2011 Bahrain Country Commercial Guide - US - Export.gov

double oil production by 2013. In 2011, the Government increased fiscal expenditure and
announced new projects in the oil & gas sector. Bahrain is not a member of Organization of the
Petroleum Exporting Countries (OPEC).
Due to its relatively limited energy reserves, Bahrain is diversifying its economy away from oil
and gas production. The kingdom‘s long-term ―Economic Vision 2030‖ development plan
highlights the need for diversification by increasing the number of Bahrainis in the workforce
(―Bahrainization‖). The plan also seeks to raise the standards of industrialization, privatization,
training and education of the Bahraini work force, establishing Bahrain as a regional center for
human capital.
The Government of Bahrain has actively sought to develop the transportation and
communication infrastructure necessary to attract and foster international business. With the
Government seeking to reduce Bahrain‘s reliance on oil, Bahrain has become a regional
financial center with a regulatory infrastructure of high international standards. To overcome its
small size, Bahrain has further sought to position itself as a regional services hub. After early
success, the financial, telecommunications, and transportation sectors have faced stiff
competition from Dubai and elsewhere. In its quest to increase foreign investment, the
Government of Bahrain has targeted six "economic clusters" for further expansion: tourism,
information and communication technology, health care, education and training, business
services, and financial services. Downstream aluminum and petrochemicals industries also
remain priorities.
Based on the 2011-2012 budget, government expenditures accounted for approximately 26
percent of Bahrain's GDP. The Government is heavily involved in industry, with wholly or
partially government-owned parastatals dominating certain sectors of the economy. In 2006,
the Government transferred control of all parastatal companies to a quasi-independent holding
company – Bahrain Mumtalakat Holding Company – to increase the productivity and the
profitability of the Government's investments. Mumtalakat was also established to serve as a
quasi-sovereign wealth fund to invest in international financial markets and international
projects.
Market Challenges Return to top
The divide between the government and the private sector is not well defined in Bahrain,
leading to potential conflicts of interest. U.S. companies have noted a lack of transparency in
government project tendering at times (see Chapter 6, Investment Climate). The GOB
implemented a new tender law in January 2003 to promote a more transparent tendering
process. The Tenders Board regulates and oversees most of the Government‗s tenders and
purchases.
Entrenched local business interests with government influence can cause problems for
potential competitors. Interpretation and application of the law sometimes varies by ministry,
and may be dependent on the stature and connections of an investor's local partner.
Departures such as these from the consistent, transparent application of regulations and the
law remain rare, and investors are usually pleased with government cooperation and support.
Bureaucracy and poor coordination between ministries on occasion impedes new industrial
ventures. The Government's priority of "Bahrainization" of the labor force – a quota system
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