Leading a country towards economic prosperity is no easy task. It is the kind of responsibility reserved for only the most determined, qualified and fiercely intelligent individual available. Luckily for us, we have just the man. This month, BIG had the exclusive honour of interviewing Chief Executive of the Bahrain Economic Development Board (EDB), Khalid Al Rumaihi. The Harvard-educated visionary gives us a valuable insight into the future of Bahrain’s economy, and our progress towards the government’s vision for 2030.
How would you define your role, and what does that mean for you on a day-to-day basis?
My role is to lead the EDB’s efforts to achieve our core objective of attracting investment into Bahrain and creating high quality jobs for Bahrainis. Sometimes that means travelling to meet potential investors in our target markets, attending events to raise Bahrain’s profile, or hosting people here in Bahrain and introducing them to companies and opportunities. A large part of what we do involves working with companies established in Bahrain and addressing their concerns so that we can ensure the business environment remains friendly. We also work closely with government entities, and I sit on a number of committees and boards that help us to update policy and regulations to facilitate doing business and encourage competition. Every day is different and brings its own challenges and achievements.
Could you briefly explain the organisational structure of the EDB? How involved is the EDB in terms of developing policies and regulations to make the country more attractive to foreign investors, as opposed to simply reacting to the implementation of a new policy?
The Bahrain EDB is chaired by His Royal Highness Prince Salman bin Hamad Al Khalifa, the Crown Prince, Deputy Supreme Commander and First Deputy Prime Minister, and the board includes representatives of the Bahraini Government and private sector. The Bahrain EDB is an investment promotion agency with the overall responsibility for attracting investment into the Kingdom and supporting initiatives that enhance the business climate. We do not fall under any particular sector or ministry. However, we work very closely with all public entities, including ministries; the Central Bank of Bahrain; Bahrain Mumtalakat Holding Company; Tamkeen; Bahrain Bourse; Bahrain Tourism and Exhibition Authority and the Bahrain Development Bank, as well as private sector organisations. We have specialist analysts and economists who help to identify and advise on potential policy reforms. We also remain in close contact with businesses and recent investors through our aftercare team. This allows us to gain first-hand feedback on what challenges companies face and how policy and reform updates can help in addressing those issues. This often translates into regulatory developments that help in continuing to improve the Kingdom’s business environment. For example, foreign companies can now own 100% of their business across almost all sectors, including manufacturing, logistics and financial services. Also, just this year Bahrain introduced an Investment Limited Partnership law, the first in the region to do so onshore. This law allows investors to establish limited partnerships nationwide. This flexibility to develop tailored investment terms is a more cost-effective option compared to other economies in the region, which may only offer it through ‘free zones’. The EDB helped introduce these laws as part of our policy advocacy programme, which focuses on the importance of updates and changes in the regulatory environment. There are also a number of initiatives being undertaken to support smaller businesses and the startup community. The minimum capital requirement for starting a business was recently reduced from BD 20,000 to just BD 50, and a Regulatory Sandbox was launched by the CBB. In addition, we’re expecting to see the introduction of a new bankruptcy law to support the development of the SME sector. Along with the recent Sandbox initiative and the Bankruptcy law, we’re working with the venture capital community to establish funds and attract new sources of capital and new regulations around crowdfunding, as well as a focus on innovation within Islamic Finance.
Does the EDB have any set clear goals for 2030, in terms of job rates, diversification of GDP, or any other statistics? Are we currently on the right track to achieving these targets?
Our main goal at the EDB is to grow and diversify the economy by increasing investment in sectors that offer Bahrain a competitive advantage and create high-quality jobs for Bahrain’s citizens and residents. There is still more to be done, but we have made strong progress in the last decade. For example, in 2000, the non-oil sector accounted for around 55% of GDP – now that is up to over 80%, reflecting how much progress we have made on diversification. In 2016, 40 new companies invested a total of USD 281 million in Bahrain as a direct result of efforts by the Bahrain EDB. This figure is double that of 2015, when investment stood at USD 142 million from 22 companies. These new companies are expected to generate a total of 1,647 job opportunities over the next three years. In my opinion, we are definitely on the right track, we know our strengths and where we can excel. We have a highly educated and bilingual local workforce and the lowest operating costs in the region. This, along with our highly competitive taxation system, means that Bahrain is an ideal location for foreign businesses who would like to access the region or for entrepreneurs looking to start a business.
With the drop in oil prices, which business sectors is the EDB focusing on in order to retain and further attract foreign investment?
