Executive Summary

The investment climate in Bahrain is generally good and has remained relatively stable in the last year, despite the sustained downturn in global oil prices. Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. In an economy largely dominated by state-owned enterprises, the Government of Bahrain (GOB) aims to foster a greater role for the private sector in economic growth. Government efforts focus on encouraging foreign direct investment in Bahrain, including in the manufacturing and logistics, information and communications technology (ICT), financial services and tourism sectors.

The U.S.-Bahrain Bilateral Investment Treaty (BIT) entered into force in 2001. The BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation treatment and national treatment, the right to make financial transfers freely and without delay, international law standards for expropriation and compensation cases, and access to international arbitration.

Bahrain permits 100 percent foreign-ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. In July 2016, the GOB expanded the number of sectors in which foreigners were permitted to maintain 100 percent ownership stakes in companies, to include the following: tourism services, mining and quarrying, real estate activities, and water distribution.

The U.S.-Bahrain Free Trade Agreement (FTA) entered into force in 2006. Under the FTA, Bahrain committed to world-class Intellectual Property Rights (IPR) protection.

Despite the Government of Bahrain’s transparent, rules-based government procurement system, U.S. companies sometimes report operating at a perceived disadvantage compared with other firms in certain government procurements. Many ministries require firms to pre-qualify prior to bidding on a tender, often rendering firms with little or no prior experience in Bahrain ineligible to bid on major tenders.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) introduced the new business registration portal “sijilat” in 2016. The portal 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.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 70 of 176
World Bank’s Doing Business Report “Ease of Doing Business” 2016 63 of 190
Global Innovation Index 2016 57 of 128
U.S. FDI in partner country ($M USD, stock positions) 2015 $168 million
World Bank GNI per capita 2015 $19,840

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards 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. 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, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits in foreign control, and the right of ownership and establishment of a business. MoICT maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic Pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement outlines all activities in which the two countries restrict foreign ownership.

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 facilitate quicker resolution of 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.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted a formal Trade Policy Review of Bahrain in 2014 (available here ).

Business Facilitation

The Ministry of Industry, Commerce and Tourism (MoICT) made several changes to the commercial registration process in 2016 in an effort to enhance efficiency and transparency. The new commercial registration entity, called “Sijilat” ( ), in principle allows all Bahraini individuals to complete the company registration process online, following the two steps below:

  1. Obtain a business license
  2. Obtain approvals from relevant ministries to offer services in specific sectors of the economy

Only Gulf Cooperation Council (GCC) nationals can use the online platform to register their companies. U.S. citizens must still appear in person at MoICT’s Bahrain Investors Center to initiate their applications. The online platform can be accessed through a national identification tool called the e-key. Sijilat allows GCC companies and individuals the opportunity to apply for, track and get a “primary approval” for a new commercial registration online, usually within two business days. MoICT estimates it takes between 15 to 45 business days to complete the company registration process, including obtaining all licenses necessary to operate a business.

Although the website for Sijilat includes extensive explanations designed to assist applicants, preliminary feedback from site users indicates that it is still easier to complete the commercial registration process with the assistance of an expert, such as a lawyer or clearing agent.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

  • MoICT
  • Ministry of Electricity and Water
  • The Municipality in which their business will be located
  • Labor Market Regulatory Authority
  • General Organization For Social Insurance

Outward Investment

The Government of Bahrain (GOB) neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation Treaties

Bahrain and the U.S. signed a bilateral investment treaty (BIT) in September 1999, the first BIT between the United States and a GCC state. The agreement entered into force in May 2001. The U.S.-Bahrain FTA does not include a separate investment chapter.

According to UNCTAD, Bahrain has bilateral investment protection agreements in place with Algeria, Belarus, Brunei, Bulgaria, the Czech Republic, China, Egypt, France, Germany, India, Italy, Iran, Jordan, Lebanon, Malaysia, Mexico, Morocco, Netherlands, Singapore, Spain, Sudan, Syria, Thailand, Turkey, Turkmenistan, United Kingdom, United States of America, Uzbekistan and Yemen.

The Government of Bahrain signed the Foreign Account Tax Compliance Act (FATCA) with the United States Government in January 2017.

3. Legal Regime

Transparency of the Regulatory System

Currently, there is no competition law in force in Bahrain. However, Bahrain’s so-called Law of Commerce (Legislative Decree No. 7, passed in 1987) addresses the concept of unfair competition and prohibits acts that would have a damaging effect on competition. Companies also are forbidden from undertaking practices detrimental to their competitors or from attracting the customers of their competitors. There is no official competition authority in Bahrain.

