Bahrain: Investing in Bahrain
Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated USD 1.65 trillion, from 929 billion in 2020, surpassing their pre-COVID19 level. FDI flows in developing countries increased by 30% but almost three quarters of the total increase in global FDI (USD 500 billion) was recorder in developed economies, with developing economies showing a more modest recovery growth. FDI inflows to West Asia and the middle East increased by more than 49% in 2021 to 90 billion USD (UNCTAD, January 2022).
The Kingdom of Bahrain is very open to foreign investment and has one of the highest FDI stock-to-GDP ratios in the region. According to UNCTAD's 2021 World Investment Report, FDI in Bahrain contracted by a third to USD 1 billion in 2020, following the global economic crisis triggered by the Covid-19 pandemic. In the same period, FDI stocks reached USD 31.7 billion. The government has announced plans to continue implementing wide-ranging reforms to attract foreign investment and link it to national development and economic diversification plans. Foreign investment in 2020 was mainly directed at the country's manufacturing, education, healthcare and information technology industries. The main investor countries are Saudi Arabia, Kuwait, India and United Arab Emirates.
The Kingdom of Bahrain was ranked among the top 20 global economies in attracting direct investment, according to the Financial Times’ Greenfield FDI Performance Index 2021. Bahrain ranked 15th among 84 countries from around the world that were included in the report. The Kingdom also ranked 2nd in the Gulf and 3rd in the Middle East and North Africa (EDB Bahrain, 2022).
Bahrain enjoys an open and attractive economic and regulatory environment for international companies looking for a gateway to Gulf and Middle East markets. The country has the lowest corporate and personal taxes in the Gulf, without any restrictions for free trade zones. Foreign business ownership is fully permitted in more than 95% of all economic activities, eliminating the need to resort to a local partner in most cases. The excellence of the country’s logistical infrastructure is also a major factor of attraction. Moreover, Bahrain offers a large, highly skilled pool of financial workers, a regulatory structure that is both advanced and internationally well-regarded, and a physical connection to Saudi Arabia – by far the largest economy in the Gulf. Beside a strong regional competition, FDI in Bahrain have been limited by the slow advancement of the privatisation programme and a rigid labour market. The absence of true reconciliation between the Sunni monarchy and the predominantly Shiite opposition constitutes a hindrance to FDI. Moreover, new emerging trade centres in the Gulf increased the competition to become a regional financial crossroad. The country ranked 43rd out of 190 countries in the last World Bank's Doing Business 2020 Report, up by 19 spots from a year earlier. There was a number of prominent local, regional, and international investments in the kingdom in 2020, including from GCC, European, and Asian companies. These companies invested in a number of major sectors including financial services, manufacturing, logistics and retail services, education, healthcare services, real estates, tourism, and ICT.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 1,501 | 1,021 | 1,766 |
FDI Stock (million USD) | 30,684 | 31,705 | 33,471 |
Number of Greenfield Investments* | 29 | 24 | 30 |
Value of Greenfield Investments (million USD) | 1,051 | 1,090 | 1,061 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Bahrain | East Asia & Pacific | United States | Germany |
Index of Transaction Transparency* | 8.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 4.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 5.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
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Latest Update: March 2023