Overview of Bahrain’s Economy, Private Sector and Bahrain Human Rights

Interview with Dr. Essam Abdulla Yousif Fakhro, Chairman of Bahrain Chamber of Commerce & Industry

According to the World Bank, Bahrain ranks 28th out of 183 economies in ease of doing business which is a slight drop from its 25th position in 2010. The main drop occurred in categories such as starting a business, and registering property. Now, how easy is it to do business in Bahrain, and what difficulties is Bahrain facing? Also, what do you think is the impact of the recent internal struggle in Bahrain on the business environment?

Regarding ranking, I think you need to look at the long-term trend. The Heritage Foundation, which is another international ranking agency that traces the freedom of economies, has ranked Bahrain 10th and that in itself is quite an achievement. Rankings vary from one agency to another, so they can fluctuate. But Bahrain is definitely moving forward and will do better at ranking.

As you know, Bahrain is in relation with its sister/neighbouring countries as it has limited resources in oil and gas. For this reason, Bahrain needs to diversify its economy, and we are currently doing so. This process started with a reform initiative 10 years ago on the impulse of the King. Bahrain 2030 is a road map for the country and emphasizes competitiveness, fairness, human capital and sustainable growth, and a shift away from oil and gas.

Most of the government’s income comes from oil and gas and this needs to be reexamined. The GCC concept helps us be strong with a 1 trillion excess in our economy. Whatever happens within a sister state of the GCC has a positive impact on the others, therefore the issue isn’t competitiveness. Each of us has its own business model and we complete each other. We must not forget that we are located in one of the world’s most important regions, with 70% of oil reserves and 30% of gas reserves.

Bahrain has the most open economy in the Arab world and we aim for it to become an economic gateway for the entire Arab world and not only the GCC: a gateway for investment. This isn’t only to save Bahrain’s economy, but this entire economy.

Why choose Bahrain? The economy here is very competitive. Access to capital is one of the best here. The financial sector represents more than 25% of the total GDP. Any investor depends on borrowed capital. Bahrain has excellent Islamic banking with a continuous growth of 20% in this sector. Investors that come here can either resort to conventional banking or Islamic banking.

Another aspect of Bahrain is its cosmopolitan society: it is well known for its tolerance. Another major advantage of Bahrain is the absence of any sort of taxation, including in the repatriation of capital. We are a few kilometers away from Saudi Arabia, which is the largest member state of the GCC. We are very close to the Eastern province of Saudi Arabia, which has all of the oil activity.

We also hope to begin the building of a causeway with Qatar very soon, which will, once completed, make Bahrain very close to the United Arab Emirates (4-5 hours driving). And, of course, the FTA (Free Trade Agreement) with the US is an added advantage to Bahrain’s economy.

Women empowerment in Bahrain has increased since the reform initiative 10 years ago. Other reforms have been made, such as educational reforms and labour reforms in order to comply with the FTA requirements (we now have trade unions).

Bahrain has signed 6 out of 7 human rights international agreements. This ensures, for example, that child labour doesn’t exist in Bahrain. This is to grow within a socially sustainable economy.

Regarding what has been happening in Bahrain for the last 3 months, our first objective was to ensure security for the people residing in Bahrain. This crisis began with something meaningful: the people had demands regarding their living requirements, which is fully understandable.

Unfortunately the movement has been “hijacked” by extremists wanting to overthrow the regime. However the majority of the population of Bahrain does not want that. Some of the media have compared Bahrain to places like Egypt or Tunisia.

This is misleading as Bahrain has a very high GDP per capita and a fully developed infrastructure, unlike Egypt and Tunisia. With the National Safety Decree that has been introduced, the situation has calmed down. Hopefully the decree will be lifted by June. We now need to reconcile and reestablish national unity through dialogue and political achievements.

In a way, the crisis that occurred has been beneficial to Bahrain, as we can now implement reforms at a faster rate to make sure that the needs of the population are met. For example, we need to build 5000 housing units to catch up with the population growth. We have also benefited from the support of the entire GCC region in terms of security, but also financial support.

 

The Chamber of Commerce currently has 10 000 active members and plays an important role in the country’s development as well as enhancing the private commercial and industrial sectors. How are you going to enhance these sectors, and what is your vision for the long term? And what is the Chamber’s agenda for this year?

Like you said, the Chamber has 10 000 members. Very soon, with the introduction of the novelties  approved by the government, we will have 80 000 members instead of 10 000, because membership will be compulsory. The fees are minimal: only 20 dinars. The idea is to raise awareness within the private sector regarding the Chamber’s role in serving the private sector and achieving a mission:

the Bahrain vision 2030 aims for the private sector to become the main driver of the economy. Public-private partnerships are quite important too. More than 20 committees are in charge of different sectors of the economy and work in partnership with the government to ensure that the private sector doesn’t face any obstacles.

