Ongoing changes to Bahrain’s regulatory framework, from the economic substance requirements touched upon in last month’s issue to the kingdom’s personal data protection law (the PDPL), are simply a window into the efforts that the government and key decision-makers are making to establish Bahrain as the automatic choice for investors – both large and small, looking to establish a presence in the GCC. These efforts have been noticed: just last month the World Bank, in conjunction with Bahrain’s Economic Development Board (EDB), hosted an event highlighting Bahrain’s continuing and accelerating improvements in its Doing Business rankings. In fact, Bahrain was ranked in the top 10 of improving nations, with improvements in nine of the ten metrics that the World Bank analyses, including getting credit, protecting minority investors, paying taxes, and resolving insolvency. The creation of an institutional framework to register and regulate entities dealing with insolvency and bankruptcy can only make doing business in Bahrain more attractive. Even in the only metric where Bahrain did not improve – starting a business – it earned a score of almost 90 (89.6) out of 100.
According to the EDB, Bahrain implemented over a dozen reforms in 2019 like freeing up business activities, abolishing minimum capital requirements, implementing Bahrain’s personal data protection law and moving business registration online with streamlined licensing processes and reduced registration times. The new trust law introduced in 2018, makes establishing trusts, including charitable and ‘purpose’ trusts, easier. Other laws simplify raising capital and establishing investment funds while new rules on crowd-funding like the Central Bank of Bahrain’s (CBB) approval on platforms where people (P2B) or businesses (B2B) can lend money to businesses to get a financial return or to raise capital by issuing ordinary shares and Bahrain’s growing reputation as a FinTech hub with the CBB continuing to grow its regulatory sandbox are all pointers towards continuing success.
Meetings over the last month with key decision-makers in Bahrain suggest that piece-by-piece, we are moving towards achieving the aims of the Vision 2030 blueprint. FinTech is an important indicator of both the challenges and the progress that the Kingdom is making particularly with over 400 financial institutions now based here in Bahrain and the financial sector the most significant provider of private-sector employment. New infrastructure, fresh thinking, and supportive regulations are supporting the formation and growth of a thriving community where a range of different ideas are combined to often form innovative and surprising results.
Using a careful blend of both carrot and stick – with the government part-funding salaries for fresh graduates in the private sector and supporting strategic investments (such as moves to the cloud) while the public sector seems to be on the verge of moving to one-year contracts for expatriate employees, the government knows that it has to balance the interests of investors and the desire to nurture home-grown industries and businesses as well as the region’s most highly educated, skilled multi-lingual workforce. However, with sophisticated investors increasingly spoiled for choice, this is no time for Bahrain to rest on its laurels. Indeed, looking again at the Doing Business analysis, Kuwait (83rd globally) and Saudi Arabia (62nd) are also ranked in the top 10 improvers for 2019 and the UAE (16th globally) remains some distance ahead of Bahrain (43rd) – although the gap is narrowing. When it comes to starting a business, Bahrain (67th globally) is only ranked seventh in the Arab world, outstripped not just by the UAE but also by Tunisia (19th), Oman (31st), Saudi Arabia (38th), Morocco (43rd) and Mauritania (49th).
Change brings both opportunity and threat. The signs, however, are mostly positive. Bahrain’s GDP growth in 2020 is expected to outstrip peers. Bahrain’s commitment to regulating economic substance has had the positive effect of removing the kingdom from the European Union’s list of “uncooperative jurisdictions for tax purposes”. The oil price is holding relatively steady. The geopolitical picture is becoming clearer. Business confidence is returning.
Now it is up to us to keep up, move forward and thrive.