InterviewsNovember 30, 1999

Bahrain International Investment Park (BIIP) Bahrain Investments

: Published: November 30, 1999

Bahrain has been ranked the best country for business in the Gulf by Forbes, one of the most trusted information resources for the world’s business leaders. How do you see the present business climate in Bahrain and how does it differ vis a vis other GCC countries?

Bahrain International Investment Park (BIIP), Bader Al Saad: We can't clearly compare Bahrain to other countries because each country has its advantages. Our region, the Middle East, is trying to attract more foreign direct investment to raise living standards and compete with other, developed countries, to the point that the quality of life and wealth become acceptable for the people here and for those coming to live in the Middle East. Bahrain wishes to attract foreign direct investment to bring wealth to the country and to employ Bahrainis. In our case, we have tried to look around and see what we can offer to foreign investment. So we came up with a model, which is the Bahrain International Investment Park, specifically focused on attracting industrial and services investments to Bahrain. This model is new to Bahrain and will hopefully be a benchmark for the future because it has provided many incentives to foreign investments. It has been a very successful start. We have attracted major companies and brands like Kraft Foods and Abahsain Fibreglass. It's a mix of regional companies, European companies, and American companies.

What are the advantages for international and local companies to establish themselves in Bahrain?

Bahrain International Investment Park (BIIP), Bader Al Saad: Bahrain has a lot of advantages; the location is very strategic because we're close to one of the biggest markets in the region, which is Saudi Arabia, which has a population of maybe 30 million people. Bahrain is located in the center of the Gulf and there is accessibility to the GCC countries, so you can reach them easily through roads, air, or sea. We also have the GCC Free Trade agreement, which allows countries in the region to exchange and trade with each other easily. This has helped us progress and attract foreign direct investment. We also looked around us and saw what countries are offering and we tried to learn and come up with ideas that will allow us to compete and show that "yes, we have things you cannot find in other places." There are strong incentives for companies to prefer Bahrain as the best location in the Gulf. Particularly the business climate here and the quality of life.

But the same thing could be said about Dubai, so what are the particular advantages Bahrain has over Dubai and Abu Dhabi?

Bahrain International Investment Park (BIIP), Bader Al Saad: We don't like to compare ourselves with other locations like Dubai and Kuwait and other countries, but we like to say what we have, or what incentives we offer. We offer zero % tax and this is guaranteed in our park for ten years, 100% foreign ownership of companies, mainly in the industrial and services sectors, quality serviced land, in our case, for example, all the infrastructure is provided there. The price of land is very low compared to the high quality services we provide. Our government's intentions is to support the businesses coming to Bahrain, so we have our people who are dedicated to supporting these companies and following up with them from the start and guiding them in all the stages to establish their business here in Bahrain. One of the most important things is that we have an international management team from Ireland in our park, to specially manage this land and provide the best services and support and follow up for companies once they come to the park.

The BIIP is designed to attract export oriented companies, in manufacturing and internationally traded services, with high value projects that will contribute to creating quality local employment. You mentioned you are unique. How would you characterize your strategy and your business model?

Bahrain International Investment Park (BIIP), Bader Al Saad: Yes, there are other locations in the Gulf which have been found to be attractive places to do business. However when you put together all the incentives Bader talked about; the central location, the best tax deal in the world, no corporate or income tax, no restrictions on repatriation of profits, no capital taxation, and very importantly as well you have duty free access to the GCC markets, this is a unique package. If you're in a free trade zone in the GCC, you will be paying import duties from the trade zone into the GCC. Bahrain isn’t a free trade zone, we're part of Bahrain, and you have duty free access into the GCC and the Bahraini markets. We do have duty free access for raw materials for manufacturing, and you have the opportunity to put together a multi-national labor team, whether it be drawn from Bahrain which has the youngest and one of the best educated populations in the Gulf, or whether you're bringing in Asian or European and American labor. Bahrain is a cosmopolitan location where it's very easy to put together a business that can trade within the Gulf and internationally. Our government did research to see what type of sectors will benefit the Bahraini society and will create better jobs. They looked at what resources Bahrain has at the moment - materials, people, skills - and matched them with what companies want to establish themselves here. There were eligibility criteria prepared to show what type of companies we are looking for so that is why we zoned our park into different zones, like the Knowledge and Services Zone, the High Technology Zone etc. We want to take a different approach to attracting companies. Other countries maybe focus a lot on the preliminary stages of the industries, but in our case we want to skip this stage and go for the final products, to have products manufactured in Bahrain, and to create skills that will develop the country later. The location of Bahrain is very important. Within thirty minutes from this park you're on the way to Saudi Arabia, so it's a direct land link into Saudi Arabia. The new friendship bridge is being built between Bahrain and Qatar which will be opened in about 2013 and will give a direct road link to the rest of the GCC. This park is located five minutes from the new international port which has been opened here at a cost of about 600 million dollars. Then we have the international airport which is located ten minutes from the park. It is very unique in terms of accessibility and moving into markets nearby.

How would you assess your balance of power between your customers and clients as a supplier of services? Who holds the bargaining power? Is it the clients that come to you or you who comes to the clients?

