Exclusive Interview for SA Entrepreneurs
Bahrain EDB is the country’s investment promotion agency. In practice, the EDB’s acts as a nerve centre for the Kingdom’s economic ambitions
1. Can you tell us about the role of the economic development board of Bahrain?
On the surface, Bahrain EDB is the country’s investment promotion agency. Although in practice, we have developed the EDB’s network and scope to the extent that it acts as a nerve centre for the Kingdom’s economic ambitions.
The EDB functions as a business development division, but we do not stop at just finding the right investors and business prospects. We offer this through our integrated Team Bahrain proposition. When an opportunity arises, we consider every network, contact and resource that could help the prospect launch and grow successfully. This starts from introducing the prospect to relevant government entities and local private sector businesses. It continues to ensure they have access to funding, infrastructure, and the right talent locally.
At the EDB, we are determined to be anything but complacent in our ability to attract new investments. We go all in and have had great results with this approach. For example, ICT continues to be a focus sector for us as we look at promoting Bahrain’s potential. We have cloud aspirations but only an embryonic data centre network. Knowing this could be a gamechanger for Bahrain, we invited the biggest cloud providers to come see for themselves how we could give them access to the $1.5 trillion regional economy. From regulation to cost-effectiveness, we were able to show a clear advantage over other cities. Today, Amazon Web Services (AWS), the biggest and fastest growing cloud enabler globally, is setting up its regional hub in Bahrain. As the EDB, we have taken every measure to make Bahrain the top choice, and this is the differentiation we bring to every conversation.
2. What are the main sectors in which you have been successful so far in attracting foreign investors? any data on their sectorial distribution in terms of the size of investments?
We have five main sectors and two subsectors that we, as the EDB, are promoting actively to investors. ICT, which accounted for 5% of FDI in 2018 is definitely top on our economic agenda. As with the AWS example, we have been keenly developing the sector to become a key growth generator. As you can imagine, technology cuts across all industries and segments of business, and this is where we see its value.
Another core area that we are focused on is the financial sector. Bahrain has a long-standing tradition of being a financial hub in the region. We were admittedly slower in evolving the sector technologically than other financial hubs, but this is something we believe is changing rapidly. In fact, we are currently the only country in the region to have an onshore regulatory sandbox, which today includes close to 30 FinTech concepts, in cryptocurrency, trade, payments and more.
FinTech is also an important growth segment for Bahrain. One of the key advantages we offer is competitive operating costs, approximately 30-40% less than neighbouring countries. In the Gulf, FinTech startups are expected to attract $2bn in private funding over the next 10 years, compared to $150m over the previous decade. To this end, we have developed Bahrain FinTech Bay as the region’s largest hub for FinTech businesses to come together, collaborate, learn and grow.
As part of our efforts to diversify the economy, we have also built up our profile as a manufacturing hub. The sector, along with logistics and transportation brought in a significant 24% of investments last year. Much of this comes down to the cost advantage, as well as connectivity to the entire GCC and most importantly to the largest market, Saudi Arabia.
Logistics, as it complements manufacturing, is also key to other growth sectors such as ecommerce and regional trade. We have seen tremendous success in this area. In fact, today the occupancy rate of Bahrain’s logistics zone is well above 80%, compared to 39% in 2015. Moreover, the sector has attracted over US$184 million in investments, creating 875 new jobs in the market.
Finally, and most importantly, we’re developing the tourism sector in a big way. The potential here is greatly underestimated. In 2018, for example, Bahrain received a record 13.7 million international visitors, which is 7.9% over the previous year. We have two UNESCO world heritage sites, and a growing number of retail and leisure concepts prompting greater investment into tourism. For Bahrain, we think that if we can ensure we have the right assets we can see significant tourist flows.
