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EXECUTIVE SUMMARY

The investment climate in Bahrain is generally positive and has remained relatively stable in the last year. 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 (FDI) in the manufacturing, logistics, information and communications technology (ICT), financial services, and tourism sectors. Bahrain’s FDI as of June 2019 reached BD 10.9 billion (USD29 billion), with the majority of the investments from the financial services and insurance sector and the ICT sectors.

The Covid-19 pandemic, in tandem with the global oil price collapse in 2020, undermined GOB efforts to generate revenue and reduce spending. In April 2020, Bahrain introduced a BD 4.3 billion (USD11.4 billion), eight-point stimulus package to ease the economic impact of the Covid-19 pandemic, equivalent to 29 percent of Bahrain’s GDP. Many of the business-friendly subsidies were extended to foreign-owned and local companies alike, such as coverage of utility bills and waiver of tourism and industrial land fees.

To strengthen Bahrain’s position as a startup hub and to enhance the Kingdom’s investment ecosystem, the GOB in 2018 launched Bahrain FinTech Bay, the largest FinTech hub in the Middle East and Africa; issued four new laws covering data protection, competition, bankruptcy, and health insurance; established the USD100 million Al Waha venture capital fund for Bahraini investments; and set up a USD100 million ‘Superfund’ to support the growth of start-ups.

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 2017, the GOB expanded the number of sectors in which foreigners are permitted to maintain 100 percent ownership stakes in companies to include tourism services, sporting events production, mining and quarrying, real estate activities, water distribution, water transport operations, and crop cultivation and propagation.  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 conditions.

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 GOB’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.

Since 2017, the Central Bank of Bahrain (CBB) has operated a financial technology (FinTech) regulatory “sandbox” that enables the testing and launching of non-conventional FinTech startups in Bahrain, including cryptocurrency and blockchain technologies. The CBB also issued regulations to enable conventional and Sharia compliant financing-based crowdfunding businesses.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 77 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 43 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 78 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 647 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 USD 21,890 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

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

The World Trade Organization (WTO) has conducted a formal Trade Policy Review of Bahrain every seven years. Its last formal review was in 2014 (see link below). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

Business Facilitation

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” (www.sijilat.bh ) 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:

  • MoICT
  • 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.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

2. Bilateral Investment and Taxation Treaties

Bahrain and the United States signed a bilateral investment treaty (BIT) in September 1999, the first BIT between the United States and a Gulf Cooperation Council (GCC) state. The agreement entered into force in May 2001. The U.S.-Bahrain FTA does not include a separate investment chapter.According to the United Nations Conference on Trade and Development (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, Pakistan, Belgium, Luxembourg and Yemen.

The Government of Bahrain signed the Foreign Account Tax Compliance Act (FATCA) with the United States Government in January 2017. The GOB issued the law implementing the agreement in February 2018.

3. Legal Regime

Transparency of the Regulatory System

In 2018, the GOB issued a competition law, a personal data protection law, a bankruptcy law, and a health insurance law to enhance the country’s investment eco-system. The 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 and the country has yet to institute comprehensive anti-monopoly laws or an independent anti-corruption agency.

Bahrain’s industrial sector exhibits dominance by state-controlled companies such as Aluminum Bahrain (ALBA) and Gulf Petrochemical Industries Company (GPIC). De facto monopolies also exist in some industries led by individuals or family-run businesses.

The 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 requires 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 MoICT, 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 International Financial Reporting Standards (IFRS) and Bahrain’s Code of Corporate Governance. Bahrain-based companies mostly 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 have the legal obligation to publish the text of proposed regulations before their enactment and there is no period of time set by law for the text of the proposed regulations to be publicly available. Bahrain, therefore, ranks among the countries with low rule-making transparency. http://rulemaking.worldbank.org/en/data/explorecountries/bahrain 

http://rulemaking.worldbank.org/en/data/explorecountries/bahrain 

Bahrain – Laws can be drafted or proposed by the Cabinet or originate in the Parliament, comprised of an elected Council of Representatives (COR) and an appointed Shura Council. The independent Legislation and Legal Opinion Commission drafts legislation based on the proposals. King Hamad’s signature is required to ratify any laws following parliamentary approval; laws are in force once published in the official gazette. King Hamad may also make royal decrees (known as Decree Laws), that are immediately effective once issued, unless otherwise stated; some royal decrees are later redrafted as legislation.  GOB ministers and heads of agencies are authorized to issue regulations that pertain to the administration of their respective bodies.  Bahrain is a member of the Gulf Cooperation Council (GCC), which created a Unified Economic Agreement to expedite trade and the movement of people and goods within GCC borders.  It has also adopted a number of unified GCC model laws, such as the GCC Trademark Law.  Bahrain is a signatory to the Apostille Convention and is a member of the Permanent Court of Arbitration.  It is a dualist state, therefore international treaties are not directly incorporated into its law and must be approved by the Parliament and ratified by King Hamad.

