
proposed fiscal consolidation and structural reforms, or an unexpected decline in oil prices
or wider market uncertainties could trigger additional sovereign rating downgrades making
access to external financing harder and intensifying pressure on international reserves
and the currency peg. Fiscal solvency and liquidity risks remain high, despite the recent
successful public debt issuance in September 2017.
Future of Bahrain: Regulatory boost & Diversification of investments:
Bahrain continues to enhance its investment ecosystem by implementing four new
laws which have been officially issued by His Majesty King Hamad bin Isa Al Khalifa. The
laws address a range of issues and will have a particularly strong impact on the Kingdom’s
economy and its growing startup ecosystem.
The laws come as part of a wider development effort, designed to create new
opportunities for investors looking to access the $1.5tn GCC economy.

 Personal Data Protection Law

 Competition Law
 Bankruptcy Law
 Health Insurance Law
Major announcements at Gateway Gulf included a number of large-scale real estate
developments as part of a broader boom in Bahrain’s tourism sector, as well as the launch
of the $1bn Bahrain Energy Fund. As a fund which grants international institutional
investors access to local energy assets, the Bahrain Energy Fund is the first of its kind in
the GCC. Gateway Gulf showcased a total project pipeline worth $26 billion, which
includes investment-ready projects worth $18 billion.
Bahrain Development Bank launched a new $100m venture capital fund of funds –
capitalising on Bahrain’s position as a regional financial centre to help address this
challenge.

The Al Waha Fund of Funds will invest in venture capital funds that have a
presence in Bahrain. As a result, it is expected to help attract new funds to Bahrain,
boosting the local startup ecosystem by bringing funds and expertise to the country.

Of course, the launch of the fund isn’t an isolated initiative. Bahrain’s ecosystem
has benefitted from a number of major economic reforms in recent years, including a
reduction in the minimum capital required for starting a business, the launch of the region’s
largest FinTech hub – Bahrain FinTech Bay, measures to enable onshore crowdfunding
in conventional and shari’a-compliant finance and the introduction of a regulatory sandbox
for FinTech.

Progress overview and the way forward:

The economy grew by an estimated 2.5 percent in 2017, which was driven by an
expansion of non-hydrocarbon GDP at a rate of 3.1 percent. A raft of project spending,
ranging from an airport expansion to social housing developments, has lifted activity in the
wider economy.
The downside of relying on fiscal stimulus to generate growth, however, has been
manifested in persistently high financing needs met via debt issuances, despite the
sovereign credit rating being well below investment grade. Recently, infrastructure
spending has been bolstered by the allocation of funds under the Gulf Development
Program – a pledge by Bahrain’s neighbours in 2011 to provide some US$10 billion in
grants over 10 years to boost investment in infrastructure and housing.
The government’s investment program is linked to an industrial strategy based on
downstream energy intensive sectors and digital development, and hence is focused on
aluminum sector, utilities, roads, renewable energy and telecommunications.
The Road to a More Diverse Economy:

 Support horizontal diversification by enhancing allocation of government oil

revenues in a manner that reduces production costs in new sectors and raises their
efficiency while encouraging entry of new investors.
 Enhance vertical diversification in existing sectors by focusing on moving into
higher value-added products in the mineral and chemical industries.
 Enhance labor market competitiveness through greater focus on wage growth in
line with productivity
 Investments to support small and medium-sized enterprises, national branding and
promotion, property development, education, and research and development,
among other activities.