The Government of Bahrain (GOB) uses International Financial Reporting Standards (IFRS) as part of its implementation of Generally Accepted Accounting Principles (GAAP). IFRS are used by domestic listed and unlisted companies in their consolidated financial statements for external financial reporting.

Bahrain adopted International Accounting Standard 1 (IAS 1) in 1994 in the absence of other local standards. Non-listed banks and other business enterprises use IASs in the preparation of financial statements.

The 2001 Bahrain Commercial Companies Law required each registered entity to produce a balance sheet, a profit-and-loss account and the director’s report for each financial year. All branches of foreign companies, limited liability companies and corporations must submit annual audited financial statements to the Directorate of Commerce and Company Affairs at the Ministry of Industry, Commerce and Tourism, along with the company’s articles and /or articles of association.

Depending on the company’s business, financial statements may be subject to other regulatory agencies such as the Bahrain Monetary Agency (BMA) and the Bahrain Stock Exchange (banks and listed companies).

Bahrain encourages firms to adhere to both the IFRS and Bahrain’s Code of Corporate Governance. Statistics indicate that the level of corporate governance applied to Bahrain listed companies is 72.5 percent, and Bahrain-based companies by-and-large remain in compliance with IAS-1 disclosure requirements.

There are no informal regulatory processes managed by non-governmental organizations or private sector associations. According to the World Bank, the GOB does not solicit comments on proposed regulations from the general public or businesses that might be impacted. Bahrain, therefore, ranks among the countries with low rule making transparency. 

Entrenched local business interests with government influence can sometimes cause problems for foreign companies. Interpretation and application of the law sometimes varies by ministry, and may be dependent on the stature and connections of an investor’s local partner. These departures from the consistent, transparent application of regulations and the law remain rare, and investors report general satisfaction with government cooperation and support.

International Regulatory Considerations

Bahrain is a member of the Gulf Cooperation Council (GCC), and the Government of Bahrain (GOB) has agreed to enforce GCC standards and regulations where they exist, and not to create any domestic rules that contradict established GCC-wide standards and regulations. In certain cases, the GOB applies international standards where domestic or GCC standards have not been developed. For example, the GOB mandates that imported vehicles meet either the U.S. Federal Motor Vehicle Safety Standards or the so-called “1958 Agreement” standards developed by the United Nations Economic Commission for Europe. Bahrain is a member of the WTO and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Islamic State. Although Article 2 of the Constitution states that Islamic Sharia (Islamic law) is the main source of legislation, general matters and private transactions are governed mainly by laws derived from modern legislation. In practice, Bahrain has a dual court system, consisting of civil and sharia courts. Sharia courts deal primarily with personal status matters (such as marriage, divorce, and inheritance).

The civil court system consists of summary courts and a Supreme Court. Summary courts deal with all commercial, civil, and criminal cases, as well disputes related to the personal status  of non-Muslims. The Supreme Court hears appeals from the summary courts. The Supreme Court of Appeal, also known as the Court of Cassation, is the highest appellate court in the Kingdom. The Supreme Court of Appeal also decides on the constitutionality of laws and regulations.

Many of the high-ranking judges in Bahrain are either members of the ruling family  or non-Bahrainis (mainly Egyptians). Bahraini law borrows a great deal from other Arab states, particularly Egyptian codes. While Islamic Sharia is the major source of legislation, custom, natural law and principles of equity and good conscience also inform the legal system.

Bahrain has a long-established framework of commercial law. English is widely used, and well-known international (including U.S.) law firms, working in association with local partners, provide expert legal services both nationally and regionally. Fees are charged according to internationally accepted practices. Although only a Bahraini lawyer can argue in a Bahraini court of law, lawyers of other nationalities can and do work on cases. In April 2007, the government permitted international law firms to be established in Bahrain; these firms provide services such as commercial and financial consultancy in legal matters.

Entrenched local business interests with government influence can sometimes cause problems for foreign companies. Interpretation and application of the law sometimes varies by Ministry, and may be dependent on the stature and connections of an investor’s local partner. These departures from the consistent, transparent application of regulations and the law are not common, and investors report general satisfaction with government cooperation and support.

The GOB is eager to develop its legal framework further. The U.S. Department of Commerce’s Commercial Law Development Program has conducted training and capacity building programs in Bahrain for several years, in cooperation with the Ministry of Justice, Higher Supreme Council for Judges, and the Judicial and Legal Studies Institute.

Judgments of foreign courts are recognized and enforceable under local courts. Article nine of the U.S.-Bahrain Bilateral Investment Treaty outlines how problems with U.S. investments should be handled within the Bahraini legal system. The most common source of investment-related problems in Bahrain is slow or incomplete application of the law.