Commercial regulations can be proposed by the EDB, MoICT, the Cabinet, or the COR. Draft regulations are debated within the COR’s Finance and Economic Committee. The Bahrain Chamber of Commerce board of directors may raise concerns over draft legislation at committee meetings or send written comments for review by Members of Parliament, but the bills are otherwise not available for public comment. The Cabinet issues final approval of regulations.

The e-Government portal and the Legislation and Legal Opinion Commission website list laws by category and date of issuance. Some laws are translated into English. The National Audit Office publishes results of its annual audits of government ministries and parastatals.

International Regulatory Considerations

As a GCC member, Bahrain 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. Bahrain ratified the Trade Facilitation Agreement (TFA) in September 2016 through Law No. 17 of 2016.  Bahrain Customs and MoICT have begun working toward implementing the TFA’s requirements.

Legal System and Judicial Independence

Bahrain’s Constitution defines the Kingdom as a sovereign, independent, Arab Muslim 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 international legislation. Three types of courts are present in Bahrain – civil, criminal, and family (Sharia) courts. The civil court system consists of lower courts, courts of appeal, and the Court of Cassation — the highest appellate court in the Kingdom, hearing a variety of civil, criminal and family cases. Civil courts deal with all administrative, commercial, and civil cases, as well as disputes related to the personal status  of non-Muslims. Family courts deal primarily with personal status matters, such as marriage, divorce, custody, and inheritance.

Many of the high-ranking judges in Bahrain come from the ruling family , prominent families, or are non-Bahrainis (mainly Egyptians). Bahraini law borrows a great deal from other Arab states, particularly Egyptian codes.

Bahrain has a long-established framework of commercial law. English is widely used, and a number of well-known international (including U.S.) law firms, working in association with local partners, are authorized to practice law in Bahrain and provide expert legal services both nationally and regionally. Fees are charged according to internationally accepted practices. Non-Bahraini lawyers can represent clients in Bahraini courts. 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 (CLDP) has conducted training and capacity-building programs in Bahrain for several years, in cooperation with the Ministry of Justice and Islamic Affairs, the 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. In general, the judicial process is fair and cases are appealable.

Laws and Regulations on Foreign Direct Investment

The U.S.-Bahrain 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 immediately, 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 of a limited list of activities, including ownership of television, radio or other media, fisheries, real estate brokerages, and land transportation. Bahrain 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. A commercial agent is any Bahraini party appointed by a foreign party to represent the foreign party’s product or service in Bahrain.

With few exceptions, 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.

Expatriates may own land in designated areas 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.

Bahrain issued Bankruptcy Law No. 22 in May 2018 governing corporate reorganization and insolvency. The law is based on U.S. Chapter 11 insolvency legislation and provides companies in financial difficulty with an opportunity to restructure under court supervision.

Below is a link to a site designed to assist foreign investors to navigate the laws, rules, and procedures related to investing in Bahrain: http://cbb.complinet.com/cbb/microsite/laws.html 

http://cbb.complinet.com/cbb/microsite/laws.html 

Competition and Anti-Trust Laws

The GOB issued Competition Law No. 31 in July 2018 to prevent the formation of monopolies or the practice of anti-competitive behavior. This law makes it easier for new businesses to enter existing markets and compete with significant players.

Expropriation and Compensation

There have been no expropriations in recent years, and there are no cases in contention. The U.S.-Bahrain 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 Centre, 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 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 foreign investor 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 2010, the Ministry of Justice established the Bahrain Chamber for Dispute Resolution (BCDR). In partnership with the American Arbitration Association (AAA), the BCDR specializes in alternative dispute resolution services. The jurisdiction of the BCDR-AAA is twofold: Jurisdiction by Law (Section 1 cases), and Jurisdiction by Party Agreement (arbitration, also referred to as Section 2 cases).

Jurisdiction by Law (Section 1 Cases)

Disputes exceeding BD 500,000 (approximately USD 1.3 million) that involve either an international commercial dispute or a party licensed by the Central Bank of Bahrain (CBB) are referred to the BCDR-AAA. Prior to the creation of the BCDR, these cases fell within the jurisdiction of the courts of Bahrain.