3. What are the procedures for foreign companies to enter the market?
Bahrain has a really simplified market entry process in many ways. We have an online registration system, Sijilat, which has digitised and accelerated the entire process of obtaining a commercial registration. On top of that, the change in entry visa procedures now allows for visa on arrival for 66 countries and eVisa’s for 114 countries. In terms of regulation, we reduced the minimum capital requirement from BD 50,000 to BD 100. We at the EDB are here to support companies, and what differentiates us and Bahrain from other business hubs is that we have a private sector approach to business. We like to call it our Team Bahrain approach, it is where the public and private sectors collaborate to create a successful business environment.
4. How can you help businesses and investors to become successful, what is your formula for entrepreneurs to be successful?
I think what is most important is that as the EDB, we recognise that there is no one-size-fits-all solution for businesses to be successful. We have consciously developed various platforms and initiatives to help entrepreneurs get the best value and returns in Bahrain. For one, as our size allows new businesses to test their products or services from here, and then scale beyond borders.
We have also worked tirelessly towards creating a startup hub in Bahrain, not just to spur investments but also to address some of the biggest challenges facing the region, such as youth unemployment. We see startups as job creators and skill enablers. To help fledgling businesses, we introduced a new bankruptcy law to allow entrepreneurs to fail and start again. In addition to that, we are the first country in the region to have a nation-wide cloud first policy, which will allow the government to provide services more efficiently and at a lower cost. Shortly after that came the data protection law which is modelled after global practices.
We believe business success is relative to the ecosystem in which it operates. Our efforts have been consistently directed at making sure Bahrain offers the ideal conditions for entrepreneurs and investors to thrive.
5. What is your vision and your efforts in terms of the 4th industrial revolution and the digital economy?
I think as a nation we are on the right path towards digitalisation and Industry 4.0. Proving this point is the fact that we saw investment levels rise by over 13% in 2018, to approximately US$830 million..
To this end, we have attracted several incubators and accelerators, as well as a substantial flow of financing through the US$100 million Al Waha Fund of Funds. Already, we have deployed 45% across five funds, four of which are technology focused and one FinTech focused.
To add to this, Bahrain is the first country in the region to introduce a cloud-first policy. Our ability to attract big names such as AWS reinforces Bahrain’s willingness and potential to create the perfect environment for 4IR-driven disruption in the region.
We are also developing the skills to complement this evolution. This includes upskilling Bahraini talent to lead the region in highly technical fields, including in programming, coding, industry 4.0 and FinTech. Amazon Web Services has come to Bahrain and has set up their AWS Educate program. A huge number of young Bahrainis have signed up for this – even more than in India and China. Additionally, we are working with Udacity, the Polytechnic University, and Tamkeen to develop local talent as it is a very crucial part of the ecosystem.
6. The fintech industry is gaining momentum globally and in the GCC region. Why has Bahrain chosen to be a hub for FinTech, what type of cooperation do you have with Bahrain FinTech Bay?
Financial services account for close to 20% of Bahrain’s GDP. Even before FinTech became a global phenomenon, Bahrain has had a long tradition of financial innovation that is widely accepted as the leading standard in the region. Naturally, we see a clear parallel between the Kingdom’s historical success as a financial hub, and the emerging technology trends that we are now well-positioned to support, not least because of our advanced digital infrastructure.
Bahrain FinTech Bay is a shining example of how countries can catalyse expertise and innovation. We work very closely with Fintech Bay to ensure a good balance of established names and newcomers in the financial sector. The idea here is to create an environment of collaboration, mentorship and learning that generates new ways of activating financial services. We are looking to develop capabilities in RegTech, InsurTech, and Blockchain technologies. Through its state-of-the-art venture accelerator program, FinTech Bay is bringing exciting new ideas to life. We see the co-working space as a launch pad for realising Bahrain’s FinTech ambitions.
7. According to “Expat Explorer Survey”, Bahrain is in the top of the ranking (5th place) before the USA, UK and Switzerland, how could Bahrain achieve that?
Bahrain offers a very high quality of life that sets it apart from the rest of the region. The population mix here is balanced 50:50 between expats and Bahrainis, which reinforces the Kingdom’s long history of being a cosmopolitan trading centre. Bahrain’s connectivity with the rest of the Gulf region also plays to its strengths, with flights from most cities in the region taking less than hour.