Laws and 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 most sectors, with exceptions only for ownership of television, radio or other media, fisheries, and dredging or oil 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, though certain areas are restricted to them. 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 Government of Bahrain.

Officials from U.S. companies with investments in Bahrain occasionally have reported their belief that certain court cases brought against members of the Royal Family have languished in the court system. These officials believed the delays could be attributed to subtle executive pressure put on the judiciary to use administrative means to postpone court cases and ensure the Royal Family member would not be found liable in court.

Below are links to sites designed to assist foreign investors in navigating the laws, rules and procedures related to investing in Bahrain: 

Competition and Anti-Trust Laws

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.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain Bilateral Investment Treaty (BIT) protects U.S. investments by banning all expropriations (including “creeping” and “measures tantamount to”) except those for a public purpose. Such transactions must be carried out in a non-discriminatory manner, with due process, and prompt, adequate, effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Bahrain uses multiple international and regional conventions to enhance its commercial arbitration legal framework. Bahrain is a party to the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention, the International Centre for the Settlement of Investment Disputes (ICSID), and the GCC Convention for Execution of Judgments, among others. These conventions and international agreements established the foundation for the GCC Arbitration body, and the Bahrain Chamber for Disputes & Resolution (BCDR). Bahrain’s Constitution stipulates international conventions and treaties have the power of law.

Investor-State Dispute Settlement

The U.S.-Bahrain Bilateral Investment Treaty (BIT) provides for three dispute settlement options:

  1. Submitting the dispute to a local court;
  2. Invoking dispute-resolution procedures previously agreed upon by the national or company and the host country government; or,
  3. Submitting the dispute for binding arbitration to the International Center for Settlement of Investment Disputes (ICSID) or any other arbitral institution agreed upon by both parties.

In 2009, the Ministry of Justice established the Bahrain Chamber for Dispute Resolution (BCDR). In partnership with the American Arbitration Association, the BCDR specializes in alternative dispute resolution services. As of December 2014, BCDR officials claimed 125 cases had been referred to the chamber, with the total value of claims exceeding $2.3 billion. Of those, roughly one-quarter had been awarded/settled within six months. Most of the companies’ cases involved family-owned companies in the GCC region.

Bahrain Chamber for Dispute Resolution
Suite 301, Park Plaza
Bldg 247, Road 1704
P.O. Box 20006
Manama, Kingdom of Bahrain
+ (973) 17-511-311 

International Commercial Arbitration and Foreign Courts

Arbitration procedures are largely a contractual matter in Bahrain. Disputes historically have been referred to an arbitration body as specified in the contract, or to the local courts. In dealings with both local and foreign firms, Bahraini companies have increasingly included arbitration procedures in their contracts. Most commercial disputes are resolved privately without recourse to the courts or formal arbitration. Bahraini law is generally specified in all contracts for the settlement of disputes that reach the stage of formal resolution, but is optional in those designating the BCDR. Bahrain’s court system has adequately handled occasional lawsuits against individuals or companies for nonpayment of debts.

The GCC Commercial Arbitration Center, established in 1995, serves as a regional specialized body providing arbitration services. It assists in resolving disputes among GCC countries or between other parties and GCC countries. The Center implements rules and regulations in line with accepted international practice. Thus far, few cases have been brought to arbitration. The Center conducts seminars, symposia, and workshops to help educate and update its members of any new arbitration related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
(973) 17278006 

Bankruptcy Regulations

The GOB enacted its bankruptcy and insolvency law in 1987. Chapter three of the law states that if a business is facing financial difficulties, fails to make consistent financial payments, or fails to pay commercial transactions within a 30-day timeframe, either the company or debt collectors may declare bankruptcy or ask that the company be liquidated. Chapter 7 of the law specifies that the Supreme Court specializes in bankruptcy and liquidation cases. Chapter 2 briefly describes the procedures for managing insolvency: the Supreme Court designates a firm to represent the business in all legal and business procedures. The representative will be involved in managing the firm’s funds, making payments, and other administrative procedures.

CLDP attorneys have been working with the GOB for the last several years to help draft and ratify a new bankruptcy law. The GOB has prioritized updating its bankruptcy law as part of efforts to spur entrepreneurship and the growth of small and medium-sized enterprises.

4. Industrial Policies

Investment Incentives

The GOB offers a variety of incentives to attract Foreign Direct Investment (FDI). The Bahrain Logistics Zone, Economic Development Board (EDB), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP) and Tamkeen all offer incentives to encourage FDI. Some examples of incentives include: assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty free access to other GCC markets for products manufactured in Bahrain.