Bahrain International Investment Park (BIIP), Bader Al Saad: I don't think we look at it as a balance of power. We see ourselves as being in a partnership with our clients. Our clients have a lot to offer Bahrain; they bring technology, management skills, jobs, and exports. These things contribute to the economic success of Bahrain and as such, that is something that Bahrain is looking for. On the other side, I think Bahrain brings competitiveness to our clients. We bring an international labor force, whose cost, by international standards is very low, we bring a tax regime that is unique in the world, we bring the availability of raw materials, and geographic closeness to some of the richest markets in this region. I think it's a win-win situation. As a small economy, Bahrain values inward investment, it knows the contribution that inward investment can make to the development of Bahrain, and it will work to make sure that companies who choose to invest in Bahrain get a return on that investment. It's a mutual benefit. It doesn't mean that we offer these incentives and the companies either take it or leave it, we also try to facilitate more things for these companies. We study their requests and see if we can do something for them.

How have your clients and the international companies interested in investing in Bahrain behaved since the beginning of the global economic downturn, and how has this affected your operations?

Bahrain International Investment Park (BIIP), Bader Al Saad: It affected some companies in that it caused some of them to change their plans, we got less applications for land in Bahrain, but there was still an encouraging level of demand, mainly to get these incentives that we offer. Just a few months ago we had a very large company sign up to establish itself in our park. This makes us optimistic that there are still companies looking to invest and expand, and maybe this is the best time for them to expand. Clearly the Middle East hasn't escaped the downturn that the rest of the world is experiencing, but we're seeing that in terms of inward investment, perhaps the downturn is forcing companies to look at their cost structures and competitiveness, even more so now when times are tough than when they were good. I think what many European and American companies are doing are looking around the world to see the different business models that will help them compete in a global economy that is growing at a slower rate than it did in the past. I think what they are finding in this part of the world are some of those unique incentives we talked about before. I think the global recession is forcing companies to look again at their business models and we're seeing some advantage in that. Just last month we announced the single biggest investment we have had in this park so far. They're regional investments but we're also talking to international companies who are looking at the Middle East. I think the Middle East has been touched less by the global recession than other parts of the world. We have received applications and we have companies in the park that are leaders in their market such as Kraft Foods, which brought an investment of a 40 million dollars cheese and powdered beverages manufacturing plant. We also have MTQ Corporation from Singapore, a leading engineering company listed on Singapore's stock exchange and involved in the oil and gas industry. We also have Abahsain Fiber Glass Middle East, which is considered the only Middle Eastern manufacturer for raw fiber glass. And there are many more. In total, over 70 projects have been approved for the park at this stage. Two thirds of those projects are Bahraini companies, and one third are regional and international companies. Between them, they will create, at full production, 8,000 jobs, and between them they are investing over 600 million US dollars. Approximately 60 to 65% of the park is allocated at this time. What that is saying is that Bahrain is now on the stage as a serious player in terms of attracting investment, whether it be local, regional, or international investment. What Bahrain is now proving is that not only can it compete, but it can compete and win, in terms of attracting new investment.

You mentioned that 60 to 65% of the park is allocated. Are the companies already in place and functioning, or when are they going to start to function?

Bahrain International Investment Park (BIIP), Bader Al Saad: About 70 companies have been approved to come in to the park. Over twenty of those companies are either in production or finishing construction of their plants as we speak. Thirty companies have signed leases to come to the park and are now in the process of getting their building permits, and will start construction over the next 12 months. Another 15-20 companies have recently been approved and we expect them to sign their leases in the next 4 months.

You were talking about the individual companies. What about the development of the park itself?

Bahrain International Investment Park (BIIP), Bader Al Saad: Actually, for our park, we have tried to develop a world standard location for companies to come to. What we will have is a fully landscaped park, fenced and surrounded by security, similar to what you see when you go to Europe, because we learn from what is provided there and what is attractive to companies. We want to implement this in the park and we are now at a very advanced stage.

When can we expect the full completion of this project?

Bahrain International Investment Park (BIIP), Bader Al Saad: Assuming we continue to allocate the park at the same rate we have, we would expect to have the park fully allocated within two and half to three years, and then all the plants constructed within a further 18 months. Having done that, we will have created in Bahrain an international standard business park that international companies would be proud to call their home. The challenge for Bahrain will then be to go on to the next business park and to replicate that process. What we're trying to do is move up a notch, to make sure the quality of this park is that of any developed economy in the world.

How does your performance in 2009 compare to your performance in 2008 and how does it benchmark against the performance of other free trade zones in the region?

Bahrain International Investment Park (BIIP), Bader Al Saad: As we see at the moment, we are well on target this year to achieve what we achieved in the last two years. We announced the Saudi Arabian Amiantit Company investment last month, which will be on 60,000 square meters of land. I can't go into details obviously, but we are in negotiations with a couple of other major companies at the moment; if they come I think we will exceed what we did in the last two years. I think that given the environment we are operating in globally, if that happens, that is something we will be quite proud of to have done. We work with partners in this and I think that's important. The Economic Development Board are our partners as well, and they market Bahrain internationally, and they are very important for our success, as I hope we are to their success. You have a team of Bahrainis and an Irish team here in the park who have experience working with international companies setting up in new locations.