As such, the cost of living in Bahrain is also quite favourable, with estimates showing that it is 45-70% lower than our neighbours. The country also promotes religious tolerance, and is home to a number of mosques, churches, temples, and the GCC’s only synagogue.
From the perspective of workplace diversity as well, Bahrain offers equal opportunities and encourages women to enter the workforce. As an example, women make up 61% of the EDB’s workforce, while 58% of them work in management positions. On the other hand, Bahrain offers flexible worker permits, which allow expatriates to work and live in the country without a sponsor, work full or part-time, and for more than one employer, for a renewable two-year period.
8. Can you give us some examples of the most successful stories that you have?
As mentioned earlier, Team Bahrain’s success in bringing Amazon Web Services to Bahrain is perhaps one of the most notable success stories we have seen recently.
Another notable example is the expansion of the FMCG giant, Mondelez, in Bahrain. The company opened its second facility and it’s 6th global megaplant in the Kingdom in 2018, This was a great moment for EDB, given how closely we worked with the Mondelez team to build their trust in the market.
There were several critical factors that led to this. For one, Bahrain’s talented young workforce allowed Mondelez to build a world-class team here. The other equally important factor was access to Saudi Arabia. Approximately 97% of Mondelez products made in Bahrain are exported, of which 60% goes to Saudi Arabia. Through our Team Bahrain approach, we worked with Mondelez to reduce the transit times from its Bahrain factory to the Saudi market by 70%. This was significant, and stands as a testament to the Kingdom’s strength as a leading manufacturing hub in a fast-growing market.
9. Could you describe the entrepreneurial scene in the country? In terms of entrepreneurship, Bahrain (ranked: 10th) overcome Switzerland (ranked: 21st), what are your expectations in the next 10 years?
Up to 90% of Bahraini companies are SMEs, and Bahrain is top in the global startup ecosystem in terms of female founders, therefore, it’s safe to say that we see entrepreneurship as a fundamental pillar of economic growth. Education is key to develop the next generation of entrepreneurs. This forms a huge part of what we offer as a stepping stone towards entrepreneurship, through platforms such as Startup Bahrain.
We’ve seen the local startup ecosystem grow substantially in the past couple of years, from the number of accelerators and incubators to funding opportunities. This has lead to a growth in the number of startups set up in Bahrain, which has doubled, and an increaed international recognition. We recently signed an MOU with Invest Istanbul to cooperate on ecosystem development and growth and stratup support.
Looking forward, we are transforming the playing field through a comprehensive startup support programme, which is essentially a bespoke concierge for entrepreneurs. New businesses can fast-track registration applications, pitch and access funding, and really cut through the noise of business set-up. One of the more notable benefits of this programme is that it allows Global Entrepreneurship Network (GEN) members access to seed financing programs offered by Tamkeen, including a $13,000 grant and an accelerated activation timeline, alongside Bahrain Development Bank’s seed fuel program which offers up to $25,000 for 15% equity.
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* Dr. Simon Galpin was appointed Managing Director of the Bahrain Economic Development Board (EDB) in February 2016.
Previously, Dr Galpin was the Director-General of Investment Promotion at Invest Hong Kong (InvestHK), the Government Department responsible for attracting and facilitating foreign direct investment into Hong Kong, and helped establish the Department as one of the world's leading investment promotion agencies.
With senior management experience in both the private and public sectors, Dr. Galpin was also actively involved in promoting Hong Kong’s expanding start-up ecosystem. Prior to joining InvestHK, Dr. Galpin spent ten years with Scottish Enterprise – at that time Europe’s largest economic development agency. He was initially posted to Hong Kong in 1992 but also worked in Glasgow, Taipei, Sydney and London.
Dr. Galpin holds Masters degrees in Business Administration, Local Economic Development and International Business Law and recently graduated as a Doctor of Juridical Science.