From the establishment of the BCDR-AAA through December 2019, 270 cases were filed under Section 1, with claims totaling over USD 5.3 billion.  Of these cases, 25.9 percent were decided or settled within 6 months; 40 percent were decided/settled within 6-12 months; 11.1 percent were decided or settled within 12-18 months; 5.9 percent were decided or settled within 18-24 months; 3.0 percent were decided or settled after 24 months; and 14.1 percent were ongoing.

Arbitration (Section 2 Cases)

As of April 2019, twelve cases have been filed: one in 2013, one in 2015, three in 2016, five in 2017, and two in 2019. Of these cases only three are ongoing – one filed in 2017, two filed in 2019 – and the rest were awarded or settled.

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

The United Nations Conference on Trade and Development (UNCTAD) reported that Bahrain faced its first known Investor-State Dispute Settlement (ISDS) claim in 2017. The case involves investor claims over the Central Bank of Bahrain’s 2016 move to close the Manama branch of Future Bank, a commercial bank whose shareholders include Iranian banks. Bahrain and Iran are party to a BIT.

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. Resolution under 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.

Bahrain Law No. 9 of 2015 promulgating the Arbitration Law (the “New Arbitration Law”) came into effect on August 9, 2015. The law provides that the UNCITRAL 1985 Model Law with its 2006 amendments on international commercial arbitration (the “UNCITRAL Law”) will apply to any arbitration, taking place in Bahrain or abroad, if the parties to the dispute agreed to be subject to the UNCITRAL Law.

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 on any new arbitration-related matters.

GCC Commercial Arbitration Center
P.O. Box 2338
Manama, Kingdom of Bahrain
Arbitration Boards’ Secretariat
Tel: + (973) 17278000
Email: case@gcccac.org
Website: http://www.gcccac.org/en/ 

Bankruptcy Regulations

The GOB enacted its original bankruptcy and insolvency law as Decree by Law No. 11 in 1987.  On May 30, 2018, the GOB issued and ratified Law No. 22 /2018, updating the original legislation. Modeled on U.S. Chapter 11 legislation, the law introduces reorganization whereby a company’s management may continue business operations during the administration of a case. The Bankruptcy Law also includes provisions for cross-border insolvency, and special insolvency provisions for small and medium-sized enterprises. The Bahrain credit reference bureau, known as “BENEFIT,” is licensed by the Central Bank of Bahrain (CBB) and operates as the credit monitoring authority in Bahrain.

4. Industrial Policies

Investment Incentives

The GOB offers a variety of incentives to attract FDI. The Bahrain Logistics Zone, Bahrain 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. 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. BIIP is most suited to manufacturing and services companies interested in exporting from 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 MoICT.

Performance and Data Localization Requirements

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets , under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini nationals. 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 at http://lmra.bh/portal/en/page/show/193 . The applicable Bahrainization rate s are mandatory across the board in the company structure, applying equally to senior management and line workers. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies that are unable to comply with the Bahrainization rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 500 (roughly USD 1,329) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with Bahrainization requirements.

The GOB issued Law 1/2019 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting the 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 (BIT) 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 Labour and Social Development, LMRA and the MoICT 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 to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which went into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

5. Protection of Property Rights

Real Property

The Government of Bahrain enforces property rights protections for land and homeowners. 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 certain areas in Bahrain. Non-GCC nationals may own high-rise commercial and residential properties in certain areas. Foreign investors may own property to operate businesses in various fields of business, including but not limited to manufacturing, tourism, banking and financial services, education and training, design, and advertising.

Foreign investors may own commercial property in the following geographic areas of Bahrain: -Ahmed Al-Fateh (Juffair) district

  • Ahmed AlFateh (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

  • Durrat Al Bahrain
  • Riffa Views
  • Amwaj Islands
  • Bahrain Financial Harbor
  • Bahrain Bay
  • Reef Island
  • Diyyar Al Muharraq
  • Some areas in Saar

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

Legally purchased property cannot revert to other owners, even if such property is unoccupied.