Foreign Trade Zones/Free Ports/Trade Facilitation

Khalifa bin Salman Port, Bahrain’s primary commercial seaport, provides a free transit zone to facilitate the duty-free import of equipment and machinery. The Government of Bahrain has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as the Bahrain International Investment Park (BIIP), is adjacent to a logistics zone, known as the Bahrain Logistics Zone (BLZ). Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) operates the BIIP, a 2.5 million square meter tax free zone located minutes from Bahrain’s main Khalifa bin Salman port. Many U.S. companies operate out of this park, among them Mondelez International. BIIP is most suited to manufacturing and services companies interested in exporting their outside of Bahrain. The park offers manufacturing companies the ability to ship their products duty-free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental.

A 1999 law requires that investors in industrial or industry-related zones launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application. Changes are not permitted without approval from the Ministry of Industry, Commerce and Tourism.

Performance and Data Localization Requirements

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets , under which the Labor Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini. Companies may contact LMRA to determine their Bahrainization rate, which differs based on the sector of the economy in which they work, or use a calculator available here: . The applicable Bahrainization rate s are mandatory across the board in the company structure, applying equally to senior management and line workers. LMRA announced in 2016 that companies who are unable to comply with the Bahrainization rates would now only be eligible to apply for new work permits and sponsorship transfers by paying an additional fee of BD 300 (roughly $800) per worker. The LMRA still advises employers to make every effort to comply with their Bahrainization rates.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting mobility of foreign investors or their employees in Bahrain. Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers a multiple-entry visa that lasts for five years, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is forced and foreign investors are not obliged to use domestic content in goods or technology. There are no government -imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors. The U.S.-Bahrain Bilateral Investment Treaty forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labor and Social Development, LMRA and the Ministry of Industry, Commerce and Tourism supervise companies operating in Bahrain on a non-discriminatory basis.

The Central Bank of Bahrain regulates financial institutions and foreign exchange offices. Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance.

5. Protection of Property Rights

Real Property

The Government of Bahrain enforces property rights protections for land and home-owners. Most land has a clear title. Ownership of land is highly concentrated among a few royal family members, and certain areas are off-limits for Bahraini nationals and expatriates alike. Foreign firms and GCC nationals may own land in Bahrain. Non-GCC nationals may own high-rise commercial and residential properties. Foreign investors may own property to operate businesses in the following sectors:

  • Industrial Tourism
  • Banking and Financial Services
  • Healthcare
  • Education and Training

Foreign investors may own commercial property in the following areas:

  • Ahmed Al-Fateh (Juffair) district
  • Hoora district
  • Bu Ghazal district
  • Seef district
  • Northern Manama, including the Diplomatic Area, where the main international corporations are located

Foreign investors may own residential property in the following tourist areas:

  • Durrat Al Bahrain
  • Dannat Hawar
  • Riffa Views
  • Amwaj Islands
  • Bahrain Financial Harbor
  • Bahrain Bay
  • Diyyar Al Muharraq
  • Norana
  • Saar Gate
  • Saar Central
  • Reef Island
  • Jeyoun Village
  • Ishbelliya Village

Most of the new development projects in Bahrain permit expatriates and international investors to own houses, buildings, outlets, or freehold apartments.

Intellectual Property Rights

Under the U.S.-Bahrain Free Trade Agreement (FTA), the Government of Bahrain (GOB) committed to enforce world-class Intellectual Property Rights (IPR) protections. Bahrain signed the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property in 1996. The GOB ratified revised legislation to implement Bahrain’s obligations under the WTO/TRIPS Agreement in 2006. The GOB has passed laws related to intellectual property to bring Bahrain’s local laws into compliance with its current Paris Convention commitment and to position it to join the Nice Agreement, Vienna Agreement, Patent Cooperation Treaty, Trademark Law Treaty, Madrid Agreement, Budapest Treaty, and the Rome Convention. Bahrain has joined the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

The government has made progress in reducing copyright piracy, and there are few reports of significant violations of U.S. patents and trademarks in Bahrain. The government’s copyright enforcement campaign began in late 1997 and was based on inspections, closures, and improved public awareness. The campaign targeted the video, audio, and software industries with impressive results. Commercially-pirated video and audio markets mostly have been eliminated. However, audio, video, and software piracy by end-users remain problems.

There are no technology transfer requirements that force firms to share or divulge technology through compulsory licensing to a domestic partner, nor are firms required to undertake research and development activities in Bahrain.