You mentioned the Bahrain Economic Development Board (EDB). What are both of your roles in the economic development of Bahrain, and what is the relationship between you?

Bahrain International Investment Park (BIIP), Bader Al Saad: Our role here is to attract the industrial and services activities to the park, since we are part of the Ministry of Industry and Commerce.. The EDB has a bigger mandate for what they attract. They are seeking to attract anything related to the financial sector, the industrial sector, and all different types of businesses. There is cooperation between both sides. For example, if there is a big company looking to invest in the industrial and services sector, the EDB will contact us, and we will meet with this company. At the same time, if we were approached by a company, and we felt that their questions and what they are looking for is something related to what the EDB can provide, we talk to the EDB. There is a link between us, and both of us are working for the government, so our target is the same at the end, which is to develop the country.

With all this economic growth, questions regarding the negative impact on the environment are often raised. How does BIIP address sustainable development?

Bahrain International Investment Park (BIIP), Bader Al Saad: In terms of sustainable development, we are very conscious in this park that we are part of a community. We have nearby neighbors in terms of people who live here and rear families, and we are very conscious that we have a responsibility to not bring to this park any kind of business that will do harm to those who live and rear families near us. We're very conscious in terms of the vetting procedures, and we've had applications from 420 companies to come to this park, and we've only accepted 70 or 75 projects. Part of that assessment is commercial, but part of it as well is environmental. Before we will sign a lease for this park, a company must have environmental approval from the Environment Protection Agency here. That is saying that from our perspective, if you want to attract high quality international business, we don't want dirty business. International companies are not going to set up in a location where the environment is not right, both from a business point of view and in the green environment sense. It is also clearly mentioned in our brochures that we try to attract clean industrial businesses here. Once we receive the application, we look at the usage of for example, water, electricity, to show if the company is a heavy user, which means it will have a lot of waste and fumes. At the same time, we look at the bi-products that will come from the plant itself, so yes, we focus a lot on environmental issues. On the park we are also setting standards in terms of the environment. As Bader said, we are about to appoint our landscaping contractor. We have a landscaping requirement for companies setting up on the park. Every plot has to have an element of landscaping built into it. We want to ensure that this park is not just a good business environment, but also a good place to work in and look at.

How has the park contributed to enhancing the economic development of Bahrain, and what is its role in the economic vision of 2030?

Bahrain International Investment Park (BIIP), Bader Al Saad: There are a number of ways we see ourselves as contributing. The first and most important is obviously job creation. Bahrain has a young and educated population that will need jobs in the future. Today, the projects that are approved in this park will help to create 8,000 jobs. Second is the investment that has gone into setting up those projects, which is 600 million dollars, spent on bricks and mortar and building contractors setting up businesses on this park. The services these companies use, the money that is spent in the economy and workforce, the use of the port and the use of the airport, all of these contribute to the economic development. Our experience in Ireland is that sometimes countries are reluctant at first to accept foreign direct investment, but I think once they do so, they see the benefits, in terms of the technologies that are brought into the economy, the management skills and practices that spread out into the indigenous base. So I think all of these things are contributing to the growth of the Bahraini economy.

How do you envision Bahrain international investment park in 2015? What is your long term vision for the park?

Bahrain International Investment Park (BIIP), Bader Al Saad: We hope to finish allocating and developing the park in 2013. In the two years after that we will continue to manage the park in a professional way; after bringing all these companies here and putting forth all this effort to market Bahrain as the best location, we have to retain these companies. We don't want to lose these investments. We want to keep them in the country and have them expand, also. From our experience, if companies are happy, they will market us, so if they meet with any others or have their own providers or suppliers, they will tell them that Bahrain is a very good location to establish your business and be closer to your customers. This will help us with the larger target at the end, in line with the greater economic vision for the country.

What is the final message you would like to address to our viewers, readers, and possibly investors about the park and Bahrain, and your vision for Bahrain?

Bahrain International Investment Park (BIIP), Bader Al Saad: Looking at the business climate in Bahrain compared to the other GCC countries, we as Bahrainis see that Bahrain is a very competitive country in terms of attracting businesses to it. It's a good location because in this country, you will not only find support from the financial sector, but also from the public sector, which will assist you and try to facilitate you . We hope to develop the whole park and come up with a model that will be copied later in industrial areas in the future. At the same time, this will reflect on Bahrain as a business-friendly location, that will be able to incubate all types of businesses, not only in the industrial or services sector but even other businesses, which will make Bahrain a hub for exports, create value added jobs for Bahrainis, and will bring wealth to all Bahrainis. If there are companies out there who are trading in the Middle East, who feel the need to be closer to their customer base, who are looking for a more competitive place to service that customer base, Bahrain should at least be on their check out list, because there is a fairly unique offering in Bahrain at the moment. The fact that the big companies we spoke about earlier chose Bahrain shows that there is a business model here that is working for companies. We would like the opportunity to show companies what we have to offer here in Bahrain.