We see the drop in oil prices as an opportunity as well as a challenge. It acts as a catalyst for an economic transformation that is creating opportunities across the region for local and international companies. Today, we are focusing our efforts on promoting and developing five main economic sectors which capitalise on Bahrain’s competitive advantages and provide significant investment opportunities. These sectors are: financial services, manufacturing, ICT, tourism and leisure, and transport and logistics. Alongside these target sectors, we are also working to cultivate an ecosystem that supports the growth of startups and SMEs. We launched Startup Bahrain as a brand to foster a sense of unison. Startup Bahrain is a community driven initiative made up of startups, corporates, investors, incubators, educational institutions and the Bahrain government to promote an entrepreneurial and startup culture in Bahrain. The initiative seeks to help and promote startups in every sector and at every stage. Recently we have seen an increase in the number of startup companies in Bahrain, and new incubators and accelerators have been established to cater to the growing number of startups among the various sectors. Most notably, C5 Accelerate launched operations in 2015 as the first cloud accelerator in the Middle East and Africa region, and just recently Brinc, in partnership with Batelco, announced plans to launch Brinc’s operations in the Middle East. Brinc will offer programmes and services tailored for Emerging Technology founders in the region.
Currently, where does the majority of Bahrain’s foreign investment come from? Which countries or entities are you targeting for further investment and why?
Bahrain has long been home to a number of businesses from the US and Western Europe and we continue to see interest from companies from these regions. We also have longstanding partnerships with countries across Asia, from India, to China, to Singapore and Malaysia. Many of these countries have seen rapid economic growth over the last decade and their businesses are looking for international expansion opportunities. Bahrain, with its trade agreements with the United States and countries across Europe, the MENA region and Asia, is an attractive destination for international companies because of its strategic location. It is seen as a bridge between East and West. Additionally, we continue to see strong investment from within the Middle East, whether from the rest of the Gulf or the wider MENA region. To support our efforts, the EDB has extended its presence to a number of international markets, and we now have offices in Saudi Arabia, the United Arab Emirates, India, China, South Korea, Malaysia and Singapore, Japan, the United States, Scandinavia, France, the United Kingdom, Germany and Turkey.
The EDB very recently signed deals with the China Hi-Tech Transfer Centre, and Shenzhen Belt and Road Economy and Technology Cooperation Association, in an effort to promote economic ties with China. What do these deals entail?
We are delighted to have signed these deals – Shenzhen is home to many innovative businesses and entrepreneurs and we think there is real opportunity for closer ties to create opportunities for both Chinese and Bahraini businesses. The deal with China Hi-Tech Transfer Center aims to enhance cooperation in ICT. We hope to do this through regular and close contact between the two countries and through mutual promotion of the China Hi-Tech Fair in Bahrain and neighbouring Gulf countries. The second deal, with Shenzhen Belt and Road Economy and Technology Cooperation Association, has several key objectives, including promoting the exchange of information, especially regarding the general business environment and investment projects, as well as exploring and facilitating emerging business opportunities.
The EDB has also recently partnered with the Singapore Fintech Consortium. What are some of the objectives of this partnership?
We have come a long way in a short space of time on fintech. While the region as a whole is, arguably, playing catch-up compared to other regions, there is real potential for the sector to grow rapidly in the coming years. We have already seen the introduction of a regulatory sandbox and are also looking at further initiatives such as a dedicated location for Fintech businesses, a specialist incubator and accelerator platform and additional sources of capital to complement existing sources, such as venture capital funds. The partnership with Singapore Fintech Consortium can play an important role in helping us to implement these initiatives. Singapore has created one of the world’s leading fintech hubs and we are delighted to be able to learn from their expertise.
Why exactly are SMEs and startups so vital to Bahrain’s economy?
Startups and SMEs help grow the economy as a whole, from creating jobs, to injecting innovations and creating disruption in existing sectors. The future of the region’s economy and prosperity will depend on productivity, growth, and innovation – and innovative new businesses can have an important role to play in stimulating this. Startups should never be fazed by the seemingly small size of the Bahraini market, but should instead use it as a testing ground for their products and services and take advantage of our location and easy access to the GCC and regional markets to scale up. Ultimately, by scaling up, startups will increase the number of high-skilled jobs and grow the economy, increase overall exports, foster further entrepreneurial activity, and grow the number of export ready startups.
In your opinion, is there something in the mindset of the general population that also needs to change in order for Bahrain to realise its vision for 2030?
I think so, but it is something I already see changing. For me, it is important to change the mindset of all stakeholders to shift approaches towards regulation, education and investment and create a business environment where growth is driven by the private sector, rather than government. Furthermore, there must be an increased ability for people, capital and ideas to move across borders, whilst entrepreneurship, innovation and risk taking should be encouraged and embraced. So, just as governments need to change the way they work, companies will also have to adapt to the changing market landscape; whether that is large companies investing more in innovative products, or young people joining a startup rather than the public sector.
If you could give any parting advice or message to our readers what would it be?
Look beyond the current challenges in the region to the opportunities that will open up as the GCC economies transition from government-driven economies to ones in which the private sector will play a leading role. And pay attention to the disruption that technology will bring to everything from Finance to Healthcare. Just like in other parts of the world, the region will see incumbents being challenged by new enterprises and this will open up massive opportunities for entrepreneurs and startups.
from http://www.businessingulf.co.