In May 2016, the GOB issued the Implementing Regulations for the Trademark Law of the Gulf Cooperation Council (GCC), which had originally been approved by Law No. 6 of 2014. Law No. 6 provided a unified trademark regime for all six GCC countries. Bahrain is not listed in USTR’s Special 301 Report of the global state of intellectual property rights protection and enforcement and does not track and report on seizures of counterfeit goods.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at .

The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent law.

Resources for Rights Holders

Aisha Y. Salem
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Patent & Trademark Office
+965 2259 1455

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .

6. Financial Sector

Capital Markets and Portfolio Investment

Consistent with the Government of Bahrain’s (GOB) liberal approach to foreign investment, government policies facilitate the free flow of financial transactions and portfolio investments. Expatriates and Bahrainis alike have ready access to credit on market terms. Generally, credit terms are variable, but often are limited to 10 years for loans under $50 million. For major infrastructure investments, banks often offer to assume a part of the risk, and Bahrain’s wholesale and retail banks have shown extensive cooperation in syndicating loans for larger risks.

In June 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth $100 million. The Bahrain Liquidity Fund is supported by a number of market participants and will act as a market maker, providing two way quotes on most of the listed stocks with a reasonable spread to allow investors to actively trade their stocks. Despite these efforts, the market remains relatively small compared to others in the region.

The GOB and the Central Bank of Bahrain are members of the IMF and fully compliant with Article VIII.

Money and Banking System

Bahrain’s banking sector remains quite healthy despite the persistent downturn in global oil prices. Bahrain’s banks remain well-capitalized, and there is sufficient liquidity to ensure a healthy rate of investment. Bahrain remains a financial center for the GCC region, though many financial firms have moved their regional headquarters to Dubai over the last decade. The GOB continues to be a driver of innovation and expansion in the Islamic finance sector. In 2016 Bahrain ranked as the GCC’s leading Islamic finance market and second out of 92 countries world-wide, according to the ICD-Thomson Reuters Islamic Finance Development Indicator.

Bahrain has an effective regulatory system that encourages portfolio investment, and the CBB has fully implemented Basel II standards, while attempting to bring Bahraini banks into compliance with Basel III standards. Bahrain’s banking sector includes 23 retail banks, 69 wholesale banks, and 36 representative offices; 24 of these banks are Islamic banks.

There are no restrictions on foreigners opening bank accounts or corporate accounts. Bahrain is home to many prominent financial institutions, among them Citi, American Express, and JP Morgan.

Ahli United Bank is Bahrain’s largest bank with total assets estimated at $35,773,715 as of 2016.

Foreign Exchange and Remittances

Foreign Exchange

Bahrain has no restrictions on the repatriation of profits or capital and no exchange controls. Bahrain’s currency, the Bahraini Dinar (BD), is fully and freely convertible at the fixed rate of USD 1.00 = BD 0.377 (1 BD = USD 2.659). There is no black market or parallel exchange rate.

There are no restrictions on converting or transferring funds, whether or not associated with an investment.

Remittance Policies

The Central bank of Bahrain is responsible for regulating remittances, and its regulations are based on the Central Bank Law ratified in 2006. The majority of the workforce in the Kingdom of Bahrain is comprised of foreign workers, many of whom remit large amounts of money to their countries of origin. Commercial banks and currency exchange houses are licensed to provide remittances services.

The commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding $10,000 must include a documented source of the income.

Bahrain enables foreign investors to remit funds through a legal parallel market, with no limitations on the inflow or outflow of funds for remittances of profits or revenue.

The GOB does not engage in currency manipulation tactics.

Bahrain is a member of the Gulf Cooperation Council (GCC), and the GCC is a member of the Financial Action Task Force (FATF). Additionally, Bahrain is a member of MENAFATF, and MENAFATF’s headquarters are located in the Kingdom of Bahrain.

The Government of Bahrain hosted the Manama Meeting on Combating the Financing of Terrorism on November 9, 2014. The closing declaration highlighted the commitment of the participating countries to combat the financing of terrorist groups and activities in all its forms. It emphasized the need for a full and effective implementation of the FATF Recommendations and an active participation in the FATF’s global network.

Sovereign Wealth Funds

The Kingdom of Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly $7 billion, conducts its business transparently, including by issuing an annual report online. The issuance of the annual report follows international financial reporting standards; it has been audited by external, internationally-recognized auditing firms since its inception. By law, SOEs under Mumtalakat are audited and monitored by the National Audit Bureau. In 2016, Mumtalakat received the highest possible ranking in the Linaburg-Maduell Transparency Index, which specializes in ranking the transparency of sovereign wealth funds.

