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. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors. As a reflection of the Kingdom’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments.
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 on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (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 (FTA) 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
Bahrain ranked 43rd out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2019.
The Central Bank of Bahrain’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.
The MoICT operates an online commercial registration portal, “Sijilat” ( ) to facilitate the commercial registration process. Through Sijilat, businesspeople can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks but can take longer if a business requires specialized approvals. In practice, some businesspeople retain an attorney or clearing agent to assist them through the commercial registration process.
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:
- Ministry of Electricity and Water
- The Municipality in which their business will be located
- Labour Market Regulatory Authority
- General Organization for Social Insurance
- The National Bureau for Revenue (Mandatory if the business revenue expected to exceed BD 37,500)
The GOB provides industrial lands at reduced rental rates for short periods of time to incentivize foreign investment in Bahrain’s targeted investment zones.
The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.
7. State-Owned Enterprises
Bahrain’s major state-owned enterprises (SOEs) include 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) Bahrain Flour Mills, Tatweer Petroleum, 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) Holding Company, which owns nine energy sector companies, and Mumtalakat, which owns 38 domestic companies in all other sectors. The full portfolio of the NOGA Holding Company 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 such as 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 Office monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.
Both funds are managed by government-appointed boards: Mumtalakat’s board is chaired by the Deputy Prime Minister, Sh. Khalid bin Abdulla AlKhalifa, and NOGA Holding’s board is chaired by the Minister of Oil, Sh. Mohammed bin Khalifa AlKhalifa.
All Bahraini SOEs 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.
The GOB has been supportive of privatization as part of its Vision 2030 economic development plan, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some medical services, such as pre-employment screenings that it previously had conducted. It has also begun the process of privatizing certain support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.
In May 2019 the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100-percent foreign ownership in oil and gas extraction projects, under certain production-sharing agreements.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
* Source for Host Country Data: www.data.gov.bh
|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||28,992||100%||Total Outward||19,233||100%|
|Cayman Islands||1,857||6%||Cayman Islands||1,251||7%|
|United Arab Emirates||1,613||6%||Egypt||726||4%|
|“0” reflects amounts rounded to +/- USD 500,000.|
|Portfolio Investment Assets|
|Top Five Partners (Millions, current US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||41,678||100%||All Countries||8717||100%||All Countries||32,961||100%|
|United States||5,429||13%||United States||1,595||18%||Turkey||4,296||13%|
|Turkey||4,315||10%||Saudi Arabia||748||9%||United States||3,834||12%|
|Cayman Islands||3,432||8%||UAE||596||7%||Not Specified||2,647||8%|