By Meera Ravi » Economic historians charting the development of the Gulf region will record for posterity that the oil boom of the 21st century brought some very different growth trajectories into play for the region. Where the Seventies saw oil money being invested in infrastructure, the key shift this time round has been the increased momentum of regional diversification.
It is no secret that Bahrain and the six-nation Gulf Cooperation Council (GCC) as a whole have benefited from increased oil revenues during 2006. But what is noticeable in this oil boom is the up-shift in diversification; in developing investment strategies for the long-term.
There has been a significant increase in both inward and outward foreign direct investment (FDI); most notably at an intra-regional level, but also on a global scale.
What this change demonstrates is a real commitment to sound, long-term planning to cement the future economic prospects of the region. It is indicative of the growing confidence of the Gulf that it is steering its own economic course for the future.
In Bahrain, the Ministry of Industry and Commerce has been particularly busy in preparing the ground for the beneficial growth surge from the Bahrain-USA Free Trade Agreement that was ratified in 2006.
“Whatever we do as a Ministry, it must be in support of the government's overall reform initiatives. His Majesty, King Hamad bin Isa Al Khalifa, has initiated major initiatives with the aim of improving the political and socio-economic conditions in the country,” said Industry Minister Dr Hassan Fakhro.
“The main initiatives of the Ministry has been to reform and streamline our institutions and policies and procedures and regulatory systems to ensure the creation and the establishment of industries and businesses are conducted in the most efficient way.”
In its effort to woo investors with a red-carpet welcome, the Ministry has set up the Bahrain Investment Centre (BIC), an electronic one stop shop to ensure that the process of registering a company in the kingdom is done in the shortest time possible. In January 2006, Bahrain introduced new regulations governing the launch of businesses in the kingdom, making it easier, faster and cheaper to set up.
The rules did away with many of the pre-approvals previously required, and brought in a flat fee of BD20 for most business registrations. A new guidebook, published by the Bahrain Investor’s Centre, will help investors through the business start-up process, ensuring all questions are answered clearly.
“We have spent a lot of time and money in upgrading our infrastructure and building new ones to ensure that there are no bottlenecks that could impede industrial development plans for the country,” Dr Fakhro said.
The result has been impressive – one of the first big projects to be announced was the $40 million Kraft Foods cheese and powdered beverage production plant at the Bahrain International Investment Park in Hidd. Once operational, the facility is expected to employ around 250 people.
Meanwhile, the Ministry of Industry and Commerce is currently reviewing applications for several ambitious projects such as:
- adding to the existing iron pelletizing plant to increase its production capacity to 6 million tons per annum at a cost of BD150 million (US $397.9 million) and creating employment opportunity for 200 people
- building a sponge iron unit as an extension to the pelletising plant using part of their iron pellets, with a capacity of 1.5 million tons per annum and at a cost of BD100 million ($265 million) and providing employment opportunity to 400 people
- a plant for the production of electric and control cables with a capacity of 33,600 tons per annum, at a cost of BD31 million ($82 million) and providing employment opportunity to 307 people
Dr Fakhro added, “We have conducted several studies and especially in the light of the Free Trade Agreement (FTA) with the United States of America; which showed that the opportunity in investing in the subsidiary and integrated industries are immense.
"This is not to say that we do not encourage investment in the basic industries. We have a healthy energy inventory and a comprehensive energy policy and plans in place. We prefer to put emphasis on the subsidiary industries because they are less energy and capital intensive and more environmentally friendly and more so because they provide more employment opportunities per dollar of capital expenditure.”
The thrust is definitely on subsidiary industries and knowledge-based industries that will allow for a ‘greener and leaner’ industrial profile for the kingdom; one that will be environmentally sound and make fullest use of the educational potential of the Bahraini people.
The kingdom’s national economy is growing stronger as the GDP witnessed an eight per cent growth. This healthy trend will help provide a strong support to all sectors, according to experts.