Mumtalakat often acts more as an active asset management company than a sovereign wealth fund, including by taking an active role in managing SOEs. Most notably, Mumtalakat has been instrumental in helping Gulf Air, Bahrain’s flagship air carrier, minimize its losses. A significant portion of Mumtalakat’s portfolio is invested in 38 Bahrain-based SOEs.

Mumtalakat does not directly contribute to the National Budget. Its contribution to the economy, however, is significant, as the companies it manages are major employers, and their production feeds development in downstream industries.

7. State-Owned Enterprises

Bahrain’s major state-owned enterprises (SOE) are the Bahrain Petroleum Company (BAPCO), Aluminum Bahrain (ALBA), Gulf Petrochemical Industries Company (GPIC), Gulf Air, Bahrain Telecommunications Company (BATELCO), the National Bank of Bahrain (NBB) and the Arab Shipbuilding & Repair Yard (ASRY). While the GOB maintains full ownership of oil production, refineries, and heavy industries, it allows investment in ALBA, BATELCO, and ASRY, and encourages private sector competition in the banking, manufacturing, telecommunications, shipyard repair, and real estate sectors.

The SOEs are managed by two government-run holding companies: the National Oil and Gas Authority (NOGA), which owns nine energy sector companies, and Mumtalakat, which owns 38 companies in all other sectors. The full portfolio of NOGA holding companies can be viewed at , while the full portfolio of Mumtalakat companies can be viewed at .

Bahrain is not a party to the WTO Government Procurement Agreement (GPA); however in 2008 Bahrain was granted “observer” status in the GPA committee.

Private enterprises can, in theory, compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. In practice, however, given the relatively small size of Bahrain’s economy, large SOEs like ALBA, BAPCO, GPIC and ASRY have an outsized influence in the market.

In 2002 the GOB instituted guidelines to ensure its SOEs were in line with OECD policies on corporate governance. SOEs produce quarterly reports. The National Audit Bureau monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.

To enhance transparency and accountability the government appointed the Minister of Industry, Commerce and Tourism to be responsible for Mumtalakat. The Minister of Oil and Gas is responsible for NOGA Holding, and all the companies under its umbrella.

All Bahraini SMEs have an independent board of Trustees with well-structured management. The Mumtalakat Holding Company is represented by a Board of Trustees appointed by the Crown Prince, while NOGA Holding’s Board of Trustees is appointed by a Royal Decree. Each holding company then appoints the Board of Trustees for the SOEs under its authority. In some cases the appointment of the Board of Trustees is politically driven.

Privatization Program

Bahrain’s Crown Prince (CP) is an outspoken proponent of privatization, and he advocates increased foreign investment as a means of driving private sector growth. The CP often touts the GOB’s decision to privatize the telecommunications sector in the early 2000s as an example of how to incentivize private sector growth in Bahrain. The GOB does not, however, have any current sectors targeted for privatization.

8. Responsible Business Conduct

In 2006, Bahrain established a National Steering Committee on Corporate Governance to improve corporate governance practices. The GOB then drafted a Corporate Governance Code to establish a set of best practices for corporate governance in the kingdom, and to provide protection for investors and other company stakeholders through compliance with those principles. The GOB enforces the code through a combined monitoring system comprising the board, the shareholders and others including the MoICT, CBB, Bahrain Stock Exchange (BSE), Bahrain Courts and Professionals firms including auditors, lawyers and investment advisers. The code does not create new penalties for non-complying companies, but does state that the MoICT (working closely with the CBB and the BSE) will be able to exercise the penalty powers already granted to it under the Commercial Companies Law 2001.

The GOB recently amended its Corporate Governance Law to enhance transparency and ethical business conduct standards. Among the changes, the GOB urged companies in Decrees By law 27 and 28 to submit audited ratified accounts to the MoICT.

The GOB does not maintain a National Contact Point (NCP) for the Organization for Economic Co-operation and Development (OECD) guidelines nor does it participate in the Extractive Industries Transparency Initiative (EITI).

9. Corruption

The King and Crown Prince have advocated publicly in favor of reducing corruption and some ministries have initiated clean-up efforts. A law to thoroughly revamp government procurement procedures went into effect in 2003, and mandates criminal penalties for official corruption. Under law, government employees (including, in theory though rarely in practice, members of the Royal Family) at all levels are subject to prosecution and punishments of up to 10 years imprisonment if they use their positions to engage in embezzlement or bribery, either directly or indirectly. The law does not require government officials to make financial disclosures.

