Exclusive Interview for SA Entrepreneurs

Dr. Steen Ehlern, Managing Partner

Ferguson Partners Family Office

Nestled in the Arabian Gulf comprising a total of 33 islands, Bahrain is the smallest member of the Gulf Cooperation Council with a population of just 1.5 million. Despite being the smallest economy in the Arabian Gulf, the Kingdom has for years been able to attract a steady and growing flow of investment both from outside the region and from within.

Over the last year alone, foreign investment levels into the country increased dramatically off the back of new corporate legislation and favorable business environment. Bahrain Economic Development Board reported a record $810 million of foreign direct investment during the first nine months of the year. That compared to $733 million in all of 2017 and was over five times the amount of FDI in 2015.

In 2018 foreign direct investment more than doubled in the first nine months, with manufacturing and logistics accounting for the most part. The EDB attributes this growth to greater focus on marketing Bahrain as the gateway for companies looking to access the Gulf region, especially Saudi Arabia. Neighboring KSA has been introducing a sweeping wave of reforms – both economic, social and political – aimed at transforming the economy and turning it into a world-class hub for business, trade, mining, light manufacturing and tourism. Some companies have used the opportunity to set up operations in Bahrain and take advantage of the momentum.

“Setting up a business in Bahrain is extremely easy and cost-efficient, especially when you compare it with neighboring GCC countries,” says Dr. Steen Ehlern, Managing Partner/CEO of Ferguson Partners, Al Dana Partners and Co-Founder of Al Dana Ferguson.

“Investment into the country is also becoming more and more attractive, as there is so much being developed, with the new additional causeway parallel to the existing one [linking Saudi Arabia and Bahrain], the LNG shipping terminal, Bahrain metro and lots of infrastructure and hospitality projects but also many private investments and shared PPP (Public Private Partnerships) in the areas of renewable energy, sustainability, smart cities and mobility.”

Dr. Ehlern draws upon years of valuable experience derived from working in the region. British-Danish citizen who grew up and graduated from Switzerland, he lives between London, Zurich and Bahrain. He is quick to point out to the kingdom’s high ambitions of becoming a FinTech hub, and “being the banking and financial center with the longest track record and experience in the region,” Dr. Ehlern thinks it has a bright future ahead. Last year Bahrain created a “regulatory sandbox” allowing companies in the field to experiment without facing normal regulatory constraints.

Indeed, Bahrain’s rise to prominence as a key regional financial center dates back to the 1970s when the kingdom was the first GCC state to diversify its economy away from dependence on oil. Today, the financial sector accounts for as much as 17% of overall GDP, while reliance on oil dropped significantly from 43.6% of GDP in 2000 to about 19% currently. Still, oil and gas revenues continue to contribute a significant share of government revenues estimated at 75.7% in 2016.

Country of “firsts”

To spur growth and attract more investment into the country, the government allowed 100% foreign business ownership in various sectors, including residency, food, administrative services, arts, entertainment and leisure, health and social work, information and communications, manufacturing, mining and quarrying, water supplying and professional, scientific, technical and real estate activities.

As Dr. Ehlern highlights, Bahrain was the first GCC country to allow 100% foreign ownership to investors: “Bahrain is very often (if not always) the pioneer. For example, it built the first hospital in the region, first schools; it was the first to allow and support education for women, women to found and own businesses, first to discover oil, and then first to diversify the economy away from oil and gas into e.g. aluminum, banking and finance, etc.”

As a result, “a large number of foreign companies are opening up businesses in Bahrain,” says Dr. Ehlern. “It is geographically a great hub and remains a gateway to the region, and certainly also to Saudi Arabia as well as other GCC countries. It is cost-efficient, has considerably lower labor costs, utility costs and you have an abundance of well-trained, experienced local staff. You don’t have to rely on, sometimes expensive, expats.”

Empowering female entrepreneurs

Its focus on innovation, capability building, and youth has stimulated a vibrant entrepreneurial environment, with women being at the helm of new business start-ups and incubators. Entrepreneurship is most certainly on the rise, and women entrepreneurship is very much promoted in Bahrain, with women present in all sectors and jobs, up to the highest ranks and executive levels, as well as politics, says Dr. Ehlern.

“I see a much larger private sector and especially young entrepreneurs, start-ups and businesses founded and owned by women. I see many more women still in key business areas and businesses and Bahrain leading the FinTech arena in the Gulf. Some very smart minds are coming out of the region, studying locally or overseas and coming back. The pace of development and momentum are incredible.”

This year Bahrain established a $100 million fund to support technology start-ups across the region, which it hopes will attract venture capital firms to Bahrain. ‘Al Waha Fund of Funds’ will help start-ups in Bahrain and across the region get access to capital and expertise.

“The government also has a designated Labor Fund (Tamkeen) to support local businesses and start-ups, where also BDB (Bahrain Development Bank) steps in and supports SMEs,” Dr. Ehlern explains.

“There are several Bahraini Family Business and SME societies and organizations. Also worth mentioning are all the women in business, the universities especially designated for women, besides the usual universities and the Supreme Council for Women, initiated by Shaikha Sabekha, the wife of H.M. King Hamad bin Isa Al Khalifa,” he added.

Trust is key

For all the benefits it offers, Bahrain remains a popular destination for foreign investors from the East, Far East and the West. But doing business in the region is not always as straightforward as you might think. It’s about trust, relationships and even “chemistry” – things without which even the most astute businessman would struggle to succeed.

“People from the West are often too impatient and immediately want to ‘get down to business’, which – frankly speaking – is not going to get you very far. In the region of the Arabian Gulf, it is all about relationships, patience and timing, word of mouth, reputation, referrals, trust and respect,” Dr. Ehlern said.

“People want to get to know you, understand you, and see whether business with would be possible, regardless of the opportunity. It really is also about personal chemistry, whether a business has the potential to happen or not,” he added.

As the managing partner of a private partnership firm specialized in providing wealth and family office/business services to investors, over the years Dr. Steen Ehlern has helped many people succeed in business, finance and investment. On our final but nevertheless important question – what are some of the key things to keep in mind if you are looking to set up a business in Bahrain? Dr. Ehlern replied simply: “Like everywhere else in the world, be professional, respectful, tolerant, openhearted and open minded. Bahrain is a fabulous example of an open society, combining the best of two worlds, in fact many worlds.”