Intellectual Property Rights

Under the U.S.-Bahrain Free Trade Agreement, the GOB committed to enforce 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 in 2006 to implement Bahrain’s obligations under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The GOB has passed laws related to IPR to bring Bahrain’s local laws into compliance with its current Paris Convention commitment and in anticipation of acceding to the Nice Agreement, Vienna Agreement, Patent Cooperation Treaty, Trademark Law Treaty, Madrid Agreement, Budapest Treaty, and the Rome Convention. Bahrain has acceded to the World Intellectual Property Organization (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 have been mostly eliminated. However, audio, video, and software piracy by end-users remain problematic. 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 included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. Bahrain does not track or 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 http://www.wipo.int/directory/en/ . The Embassy’s webpage also offers a link to local lawyers, some of whom specialize in IPR and/or patent law: https://bh.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Resources for Rights Holders:

Peter Mehravari
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Patent & Trademark Office
Tel: +965 2259 1455 Peter.Mehravari@trade.gov

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

6. Financial Sector

Capital Markets and Portfolio Investment

Consistent with the GOB’s 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 USD 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. Commercial credit is available to private organizations in Bahrain but has been increasingly crowded out by the government’s local bond issuances.

In 2016, the GOB launched a new fund designed to inject greater liquidity in the Bahrain Bourse, worth USD 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.

Additionally, in October 2019 the GOB established a BD 130 million Liquidity Fund to assist distressed companies in restructuring financial obligations, which was expanded to BD 200 million during the Covid-19 crisis in March 2020.

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

Money and Banking System

The Central Bank of Bahrain (CBB) is the single regulator of the entire financial sector, with an integrated regulatory framework covering all financial services provided by conventional and Islamic financial institutions. Bahrain’s banking sector remains quite healthy despite sustained lower 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 2018, Bahrain ranked as the GCC’s leading Islamic finance market and placed second out of 92 countries worldwide, 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 94 retail banks, of which 63 are wholesale banks, 17 are branches of foreign banks, and 14 are locally incorporated. Of these, eight are representative offices, and twenty 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 USD 40.3 billion in December 2019, and is expected to complete a merger with Kuwait Financial House in 2020.

Bahrain implemented the Real-Time Gross Settlement (RTGS) System and the Scripless Securities Settlement (SSS) System in 2007 to enable banks to carry out their payment and securities-related transactions securely on a real time basis. In 2018, the CBB was in the process of introducing a private network as an alternative communication network for the RTGS-SSS Systems.

In 2017, Bahrain became the first in the GCC to introduce Financial Technology “sandbox” regulations that enabled the launch of cryptocurrency and blockchain startups. The same year, the CBB released additional regulations for conventional and Sharia-compliant, financing-based crowdfunding businesses.  Any firm operating electronic financing/lending platforms must be licensed in Bahrain under the CBB Rulebook Volume 5 – Financing Based Crowdfunding Platform Operator.  In February 2019, the CBB also issued cryptocurrency  regulations.

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. Foreign workers comprise the majority of the workforce in the Kingdom of Bahrain, 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.

Commercial banks and currency exchange houses require two forms of identification before processing a routine remittance request, and any transaction exceeding USD 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 the Middle East and North Africa Financial Action Task Force (MENAFATF), whose headquarters are located in Bahrain. Participating countries commit to combat the financing of terrorist groups and activities in all its forms and to implement FATF recommendations. The Government of Bahrain hosted the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

the MENAFATF’s 26th Plenary Meeting Manama in 2017 and was due to host the now-postponed MENAFATF Plenary Meeting in April 2020.

Sovereign Wealth Funds

The Kingdom of Bahrain established Mumtalakat, its sovereign wealth fund, in 2006. Mumtalakat, which maintains an investment portfolio valued at roughly USD 16.8 billion as of 2018, conducts its business transparently, including by issuing an annual report online. The annual report follows international financial reporting standards and is audited by external, internationally recognized auditing firms. By law, state-owned enterprises (SOEs) under Mumtalakat are audited and monitored by the National Audit Office. In 2019, Mumtalakat received the highest-possible ranking in the Linaburg-Maduell Transparency Index for the fifth consecutive year, which specializes in ranking the transparency of sovereign wealth funds. However, Bahrain’s sovereign wealth fund does not follow the Santiago Principles.

The sovereign wealth fund holds majority stakes in several firms. Mumtalakat invests 63 percent of its funds in the Middle East, 29 percent in Europe, and eight percent in the United States. The fund is diversified across a variety of business sectors including real estate and tourism, financial services, food & agriculture, and industrial manufacturing.

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, restructure and contain losses. A significant portion of Mumtalakat’s portfolio is invested in 33 Bahrain-based SOEs.

Through 2016, Mumtalakat had not been directly contributing to the National Budget. Beginning in September 2017, however, Mumtalakat began distributing profits of BD 20 million to the National Budget each year.

