An exclusive with Dr. Simon Galpin, Managing Director of the Bahrain Economic Development Board (EDB), on the Kingdom’s initiatives for a sustainable future.
Bahrain has endured quite a challenging couple of years. How would you describe the economic development of the Kingdom this year?
2017 has clearly been a year of transition for the Bahrain economy, but we are now on a firmer footing with a clear plan for the future. The ongoing reforms will enable robust and sustainable growth, with investments from the private sector being a key driver of such growth. This is why it is so pleasing that 2017 was a record year for the Bahrain Economic Development Board (EDB) as we attracted $733 million of Foreign Direct Investment (FDI).
In the first nine months of 2018, FDI inflows increased by 138 per cent with $810 million, when compared to the same period of last year. Additionally, in only the first nine months, the EDB has already attracted a total of 76 companies, breaking the 2017 record of 71 companies.
Investments in 2018 are expected to generate more than 4,200 jobs over the coming three years, of which more than 1,100 will be high quality jobs (defined as providing a basic monthly salary of more than $1,850). The FDI attracted in the first nine months of 2018 was more than five times of the total attracted in 2015.
This strong growth has come despite a challenging global environment for FDI, with global FDI flows falling 23 per cent in 2017. The investments cover all sectors, but with particular focuses on manufacturing and logistics which account for the majority of investment with 31 companies including Ariston Thermo and Mueller.
In addition, a total of 15 companies were attracted in tourism, real estate, education & healthcare, ICT and financial services. Some of which include Al Sahel Resort, Flat6labs, Nest, Bank of Jordan, NFT Ventures, and Thales. For example, in a continued effort to promote investment opportunities from across the world, the EDB led a high-level delegation focusing on trade and investment to India this month.
We signed a Memorandum of Understanding (MoU) with the Maharashtra Government during the visit. This MoU is in line with the EDB’s aims of exploring greater synergies between India and Bahrain in the financial technology space and will last for an initial period of three years.
This strategic partnership will introduce innovations that will further strengthen the landscape of the fintech industry in Bahrain, which is widely regarded as the financial sector’s future.
Bahrain used to be one of the main financial services centres in the region. What are the government’s initiatives in raising Bahrain’s profile again as the financial centre of choice for investment?
Bahrain is still the largest financial centre in the GCC and it continues to expand with increased levels of employment and investment. Perhaps most importantly, we are a country defined by ambitious digital transformation. Transformation that includes the disruption of traditional financial services. For example, the development of Bahrain’s fintech ecosystem has been a top priority and this builds upon Bahrain’s position as a leading and established financial services hub.
Bahrain has been committed to introduce and improve both the regulatory framework and supportive environment needed by start-ups and existing companies to grow and succeed. Earlier this year, we saw the launch of the Al Waha $100 million Fund of Funds by Bahrain Development Bank.
Also, Bahrain FinTech Bay, the region’s largest and first fintech accelerator was launched earlier this year and a perfect example of what we call our ‘Team Bahrain’ approach—a successful economic model of publicprivate sector collaboration. The collaborative approach between the Government and private sector as illustrated by Bahrain FinTech Bay, has been instrumental to the advancement of the fintech activities in Bahrain.
Last year, the Central Bank of Bahrain established a fintech unit that has shaped a pro-innovation regulatory framework and the region’s only onshore Regulatory Sandbox. The Sandbox is a virtual space where start-ups or larger businesses can test their innovations before going into the market.
The Central Bank of Bahrain (CBB) has also issued for consultation the draft rules on ‘open banking’, which is a positive step towards growing and upgrading the financial services sector in Bahrain. Just this week, the CBB announced their first graduate from the Sandbox, Tarabut Gateway, which will allow customers to access all their bank accounts across different banks on a single platform.
Tarabut is in accordance with the open banking regulations and it is worth noting that such platforms are amongst the latest fintech trends. Currently, financial services accounts for around 17 per cent of Bahrain’s GDP and we are confident that the Kingdom will continue to strengthen its position as a financial services leader, regionally and globally while preparing for a future in which technology is going to make a bigger impact.
What initiatives are in place to improve the business environment and encourage foreign direct investment into the country?
We have seen a very strong period of growth in FDI in Bahrain over the past few years and the broader programme of regulatory development has been an essential enabler of that. However, we know that to maintain that growth, we need to continue to innovate. The Kingdom’s recent introduction of multiple regulatory reforms will ensure that we remain competitive and business friendly.
These reforms will address a range of issues and will have a particularly strong impact on the Kingdom’s economy and its growing start-up ecosystem. The laws come as part of a wider development effort, designed to create new opportunities for investors looking to access the Bahraini market. Government initiatives implemented in recent years have helped spur strong growth in FDI.
The four laws recently implemented are:
- Personal Data Protection Law – Bahrain has introduced a nationwide data protection law, supporting the development of the Kingdom’s digital economy.
- Competition Law – facilitates innovation as well as increasing productivity and efficiency by introducing legislation to prevent the formation of monopolies or the practise of anti-competitive behaviour.
- Bankruptcy Law – enables experimentation and innovation by businesses and improves the outcomes of the bankruptcy process for all parties.
- Health Insurance Law – promotes an integrated health system for Bahrain, based on a sustainable financing system that supports and attracts investment in both the health care and insurance industries. Bahrain has a long track record as a regional pioneer, and these new laws underline how important it is for us to maintain that culture of innovation.
Looking at 2019, what challenges do you foresee for Bahrain’s economic and financial sector?
The global financial sector continues to face a number of challenges, including rising compliance costs, heightened regulatory scrutiny and disruptive technologies dramatically increasing competition. Bahrain’s financial sector faces the same challenges, but we are well positioned to meet them.
Our flexible economy, agile government and highly educated workforce are key foundations for embracing economic opportunities and will also help ensure that Bahrain overcomes any challenges to its economy in the future.
What are your projections for the year and where do you see opportunities?
We are very excited to see the impact of recent economic and regulatory reforms, which will help improve the operating environment for existing industries as well as open-up new opportunities. The Kingdom’s future prosperity depends on growth driven by higher productivity and on embracing the new industries that are growing stronger every day.
Among the most prominent developments during 2018 has been the development of the fintech ecosystem, with the launch of Bahrain FinTech Bay and the CBB’s regulatory sandbox where we are seeing growing interest in both from around the world, as well as the $100 million Fund of Funds to help fund startups across the Middle East.
Therefore, we see huge growth potential for fintech in the coming year along with events around Blockchain solutions, regtech and insurtech. The Kingdom also saw several major investment announcements earlier this year during the Gateway Gulf Investor Forum, which brought together over 850 global investors and business leaders to explore ways of unlocking the opportunities being created by the economic transformation in the GCC.
We expect even more investment to be secured thanks to Bahrain’s position as an entry-point to the wider GCC, especially as we provide an ideal testbed for new technologies.