Giving or accepting a bribe is illegal. The government, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity. Officials have at times been dismissed for what is widely believed to be blatant corruption, but the grounds for dismissal are rarely tied to corruption.

The National Audit Bureau, established in 2005, is mandated to publish annual reports that highlight fiscal irregularities within government ministries and other public sector entities. The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in government accounts. In 2013, the Crown Prince established an Investigation Committee to oversee the cases highlighted within the National Audit Bureau’s annual report. In 2014, the Minister of State for Follow-up Affairs announced that seven cases had been transferred for public prosecution. In 2015, the Government transferred a number of petty corruption cases to the Ministry of Interior for investigation, and later prosecution. As of March 2017, there have been no known convictions in any of the aforementioned cases.

In November 2015 the government designated the Minister of Follow-Up Affairs to be in charge of resolving recommendations made in that year’s National Audit Report. At the same time, the Crown Prince urged all government entities and the Council of Representatives to work closely to implement the recommendations made in the report. In November 2016 the government released segments of its annual report to the press, which published parts of it; however, the full 2016 report has not been published or made available online as of this report.

As a result of the 2011 National Dialogue process, the Ministry of Interior established an anti-corruption directorate. In 2011 the Ministry of Interior signed a Memorandum of Understanding with the United Nations Development Program to enhance the anti-corruption directorate’s capabilities.

Local NGOs generally do not focus their efforts on corruption-related issues, though human rights activists and members of the political opposition who have spoken out about corruption were at times detained, prosecuted, and banned from travel for reasons related to their broader political activism. All civil society groups are required to register with the Ministry of Labor and Social Development, which has the discretion to reject registration if it determines the organization’s services unnecessary, already provided by another society, or contrary to state security.

Bahrain signed and ratified the UN Anticorruption Convention in 2005 and 2010, respectively. Bahrain, however, is not a signatory to the OECD Convention on Combating Bribery.

Resources to Report Corruption

General Directorate of Anti- Corruption & Economic & Electronic Security
Ministry of Interior
P. O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Sharaf AlMoussawi
President, Bahrain Transparency Association
P.O. Box 26059
Adliya, Bahrain
+973 39640929

10. Political and Security Environment

Historically, Bahrain has been an open, politically moderate, economically liberal Gulf state that enjoys close ties to the United States. Bahrain has experienced cyclical periods of political violence that have traditionally come from its Shi’a majority population. Notably, since 2012, a violent minority of the opposition have occasionally targeted security forces with improvised explosive devices. In the last year, the government sued to dissolve the country’s two largest opposition political societies, imprisoned several high-ranking opposition leaders and activists, and revoked the citizenship of the country’s most revered Shi’a cleric—Sh. Isa Qassim—before convicting him of money laundering and issuing a one-year suspended sentence and fine.

Qassim’s case in particular resonated among the Shi’a community, and his supporters camped in a semi-permanent protest site outside his residence for almost a year until police forcibly removed them in May 2017. Feelings of oppression and discrimination continue to linger among the Shi’a community; the case against Qassim and other Shi’a activists could continue to serve as future flashpoints for violence.

Neither demonstrators nor violent extremists have targeted Americans or Western expatriates, though civilians have occasionally been harmed in terrorist attacks. American citizens visiting Bahrain and companies interested in investing in Bahrain should visit the Embassy’s website to receive the most up-to-date information about the security situation and register with the Embassy’s consular section.

11. Labor Policies and Practices

Bahrain’s Labor Market Regulatory Authority estimates the Bahrain labor force numbers 787,190, of which 630,071 are foreign and 157,119 are local workers. Therefore 80 percent of the total workforce is comprised of foreigners, the majority being unskilled construction workers. According to the most recent government statistics, foreigners comprise 52% of the total population. Government reports state that Bahrain’s unemployment rate is four percent.

The government’s primary initiative for combating unemployment is “Bahrainization,” or the replacement of expatriate workers by national citizens. In 2009, under the initiative of the Crown Prince, the Economic Development Board launched “Bahrain Economic Vision 2030,” a long-term plan to raise Bahrainis’ standard of living, reform the government, education, and health sectors, and increase privatization, training and education of the Bahraini workforce to establish Bahrain as a regional center for human capital. For more information please refer to: 

Periodically, foreign firms experience difficulty obtaining required work permits and residence visas for expatriate employees due to Bahrainization efforts. However, this does not appear to be a matter of high-level policy, and often can be resolved on a case-by-case basis. Where problems occur, U.S. businesses are encouraged to appeal to the highest levels of the concerned ministries, and to consult with the U.S. Embassy.