We will soon introduce a center to serve SMEs (which represent more than 80% of the economy), as well as a training center in collaboration with Bahrain Polytechnic. We have recently carried out a feasibility study for an export promotion center. Both the Ministry of Industry & Commerce and the Economic Development Board are interested in this project of ours.

We have been sending delegations abroad (US, UK, France, Singapore, Russia, China) during the past few years in order to market Bahrain as an attractive investment destination. We are still doing this. We also received delegations. Before the recent political crisis Bahrain was really an active base and we are hoping to restore our previous situation thanks to hard work and cooperation.

The Chamber works as a tool for any company facing a problem regarding ongoing business. We work together with them to find out what is impeding their growth and to remove any hindrance within the private sector. We are very active in this sector.

What is your main preoccupation, your most important mission that you want to achieve?

As I mentioned before, the main challenge is the sustainability of the growth, and the shift to a diversified economy. We want to achieve a technology-based economy in order to be able to compete with the international market.

The industrial sector should also develop. The Ministry of Commerce & Industry is working on this. Bahrain is also becoming a more service-oriented economy. We have good infrastructure and are logistically ready to serve as a gateway to the gulf, with the Sheikh Khalifa port, the Bahrain International Airport, and the industrial zone. They are very close together and they are also located on the causeway to mainland Saudi Arabia. These are very important elements for future foreign investment in Bahrain.

Another main preoccupation is the human capital. A national fund (Tamkeen) is dedicated to the empowerment of Bahrain nationals. We also have a joint committee with the parliament that meets on a regular basis and discusses the parliament’s law drafts to make sure that the private sector’s issues are addressed properly. This is a very big achievement for us.

Bahrain, just like any other economy in the world, cannot depend purely on its own resources. Attracting foreign investment is a priority. The other main priority is the human capital. We have, just like all of the Arab world, a very young population. This is good, but also challenging: we need to empower this young population for them to serve their own interests, and better their own standards of living.

About Bahrain’s current image. If you look up Bahrain on the Internet at the moment, you’ll see a lot of bad news and very few good news. Same goes for TV. People have in mind negative things, such as dissidents being arrested.

If the image of Bahrain is to be changed, it will not happen through the government, because people don’t like to listen to governments these days. Social networks have a much bigger impact. It must come from within, from the nation itself: from committees, from NGOs. The human rights organisations can sometimes be biased.

You should always look at the pros and the cons when you’re doing an interview. If you see that there are incentives of human rights violations, you need to question how the issue has been addressed. Have the violations been reported, have they been dealt with?

As I said before, the political crisis  started with justified demands, which was emphasized by the king. However a minority hijacked the movement, and since then they have been the only entity to be talked about by the media. The vast majority has been forgotten. The original movement was positive, it was a chance for us to listen to the people’s needs and implement reforms accordingly and democratically. 

The Western media did not mention certain things that happened as part of the revolutionary movement. There have been killings and intimidation. A hospital was taken over and the cinema company CEO’s wife was refused medical care when she urgently needed it.

These events haven’t been covered by the media. I feel that we haven’t done our job regarding the international media. The crown prince made an offer of dialogue and negotiations, but the opposition put conditions to these negotiations before they could even start. Moreover, Iran’s intervention wasn’t acceptable. Their propaganda against Bahrain is full of fabrications.

About the media, let me give you an example. Recently the crown prince went on a visit to London. The next day, the headlines in the Independent read, on top of a picture of Cameron and the prince shaking hands, “Cameron embraces tyranny”. Out of all the GCC states, Bahrain is the most progressive.

Why say that about Bahrain precisely? Sunnis and Shiites have always coexisted peacefully in Bahrain. The new Iranian however has always tried to instigate tension in Bahrain, because it’s a small country and they have ambitions over it.

How do you plan to remedy to Bahrain’s problematic image?

I just had a meeting with the Minister of Social Development, who is responsible for all human rights issues. We discussed the upcoming visits of our parliamentarians to foreign countries as well as the invitation of members of the Western media to Bahrain.

We want them to meet officials, and see the other side of the story. We’ve failed to promote our image as a government so far. So have the NGOs. A Bahraini official recently went on a visit to the US to talk about the situation.

 Unfortunately there was a bias even among NGOs and politicians, who really focused on the “other side” of the story. Just before the crisis, I was really overwhelmed by visits of delegations from many countries. To go back to this, we need to focus on the outside and prove that this is not an end.

The fact that you are here is already a sign. Reforms and reconciliation are getting the full support of the government and I am confident that things go back to normal very soon. We only need to shed light on these facts.