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Investment in infrastructure

Discovering Bahrain’s economy

A series of articles looking at different aspects of the Bahraini economy: What is Bahrain’s business model built on? How is Bahrain’s economy evolving? What are the principle opportunities in Bahrain’s economy?

A series of massive infrastructure projects are under way in Bahrain, designed to underpin the Kingdom’s strategy of moving away from dependence on oil revenues. 

Indeed, $32 billion is being invested in a number of signature projects intended to upgrade Bahrain’s infrastructure and facilitate a greatly enhanced and more dynamic private sector which can act as the motor for the nation’s future prosperity.

This $32 billion comes from a range of sources: $7.5 billion from the GCC Development Fund, $10 billion of government funding and $15 billion of private sector funding. Six sectors have been prioritized for funding as projected areas for Bahrain’s future growth and wealth creation: Tourism and hospitality, retail, real estate, finance, infrastructure, and oil and gas services.

Making inroads into the GCC

Plans are underway for a second causeway between Bahrain and Saudi Arabia in order to more closely enmesh these two economies and stimulate enhanced economic growth in both nations. 

Bahraini businesses have proven to be highly competitive and dynamic in the wider GCC market, so increased road access will open up exciting new opportunities, as well as facilitating increased tourism from Saudi Arabia into Bahrain.

Air access to Bahrain

One of the biggest single targets of investment is a $1.1 billion modernization programme for Bahrain’s International Airport, which is projected to increase annual passenger capacity from nine million to fourteen million by 2020. During the 1960s and 70s Bahrain boasted the principle airport for the region, as a major stop-off for long distance flights and a key centre for airline companies. 

This huge investment in Bahrain’s airport facilities will help restore Bahrain as a principle air destination, acting as a significant opportunity for increasing the international prestige and importance of the Kingdom’s national airline, Gulf Air. The significance of Bahrain’s air capacity is underlined by the $7.6 billion of orders placed during Bahrain’s 2016 Air Show.

A great leap forward for tourism 

Tourism is one of the fastest growth areas in Bahrain, currently accounting for 6.3 percent of GDP, but projected to increase rapidly in the coming years. For example, there was a 13 percent increase in numbers of tourists during the first nine months of 2017, with numbers of tourists increasing year-on-year since 2012. 

A full $13 billion of the allocated funds is contributing to the tourism sector which will contribute to boosting Bahrain’s capacity to receive this exponential increase in visitors while offering them the best possible experience. As well as being a massively popular destination from the GCC and the Arab world, Bahrain has been consistently recognized as a welcoming and high-value destination by international visitors.

Retail & hospitality

In support of Bahrain’s tourism aspirations, a whole string of new retail spaces have opened up, in particular; Avenues Mall, Marassi Galleria and Dilmunia Mall. All of these offer a diverse range of leisure activities and culinary opportunities. 

These developments have occurred in parallel with massive real estate projects like Bahrain Bay; along with fifteen new four and five star hotels boasting a combined 4,000 rooms. Multiple projects are also in play for developing stretches of Bahrain’s coastline, tailored towards a range of leisure activities.

Real estate

One of the single biggest investments over the past five years has been in providing affordable housing, with the government pledging in 2014 to provide an additional 40,000 homes for citizens. A full $2.4 billion of the $32 billion total investment has gone into real estate. 

The first quarter of 2017 saw 8.1 percent real estate growth compared with 2016, amounting to $770 million aggregate sales.  Major projects include the massive Diyar Al Muharraq scheme, spread over 12km² with a capacity of over 100,000 people. 

Other sectors

Within the banking sector, a particularly important focus for investment has been financial technology and financial services. The soon to be opened Bahrain FinTech Bay is illustrative of the Kingdom’s determination to remain a major player in this sector.

With the oil market remaining relatively static, the national oil company, Bapco, is increasingly diversifying into downstream oil and gas projects, in order that for each barrel of oil Bahrain is able to gain increased revenue in a sector where it can expect to enjoy competitive advantage.

In September 2017 Amazon Web Services announced plans to build three huge data centres in Bahrain by 2019. This is an important signal of international confidence in Bahrain’s future growth as well as a major vote of confidence in Bahrain’s business-friendly technological and regulatory environment.

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