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 www.nogaholding.com/portfolio/ , while the full portfolio of Mumtalakat companies can be viewed at www.bmhc.bh .

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.

Privatization Program

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.

8. Responsible Business Conduct

The Ministry of Social Development in 2011 authorized the creation of the Bahrain Corporate Social Responsibility Society (BCSRS) as a social and cultural entity. Though there are no measures in Bahrain to compel businesses to follow codes of responsible business conduct, the BCSRS has sought to raise awareness of corporate social responsibility in the business community, and in 2019 held its third Bahrain International Corporate Responsibility Award ceremony. The Society is a founding member of the Arab Association for Social Responsibility, which includes representatives of most Arab countries.

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 it 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, represented by the LMRA, has put in place advanced regulations and laws protecting labor rights, the most vulnerable category comprising migrant workers from Southeast Asia. Labor courts have not been effective in settling labor disputes between employers and employees. However, there have been some reports of cases that were settled in favor of employees in Bahraini labor courts.

Law Number 35 of 2012, the Consumer Protection Law, ensures quality control, combats unfair business practices, and imposes sanctions for breaches of the law’s provisions. MoICT is highly effective in implementing the law.

Bahrain’s amended Corporate Governance Law enhances transparency and ethical business conduct standards. Among the changes, the GOB urged companies 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. Legislation regulating corruption is outlined in Bahrain’s “Economic Vision 2030” plan, and in the National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003. Accordingly, Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. Under law, government employees 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. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, it joined the International Anti-Corruption Academy. In 2019, the Public Prosecution initiated proceedings on 178 economic corruption cases. In 23 cases, offenders have been sentenced to prison; one was cleared; and 13 are pending investigation. The remaining 129 cases have been classified as administrative contraventions and closed.

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 rarely have been tied to corruption.

The National Audit Office, established in 2002, 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 cases highlighted within the National Audit Office’s annual report.

The Minister of Follow-Up Affairs at the Royal Court was designated in 2015 to execute 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. Bahrain’s National Audit Office issues annual reports that list violations committed by various Bahraini state bodies and agencies.

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 Programme to enhance the anti-corruption directorate’s capabilities.

Bahrain has conflict-of-interest laws in place, however, in practice, their application in awarding contacts is not fully enforced.

Local NGOs generally do not focus their efforts on corruption-related issues, and human rights activists and members of the political opposition who have spoken out about corruption have at times been 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 Labour 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.

Few cases have been registered by U.S. companies reporting corruption as an obstacle to their investments in Bahrain.

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. In 2018, Bahrain joined the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Resources to Report Corruption

Contact at government agency or agencies responsible for combating 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 AlMosawi
President
Bahrain Transparency Association
P.O. Box 26059
Phone: +973 39640929
Email: Sharaf115@gmail.com
Website: www.alshafafeyabh.org 

10. Political and Security Environment

Bahrain is an open, liberal Gulf state that enjoys close ties with the United States. Bahrain has experienced cyclical periods of violence. The most recent period of unrest began in 2011, when large-scale demonstrations and occasional violent clashes between protestors and security forces took place. Since 2011, Bahraini security forces have been intermittently targeted by individuals, including through the use of improvised explosive devices. The last such incident occurred in November 2017, when an explosion caused a fire at the main oil pipeline in Buri. In 2016 and 2017, the government dissolved the country’s two largest opposition political societies and closed the only opposition-leaning independent newspaper. On May 13, 2018, the Parliament implemented a law banning members of political societies dissolved by government order from running as candidates in elections. Since 2017, protests centered on sociopolitical or economic demands have largely dissipated or been controlled by Bahraini government authorities.

Neither demonstrators nor violent extremists have targeted Americans or Western expatriates. 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 Law No. 36 of 2012 guarantees employees’ rights by requiring clear contractual terms for employing domestic staff, and prohibiting discrimination practices of wages based on gender, ethnicity, religion, or language. Bahrain’s Labor Law has also introduced enhancements for annual leave, maternity leave, sick leave entitlement, and resolution of labor disputes.  Expatriate workers should be registered by their employer with Labor Market Regulatory Authority (LMRA) and receive a valid residence permit and work permit. Employers are prohibited from employing foreigners without a valid work permit. To work in Bahrain, foreign employees should be medically fit, have entered the country lawfully, possess a valid passport, and retain residence and work permits.

