BANKING ON BAHRAIN
Widely regarded as the best-regulated financial centre in the Middle East, Bahrain has been the region’s undisputed financial capital for more than 40 years. The Kingdom’s geographic position remains vital and more recently, it has been the education and skills of its citizens and the government’s desire to ensure diversification and growth of the national economy which have played a crucial role in the change of infrastructure.
Bahrain’s financial services sector is extremely strong, as over 400 licensed international financial institutions operate in Bahrain, both offshore and onshore making the financial sector currently the largest contributor to GDP at 27.6%.
The growth in the number of services offered, including one of the widest range of Islamic banking services as well as insurance and collective investment schemes, sets the Kingdom of Bahrain aside from other international financial centres.
FOCUS ON BANKING SECTOR
The financial sector is supervised by the Central Bank of Bahrain, which since 2002 has functioned as the single regulator for the entire financial system. This enables businesses in Bahrain to operate throughout the Kingdom with no ‘free zone’ restrictions.
Banking assets rose by 33.5 % in 2006, and by more than 18% in the first half of 2007. Opportunities for growth remain in mutual funds, fund administration, project finance, private banking and asset management. To enable institutions to take advantage of these opportunities, the Central Bank of Bahrain has created a license specifically for investment businesses.
The Bahrain-based international Banking and insurance groups enjoy a trusted regulatory environment with effective and transparent legislation.
Additionally, Bahrain plays a host to a number of organisations central to the development of Islamic finance. Bahrain has made a concerted effort to become the leading Islamic finance centre in the Arab world, standardising regulations of the Islamic banking industry. It currently has 32 Islamic commercial, investment and leasing banks as well as Islamic insurance (takaful) companies - the largest concentration of Islamic financial institutions in the Middle East.
Economic Growth
Bahrain has the most flexible economy in the Middle East, ranking 19th worldwide, ahead of France and Germany.
Over the last four decades, Bahrain has undergone a steady and controlled growth in its economy as it diversifies away from oil. Businesses enjoy the protection of the Kingdom’s legal system, with its established track record and global best-practice standards.
In addition to being part of the Arab Free Trade Zone, the Kingdom has bilateral trade and economic agreements with 43 countries, including China, France, India, Singapore, the UK and recently, the United States. All this enables businesses located in Bahrain to exploit the benefits of Middle East markets with added capability of a global business model.
Petroleum production and refining account for over 60% of Bahrain’s export receipts, over 70% of government revenues, and 11% of GDP (exclusive of allied industries), underpinning Bahrain’s strong economic growth in recent years. Aluminium is Bahrain’s second major export after oil. Other major segments of Bahrain’s economy are the financial and construction sectors.
Bahrain is actively pursuing the diversification and privatization of its economy to reduce the country’s dependence on oil. Continued strong growth hinges on Bahrain’s ability to acquire new natural gas supplies as feedstock to support its expanding petrochemical and aluminium industries.
Bahrain being one of the first Gulf States to discover oil, the reserves are expected to run out in 10-15 years. Accordingly, Bahrain has worked to diversify its economy over the past decade and has stabilized its oil production at about 40,000 barrels per day (b/d).
Ongoing economic and legal reforms will ensure that Bahrain continues to maximise the potential success of both Bahraini and foreign businesses.
With a further positive development in Bahrain’s infrastructure, the new Qatar causeway due to open in 2012 will provide a direct link to Qatar, part of the trans-Gulf highway connecting the key markets of Saudi Arabia, Kuwait, UAE, Qatar and Oman, with Bahrain at the hub.
