FDI Bahrain: Security Risk

Foreign direct investments are very sensitive to the uncertainty that surrounds Bahrain. Is this perception based on sound fundamentals or is it largely psychological?

Amin A. Al Arrayed, General Manager of First Bahrain, argues that “The FDI is very sensitive to the kind of uncertainty that exists today. FDI typically wants to feel safe and that’s the challenge. Today, with the media reports that come out, with a very public situation of unrest, if you do research and feel there may be risk associated with your investment, then you probably think twice before investing. So clearly that makes the EDB’s job more difficult because they have to really work hard to convince companies to invest. The level of scrutiny has become much higher. The flip side to that of course is the costs have come down considerably. The costs of setting up in Bahrain today are much cheaper than they were pre-crisis simply because there was a lot of inflation. Bahrain can probably provide a lot of value in terms of cost structure but it still has to overcome this initial feeling of risk associated with Bahrain which is a negative consequence of the crisis.”

Arrayed agrees that the risk perception in Bahrain is psychological. “If you look at the situation and we’ve been active for many years now after the crisis – almost two years – there is very little security risk. There is very little actual risk. There are issues you may hear about or delays because of the roads here or there or protests here or there, but I don’t think there’s major disruption to businesses.”