Attitude toward Foreign Direct Investment
The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government's top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner; no other Gulf state allows this. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends. Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) operates the Bahrain International Investment Park (BIIP), a 2.5 million square meter tax free zone located minutes from Bahrain’s main Khalifa bin Salman port. Only 5 percent of the land in the park remains available for new enterprises, though BIIP officials are confident they will attain new land to expand the park. In 2015 MoICT issued a decree doubling rental fees for industrial land. Despite this increase, however, industrial land in Bahrain is still less expensive than it is in other GCC countries. Bahrain is particularly keen on attracting investment from the United States. A Bilateral Investment Treaty with the U.S. entered into force in 2001 and the U.S.-Bahrain Free Trade Agreement commenced in 2006.
Other Investment Policy Reviews
The World Trade Organization (WTO) conducted a formal Trade Policy Review of Bahrain in 2014. Here is a link to the WTO site, where the report can be accessed: http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm
Laws/Regulations on Foreign Direct Investment
The U.S.-Bahrain Bilateral Investment Treaty (BIT) provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation and national treatment, the right to make financial transfers freely and without delay, the application of international legal standards for expropriation and compensation cases, and access to international arbitration. The BIT guarantees national treatment for U.S. investments across all sectors, with exceptions only for ownership of television, radio or other media, fisheries, and privatization of oil dredging or exploration. Bahrain also provides most-favored nation or national treatment status to U.S. investments in air transportation, the purchase or ownership of land, and the purchase or ownership of shares traded on the Bahrain Bourse.
The national treatment clause in the BIT ensures American firms interested in selling products exclusively in Bahrain are no longer required to appoint a commercial agent, though they may opt to do so anyway. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party's product or service in Bahrain.
Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. Wholly foreign-owned companies may be set up for regional distribution services and may operate within the domestic market as long as they do not exclusively pursue domestic commercial sales. Private investment (foreign or Bahraini) in petroleum extraction is permitted only under a production-sharing agreement with BAPCO, the state-owned petroleum company.
Expatriates may own land in Bahrain. Non-GCC nationals, including Americans, may own high-rise commercial and residential properties, as well as properties used for tourism, banking, financial and health projects and training centers. Expatriates may only own land in specific geographic areas designated via edict from the Prime Minister’s Cabinet.
MoICT made several changes to the commercial registration process in 2015 in an effort to enhance efficiency and transparency. The new Business Licensing Integrated System (BLIS) allows GCC companies and individuals to apply, track and get a “primary approval” for a new commercial registration online within two working days. American citizens and companies, however, are still required to appear in person at the Bahrain Investor’s Center (BIC) to file their applications. For more information on company registration, please visit the following GOB website: https://www.business.gov.bh/
The GOB’s Economic Development Board (EDB), which is chaired by the Crown Prince, is tasked with marketing Bahrain as an investment hub, and helping companies establish a physical presence in Bahrain. The EDB targets FDI in the following sectors: manufacturing and logistics, financial services, information and communication technology (ICT), and tourism, including by publishing information on each of these sectors online and in its quarterly print magazine. EDB also has several offices overseas, including one in Washington, DC, from which staff travel throughout the United States to promote investment in these sectors.
The GOB also has several programs designed to support small businesses (companies with fewer than 5 employees). The Bahrain Development Bank, for example, offers low interest loans to support small businesses, while Tamkeen (the GOB’s private sector support fund) offers technical assistance, training, and grants. Would be entrepreneurs also can apply for a loan from Family Bank, which offers credit worth up to BD 8,000 (roughly USD 21,000).
Limits on Foreign Control and Right to Private Ownership and Establishment
The Kingdom of Bahrain imposes minimal limits in foreign control, and the right of ownership and establishment of a business. The Ministry of Commerce, Industry and Tourism maintains a small list of businesses that are restricted to Bahrain ownership, including press and publications, Islamic Pilgrimage, clearance offices, and workforce agencies,
U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to resolve bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.
Bahrain's Crown Prince is an outspoken proponent of privatization, and he advocates increased foreign investment as a means of driving private sector growth. To promote this goal, he endorsed the establishment of a "one-stop-shop" for potential investors. Bahrain’s Economic Development Board works with Bahrain’s ministries to attract FDI by highlighting the business-friendly environment Bahrain offers to foreign companies. In April 2014, the Crown Prince appointed a new board of directors for the EDB, significantly increasing the number of private sector representatives on the board. In February 2015 the Crown Prince appointed a new CEO with a strong private sector background.
Screening of FDI
Bahrain does not designate a single entity to screen and/or approve FDI. In recent years, however, it is apparent the Government of Bahrain has become more selective in supporting and approving foreign investment projects. Decisions to approve or reject FDI appear to be primarily based on concerns over land scarcity and national security. The government also seeks to prioritize FDI that will generate the maximum number of jobs for Bahraini nationals.
There is no formal competition law in Bahrain, nor is there a specific agency that monitors competition-related issues. There are general restrictions on FDI in some sectors, including the oil and gas and petrochemicals sectors, in which all companies are government-owned.