Bahrain as a Business Centre
Fuller, Michael, The Middle East
The island of Bahrain is the country with the region's smallest energy reserves. This apparent disadvantage has always obliged it to be resourceful in exploiting alternative economic opportunities. Today, business confidence is encouraged by efforts to promote foreign investment and expand capital markets. In this survey of Bahrain's economy, Michael Fuller, manager of the Al Ahli Bank, provides an overview of current prospects. In addition, the report includes a guide to business regulations and opportunities in Bahrain.
The government will continue working at developing and modernising basic services. Training Bahrainis in various fields and specialisations, and developing the economy are the key aims of the national agenda. Overall there is an emphasis on shifting the economic growth from oil sector to the non-oil sector and specifically in the manufacturing sector.
A process of deregulation and privatisation has been initiated, reflecting the region's embrace of the free market philosophy. The gradual receding of direct involvement in some of its traditional areas of participation such as health care provision is creating new opportunities for the private sector in providing services for the individual. It is this transformation to public and private sector partnership which is driving the cultural change within the region, creating a stronger and competitive private sector, more capable of resisting the challenge from the developed countries which has gained greater access to the local market.
Non-oil downstream industries are being developed. Several small scale industries are being set up to meet local requirements and for import substitution. There are new export-oriented projects in petrochemical, automobile parts and textile fields.
The economic outlook is very positive. GDP projections suggest 3.5% growth for both 1994 and 1995. The country's budget has set the scene for balanced economic growth aimed at sustaining the standard of living and creating further employment opportunities for Bahrainis. New development projects such as power generation and a new port and industrial area require financing and the private sector is being groomed to take the leading role (see The Middle East, March 1995). In an effort to attract investment, Bahraini's bond and equity markets are being developed to stimulate private investment and to meet the substantial demands for finance to fund industrial development.
Tourism is set to generate further economic development for the country through a productive partnership between public and private sector as a part of the planned shift away from oil sector dependency. The country's programme of economic diversification continues to be successful, following the establishment of the Bahrain Marketing and Promotions Office in 1992.
The gradual reduction of the government's holdings in local companies is being complemented by the establishment of new private enterprises stimulated by government incentives. More than 50 foreign company registrations were recorded in 1994 with focus on clean, high technology and high added value industries and services that can facilitate technology transfer and create sustainable employment for nationals.
After five years of operation, the Bahrain Stock Exchange (BSE) is encouraging the cross listing of companies with other exchanges, greater participating of non GCC investors and preparing for the listing of foreign companies for the first time. An average of six million shares worth around two million dinars ($5.3m) are currently traded every week on the BSE, which lists over 30 Bahraini companies and has a market capitalisation of around $5.5bn. The BSE 1000 index fell during the course of 1994 from its end 1993 high of 1,928 to around the 1,500 mark and has sunk since below the 1,400 mark.
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Probably the fastest, easiest and economical way of getting a business started in Bahrain is a telephone call to the Gulf Business Centres (GBC). According to Eamonn J Duignan, managing director of the centre, which is a subsidiary of Gulf International Business Consultants, offices can be rented for an hour, a day, a week, a month, a year of even longer.
A selection of 30 fully-furnished offices is available in the Bahrain Tower Building, along with the use of a furnished boardroom, an executive lounge and a conference room. Other facilities provided include multi-lingual secretarial and support services, office boys, drivers, fax and telex communications, an audio-visual system, personal computers, photo-copiers, and mobile phones. GBC is also ready to assist in the processing of visas and all forms of government business documentation, legal and accountancy advisory services, general advice in setting up a business in Bahrain, and help with housing and schools.
"We have recently opened a second business centre in the Diplomatic Tower," says Duignan, "which has office space available for anyone looking to set up an office in Bahrain at the moment or in the near future. We really do offer a full service, and literally one can walk in with a briefcase and be ready to go immediately."
Duignan claims that Bahrain has become much more service oriented today. The country, he says, "is truly the service centre of the Gulf. We are not competing with hotels. We are simply offering companies who require it, permanent office space." He adds that "companies set up at the centre have a number of visitors who do use hotels for accommodation."
Clients using GBC come from several countries. They include Cabeltron Systems and Alliance Capital of Britain, Cray Research of the United States, Compaq Computers from Germany, Peregrine Investment Holdings of Hong Kong, and Compagnie Generale de Geophysique and the Institut Francais du Petrole SE Asia from France.
RELATED ARTICLE: Doing business in Bahrain
To facilitate company registration, a "fast track" procedure allows registration within seven days following submission to the Ministry of Commerce and Agriculture of:
Completed Registration form.
* Memorandum and Articles of Association (copy only).
* Board Resolution to establish a company in Bahrain.
* Registration Fee.
To complete registration formalities, applicants should within 90 days provide:
* Memorandum and Articles of Association.
* Most recent Audited Financial Statements.
