Bahrain highlighted as gateway to the Gulf

Island kingdom offers generous incentives to Chinese investors

The tiny Kingdom of Bahrain, off the eastern provinces of Saudi Arabia, is promoting itself as the perfect gateway from which Chinese companies can expand their business interests throughout the Gulf.

There is already a growing list of Chinese companies eyeing future projects in Bahrain, and beyond, and according to the acting chief executive of its Economic Development Board, its tax-free business economy and strategic position offer great opportunities for many more.

"Bahrain started economic and social reforms more than a decade ago, and today, more than any time, we need Chinese investments to grow our country, not only economically, but also in helping us advance the reforms," said Kamal bin Ahmed Mohamed, who is also its minister of transportation.

With a population of 1.2 million, Bahrain is located in the heart of the Gulf, lying less than 50 kilometers from many of Saudi Arabia's major oil production facilities, and 29 km north of Qatar, which is also considered one of the region's economic powerhouses.

Although Bahrain's oil production is the smallest of all the members of the Gulf Cooperation Council countries - Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman - its role in the region has for years been as an economic and financial center.

"Chinese investors and companies can receive a good return from any investment in Bahrain," added Mohamed.

"The GCC market is of great potential, and Bahrain can act as the gateway to that because of its close relations with its neighboring countries."

Chinese telecom giant Huawei Technologies Co Ltd moved its Middle East headquarters from Dubai to Bahrain in 2009.

Lu Shujun, its director of public relations for the region, said: "A favorable business environment including attractive policies for foreign direct investment, high government efficiency, a low cost of living, and low office rents, as well as a friendly social environment - these are all factors that come together to make Bahrain an attractive location for our headquarters.

"Some might consider Bahrain itself as offering a limited local market, but it does radiate its influence, especially in the eastern part of Saudi Arabia, with its major oil fields and operations and heavy population.

"And that reputation also extends into Iran, Kuwait and Iraq," added Guo Hu, first secretary at the economic and commercial office of the Chinese Embassy in Bahrain.

It takes about 20 minutes to drive from Bahrain's capital Manama to Saudi Arabia. The Saudi capital Riyadh is 400 km away, and Bahrain remains a weekend leisure spot for local Saudis and expats alike.

"Saudi Arabia is a relatively closed market, including its financial market. That's why just six or seven foreign banks operate there but most of the world's banks have operations in Bahrain, from where they can do business easily with countries throughout the region," Guo said.

The six countries of the GCC collectively made up China's eighth-largest trading partner in 2011 with a bilateral trade volume of $133.8 billion, up 44.6 percent year-on-year.

The GCC's combined nominal GDP expanded by nearly 31 percent to a record high of about $1.4 trillion in 2011, according to the Institute of International Finance, and the combined economic volume is projected to reach $1.6 trillion in 2012.

"China's trade with the GCC will maintain an annual growth of about 15 to 20 percent in the coming years.

"But China needs to optimize its trade links with the GCC because at the moment its exports of textile and apparel products make up almost all its regional business.

"China's exports of transportation machinery and expertise, such as automobiles, aircraft and yachts, accounted for less than 1 percent of the GCC's imports, for instance," Guo said.

"We need to encourage domestic enterprises to invest more in the Gulf region in future. High energy-consumption companies, and high-tech companies need to tap into the GCC markets, and Chinese service companies could also have a very bright future here, investing in Bahrain, expanding throughout the region, making use of the cheap energy and labor," Guo said.

Mohamed added that "China and Bahrain share great scope for cooperation in areas such as manufacturing, construction and telecommunications, particularly, in view of Bahrain's continued future development plans".