As of the second quarter of 2019, LMRA estimated Bahrain’s labor force numbered 748,047 people, of which 594,944 were foreign and 153,103 were local workers. Eighty percent of the total workforce is comprised of foreigners, the majority being unskilled construction workers. The number of new regular work permits issued by LMRA during the second quarter of 2019 was 37,570, representing a decrease of five percent annually. According to Bahrain’s Information and e-Government Authority, foreigners comprised 52 percent of the Bahrain’s population in 2019. LMRA stated that Bahrain’s unemployment rate was 4 percent in the second quarter of 2019.

The government’s primary initiative for combating unemployment among Bahrainis is “Bahrainization,” a policy that encourages employers to hire Bahrainis instead of foreign workers in situations where this is possible. In 2009, under the initiative of the Crown Prince the Bahrain 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: http://www.mofa.gov.bh/img/partners/Vision2030Englishlowresolution.pdf .

Foreign firms occasionally experience difficulty obtaining required work permits and residence visas for expatriate employees due to Bahrainization efforts. In 2019, the GOB stepped up efforts to enforce Bahrainization targets. Decree No. 1 of 2019 stipulated that priority be given to Bahraini physicians, technicians, and nurses with the required qualifications and experience. Separately, the GOB issued an order on March 5, 2019 requiring employers pay a BD 500 fee every two years for every work permit beyond the allotted Bahrainization quota. 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 Labour Market Regulatory Authority (LMRA), and the capacity-building organization known as Tamkeen. The law imposed a monthly fee of BD 10 (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 Prime Minister suspended the LMRA fee after the unrest of 2011 over pressure from the Bahrain Chamber of Commerce and Industry and reinstated it in 2013 as a legal amendment to the labor law. Companies pay BD 5 (USD 13.35) for the first five foreign workers and BD 10 (USD 26.67) for every employee over that limit. The Council of Representatives has attempted unsuccessfully to amend the fee structure, most recently in late 2017.

The Labor Law of 2012 allows an employer to terminate an employee in the event of the total or partial closure of an establishment. The employer must render a notice and reason for termination to the Ministry of Labour and Social Development at least 30 days prior to serving notice of termination to the affected employee. The amount of compensation due an employee for termination is set by law and is based in part on length of service.

In 2007 the Minister of Labour and Social Development 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 workers, foreign employees 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 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 Labour and Social Development 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 and the Bahrain Ministry of Labour and Social Development convened the first meeting of the U.S.-Bahrain Sub-Committee on Labor Affairs, as established under the U.S.-Bahrain FTA. At the meeting, they 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). In July 2018, Bahrain achieved “Tier 1” status in the U.S. Department of State’s Trafficking in Persons Report. It maintained this ranking in the 2019 report.

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 Free Trade Agreement. 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 Labour and Social Development, 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 ILO 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. U.S. International Development Finance Corporation and Other Investment Insurance Programs

On April 25, 1987, the Government of Bahrain and the U.S. Government signed an Investment Incentive Agreement (IIA) permitting the Overseas Private Investment Corporation (OPIC) to provide investment insurance and reinsurance for companies operating in Bahrain. On December 20, 2019, the U.S. International Development Finance Corporation (DFC) succeeded OPIC as the issuer under the existing bilateral IIA. Based on statute, DFC can provide financing in high income countries only on an exceptional basis.

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) 2017 2018
2019
$38,30 $37,61
$38,53
2017 2018 $35,43 $37,74 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017
2018
$256.78
$322.66
2017 2018 $423 $647 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Host country’s FDI in the United States ($M USD, stock positions) 2017
2018
$6,844
$4,600
2017
2018
$281 $157 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2017
2018
77.6%
75.7%
UNCTAD data available at
https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

* Source for Host Country Data: www.data.gov.bh

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 28,992 100% Total Outward 19,233 100%
Kuwait 8,936 31% Kuwait 5,299 28%
Saudi Arabia 8,452 29% India 4,475 23%
Libya 2,990 10% United States 1,266 7%
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.
Table 4: Sources of Portfolio Investment
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%
UAE 5,805 14% Cayman Islands 2,148 25% UAE 5,209 16%
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%
Qatar 2,949 7% Qatar 394 5% Qatar 2,554 8%

14. Contact for More Information

Hadeel Hassan
Commercial Assistant
U.S. Embassy Manama
P.O. Box 26431
Bldg. 979, Rd. 3119
Block 331, Zinj
Kingdom of Bahrain
Telephone No. +973 1724-2700
E-mail address: manamacommercial@state.gov

2020 Investment Climate Statements: Bahrain
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