* Power of Attorney and Specimen Signature for the nominated resident manager.
* Bank references.
* Bahrain Monetary Agency or Ministry of Development and Industry approval for financial institutions or manufacturing companies only.
* A booklet entitled "Formalities for Company Registration" incorporating registration application forms is available from the Ministry of Commerce and Agriculture or any Bahraini Embassy.
Assistance Available from Ministry of Development and Industry
* identification of suitable industrial sites
* assistance with feasibility studies including evaluation of local costs and market opportunities
* provision of services and utilities
* support for the construction of a plant or factory.
The annual fee structure varies from company to company. Legal fees for start up are competitive with regional and international charges.
* Commercial Agency Law (legislative decree 23 of 1975), defines commercial agencies, land, sea and air transport, travel and tourism agencies; and agencies for businesses, services, insurance, publication, press and advertising.
* Commercial Companies Law (legislative decree 28 of 1975), defines regulations for all types of companies, including ownership, liquidation, attachments, mortgages, management organisation, etc.
* The Labour Law (legislative decree 23 of 1976), and . . .
* Social Insurance Law (legislative decree 24 of 1976), deals with contributions, protection and regulations of employment.
* Bankruptcy and Composition Law (legislative decree 11 of 1987), deals with company bankruptcies.
* Law of Commerce (legislative decree 7 of 1987), defines general provisions relating to commerce and business activities where the intention is to speculate.
* Insurance Companies Law (legislative decree 17 of 1987), deals with all provisions in respect to insurance companies and organisations.
Types of Companies
The principle forms of commercial legal entities are:
* New 100% Foreign Owned Companies - Recent commercial legislation provides for the registration of companies with 100% foreign ownership. These include companies setting up an industrial base, or services and distribution companies establishing a regional headquarters in Bahrain. Companies registered in Bahrain with 100% foreign ownership may operate both within the domestic market and offshore. Such companies are registered as Joint Stock Companies (closed) but may be exempt from the requirement of the minimum level of capital of Joint Stock Companies. Such companies may also hold board meetings, EGM's and AGM's outside Bahrain provided that the meetings otherwise comply with the provisions of the Commercial Companies Law.
* Exempt Companies (Offshore) - Joint stock companies whose principal offices are established in Bahrain but which operate exclusively offshore. Such. companies in the manufacturing and services sectors may be established with 100% foreign ownership.
* Foreign Companies - Branch Offices A foreign company may establish a branch or representative office in Bahrain after receiving the permission of the Ministry of Commerce and appointing a Bahraini as its agent or sponsor. Such companies may be exempt from the requirement for a Bahraini sponsor if the branch office is the company's regional centre for its business activities.
* Partnership - A partnership may be registered where the partners hold joint responsibilities for the partnership obligations. Partnerships normally offer professional or advisory services (eg accountancy, engineering) which may be branches of partnerships already established abroad.
* Private Company and Limited Liability (WLL) - A Bahraini company with Limited Liability (WLL) may be established for any kind of industrial trading or services enterprise. Companies with a foreign partner are confined to industrial and services activities only. Minimum capital requirement is BD10,000 and a maximum non-Bahraini participation of 49% is allowed with not less than two and not more than 50 shareholders.
* Joint Stock Company - Public - A shareholding company enjoying limited liability requiring the approval of the Ministry of Commerce, the Cabinet of Ministers and an Amiri Decree. Joint stock companies are normally incorporated to undertake a specific and major project. Minimum capital required is BD500,000.
* Joint Stock Company - Closed - A joint stock company, whose shares are not offered for public subscription may be established with an Amiri Decree. Minimum capital requirement is BD200,000.
* Commercial Agency - For foreign companies wishing to export to Bahrain, it is not necessary to appoint a local agent. The importer, however, must be-in possession of a valid import permit.
Bahrain has a long established and clearly defined framework of commercial laws. English is widely used and well-known international firms of lawyers work in association with local partners, providing expert legal services both nationally and regionally. Fees are charged according to international adopted practice.
Bahrain has become an international and GCC arbitration centre within the guidelines of the New York Convention of 1958, since hosting the Euro-Arab Arbitration Conference in 1987. The arbitration services apply to individuals or organisations from the GCC in dealings with their international counterparts. A separate GCC arbitration centre deals with inter-regional cases. Bahrain has been able to develop these arbitration facilities due to its well-established legal framework, its excellent international communications, its political stability, its close links with Gulf Arab and Western countries, its development as the region's financial centre and the residence of professional accounting, legal, consulting, banking, insurance and other similar support services.…
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Publication information: Article title: Bahrain as a Business Centre. Contributors: Fuller, Michael - Author. Magazine title: The Middle East. Issue: 244 Publication date: April 1995. Page number: 12+. © 2009 IC Publications Ltd. COPYRIGHT 1995 Gale Group.
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