Bahrain Zone for International Industrial Companies is Seeking Companies

Interview with Osama Al Khajah Chairman of Baytik Industrial Oasis

According to the World Bank, Bahrain is ranked 28 out of 183 economies, the main categories registered were starting a business and registering property. In your opinion, how is it to do business in Bahrain and what are the difficulties that you face in here?

Bahrain is ranked as one of the easiest countries to do business and if you refer to the index you just mentioned and look at the previous years, you will find that Bahrain has always been on the top. This time, Bahrain was ranked 28th after being the 25th with a slight decline that was due mainly to elements such as access to capital and enforcing laws that are still relatively challenging.

Nevertheless, the 28th rank among 183 countries makes Bahrain at the top of the list and it is the 2nd in the Middle East after Saudi Arabia. Kuwait Finance House has been working in Bahrain since 2002 and it has always received good service, good attention and efficient work from the government in terms of registration of property or registration and establishment of companies or other types of business.

How do you view Bahrain’s recent internal struggle and what has been the impact on the business environment?

The struggle affected Bahrain’s economy since it started in mid-February. The retail, hospitality and trading sectors were some of the main sectors that were affected by what happened in Bahrain. Some of the international media was not accurate in reflecting what happened in Bahrain to businesses and the international economy, which was a pity. 

Nevertheless, I think there are many advantages that Bahrain is getting out of what happened, economically speaking. The largest budget in the history of Bahrain was approved last week with over 4.5 billion Bahraini Dinars, which will be reflected in fostering the economy through capital and government spending and will attract the private sector to help grow the economy in partnership with the public sector. 

Bahrain has already started to receive assistance (10 billion dollars) from the Gulf countries which will mostly be invested in infrastructure, housing and capital investments such as the airport expansion, oil and gas expansion and of course the housing system, which will be one of the major elements to receive financial support either from the GCC or through the budget of Bahrain.

Industry is one of the key pullers of Bahrain’s diversification effort away from oil. How do you view the Bahraini industry now?

The challenges of the Bahrain industry as of today are still access to natural resources, mainly the energy through gas. The other challenge is the limitations of industrial land. Oil and gas production in Bahrain has grown tremendously; today it is around 40-42 thousand barrels, and there is a plan to grow it further to almost double the capacity in the coming couple of years. 

We are optimistic that with the new concessions awarded to the gas companies there will be a higher production of gas achieved which means it will open up a new gate for industrial companies. On the other hand, the existing industries will continuously create opportunities downstream. ALBA, for example, still exports around 45% of its production outside of Bahrain which means that this 45% can be used in Bahrain in downstream aluminum and add more value for Bahrain before exporting it.

This means there is still big potential, equaling to nearly half of ALBA’s production capacity for aluminum downstream companies. Similarly with the Bahrain petrochemical industries, I think GPIC is now planning for a big expansion and a downstream as well. Knowledge-based industries still attract us as investors and many other industrialists to invest in Bahrain for many reasons including the work force, the living and the other advantages that Bahrain offers for investors through free trade agreements and zero taxations.

BIO (Baytik Industrial Oasis) is situated in one of the region’s most exclusive industrial parks, the Bahrain International Investment Park, which offers a number of unique services and benefits such as dedicated assistance from a professional management team, as well as other incentives, including duty-free access to the Gulf and the Middle East market. What are the advantages of being in Bahrain?

BIO was established as a state of the art industrial park and the first project was established in the Bahrain International Investment Park.  The park is part of a model that Kuwait Finance House formed that consists of access to capital and finance from the bank, the park as infrastructure and facilities, and a state of the art international training center.

This model can assist and attract industrialists to set up their businesses in the park. Recently, Siemens, an international company, selected our park to be home to its operations for the entire Middle East. Siemens commissioned its operations in five months from the date we signed the agreement, so saving time is a big advantage BIO offers its tenants.

There is no condition for any tenant to have a minimum amount of Bahrainization but it is Siemens’ strategy to reach 50% of Bahrainization from year 1 of their operations. These 50% Bahrainis are trained in our national institute for industrial training and the EMS (Engineering Multi Skills) program has been subsidized by Tamkeen which is the labor fund of Bahrain, so Siemens took advantage of training the Bahrainis at competitive factors.

Despite all these advantages, what is your main challenge and difficulty?

At a level of regulations, we hope that Bahrain will improve in law enforcement. Enforcing laws has a big scope for development and this will really be translated into a big advantage for Bahrain. In terms of industries, we hope that new explorations will produce an additional capacity of gas which will enable us to invest in industries that use gas whether they are petrochemical or other energy-related industries.

 There are large plans announced by the ministry of industry and commerce to develop a large economic zone which will provide further access to land for industries. The continuing development over the coming few years in Salman Industrial City where BIO is located will definitely be at our advantage.

What stage are you at in terms of projects and where are you in the commercialization stage? Are there any other developments?

We completed phase one of BIO which is comprised of 110 thousand square meters. We have not yet made the official launch of phase one but the civil works and the external works are mostly completed. There are a number of mainly international companies that we are at an advanced stage of concluding agreements with them to establish their operations in BIO, and industry agreements are usually long term. We are also developing our own ventures in BIO mainly in logistics, because we think the logistics sector which includes packaging, labeling, warehousing and distributing is promising in Bahrain.

When you say venture, does that mean you have already found a partner or are you looking for one?

We have the business concept model and we are currently in discussion with potential partners to team up with us before the execution of the project.

In regards to the venture, would you like to give more details about what sort of partner you are looking for?

The venture is based on the existing and future need in Bahrain and in the region for logistics. The park and Salman Industrial City are adjacent to Khalifa Bin Salman port and Bahrain does not have proper logistics companies that function at the maximum possible value chain, from warehousing, packaging, labeling and handling.

We have developed the concepts and we are currently looking for a management partner who has the expertise in that; we are in discussion with a couple of international companies and we strongly believe that Bahrain will be a hub for logistics, at least in the short term it will have a key role in the GCC in logistics.

How difficult is it to attract companies to Bahrain? When you meet with potential investors what are the difficulties you find?

One of the difficulties that was beyond our control was unfortunately created by the international media regarding the situation in Bahrain. But this is changing and we have already started to receive queries from companies who were especially quiet during the crisis. Now they are back and they would like to continue their plans to come to Bahrain.

Attracting companies is not an easy task for BIO because it looks at high value premium projects and talents and it cannot compete with low cost parks. Whether they are international, local or joint ventures, the companies that are looking for quick start ups for their business and are looking for a unique location through Bahrain International Investment Park are our targets.

In regards to Kuwait Finance House, it has received the “Best Islamic Product” award for its pioneering project for Baytik Industrial Oasis as well as the “Bank of Middle East” award 2011 organized by CPI Financial. What do these awards mean to you and what is the message that they are sending?

 For the bank, the award means international recognition for its commitments to economic sustainability and for its efforts to diversify its assets and its investment portfolio. This is one of the international recognitions which we have recently received for Baytik Industrial Oasis.

What is the main strategy that Kuwait Finance House has now and where are you going?

We are dynamic in our strategy and yet we have a long term strategy for Bahrain. During the crisis, we launched a large project in Diyaar Al Muharaq which was comprised of 3,000 villas. It was launched by Kuwait Finance House and other strategic investors for affordable housings market and we have already started the construction of mock-up villas which should be completed by October of this year. This is an example that reflects our confidence in Bahrain and in the market and our long term plans to develop our assets and activities in the Kingdom.