In 2006 the King ratified the Labor Reforms Law, establishing two entities: the Labor Market Regulatory Authority (LMRA), and the capacity-building organization known as Tamkeen. The law imposed a monthly fee of BD10 (USD 26.67) on each expatriate employed by a company. The revenues collected under this program are earmarked to provide job training for Bahrainis. The LMRA fee was suspended after the unrest of 2011 and reinstated in 2013 with a change in fee structure. Now companies pay BD 5 (USD 13.35) for the first five foreign workers and BD10 (USD 26.67) for every employee over that limit.

In 2007 the Labor Minister introduced an unemployment allowance to be paid from a general labor fund. The fund is financed by deducting one percent from the wages of all workers and is the first such program in the GCC.

In 2002 the King approved the Workers Trade Union Law of 2002 that recognizes the right of workers to collectively organize and form trade unions, and provides limited rights to strike. The law prohibits workers from striking in certain vital sectors including security, aviation, ports, hospitals, and utilities. With the exception of domestic servants, foreign workers are allowed to join trade unions. The law prohibits employers from dismissing an employee for trade union activities. In 2011, the King issued a Decree By Law that changed Bahrain’s labor law as it pertained to trade unions and federations. Union leadership heavily criticized the new law for some of its other provisions that appear to inhibit freedom of association. The 2012 law prohibits multi-sectoral labor federations and prohibits individuals convicted of felonies from holding union leadership posts. While the amendment also allowed for the formation of multiple trade union federations, it gave the Minister of Labor the sole right to select the federation to represent the country’s workers in international fora and in national-level bargaining.

In 2010, the U.S. Department of Labor (DOL) and the Bahrain Ministry of Labor (MOL) convened the first meeting of the U.S.-Bahrain Sub-Committee on Labor Affairs, as established under the U.S.-Bahrain FTA, and reaffirmed their obligations under the FTA related to internationally recognized labor rights, including their obligations as members of the International Labor Organization (ILO) and commitments stated in the ILO Declaration on Fundamental Principles and Rights at Work (1998).

During the political and civil unrest of 2011, thousands of Bahraini employees were dismissed from their private and public sector jobs. In June 2011, the AFL-CIO filed a petition with the Department of Labor accusing Bahrain of violating the labor rights terms of the U.S.-Bahrain FTA. The November 2011 Bahrain Independent Commission of Inquiry report concluded that the majority of dismissals were motivated by retaliation against employees suspected of being involved in demonstrations. By the end of 2012, the vast majority of dismissed workers in the public and private sectors were reinstated, with the Government working to resolve the remaining cases. In March 2014, the Minister of Labor, the Bahrain Chamber of Commerce and Industry, and the General Federation of Bahrain Trade Unions signed a Tripartite agreement to resolve the remaining worker reinstatement cases. Subsequently, the International Labor Organization dropped the complaint it initiated in 2011. Bilateral consultations between the U.S. and Bahrain — invoked under the Labor Chapter of the FTA in response to the 2011 AFL-CIO complaint — are ongoing.

12. OPIC and Other Investment Insurance Programs

Since 1987, the Government of Bahrain and the U.S. Government have maintained an Investment Incentive Agreement permitting the U.S.’s Overseas Private Investment Corporation (OPIC) to provide investment insurance and reinsurance for companies operating in Bahrain.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2015 $31.1 2015 $31.126 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2015 N/A 2015 $933 BEA data available at
Host Country’s FDI in the United States ($M USD, stock positions) 2015 N/A 2015 $409 BEA data available at
Total Inbound Stock of FDI as % host GDP 2015 N/A 2015 3% N/A

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $28,324 100% Total Outward Amount 100%
Kuwait $6,707 24% N/A N/A N/A
Saudi Arabia $4,677 17% N/A N/A N/A
Libya $3,216 11% N/A N/A N/A
UAE $2,925 10% N/A N/A N/A
Indonesia $1,853 7% N/A N/A N/A
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $32,107 100% All Countries $6,715 100% All Countries $25,392 100%
UAE $4,472 14% Cayman Islands $1,655 15% UAE $4,013 16%
USA $4,182 13% USA $1,229 18% Turkey $3,310 13%
Turkey $3,324 10% Saudi Arabia $576 9% USA $2,953 12%
Cayman Islands $2,644 8% UAE $459 7% Qatar $1,967 8%
Qatar $2,272 7% Qatar $304 5% Brazil $1,208 5%

14. Contact for More Information

Gary Schumann
Economic and Commercial Officer, U.S. Embassy Manama
P.O. Box 26431
Bldg 979, Rd. 3119
Block 331, Zinj
Kingdom of Bahrain
+973 1724-2700

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