Bahrain highlighted as gateway to the Gulf(2)

Another Chinese company already in Bahrain is China Harbour Engineering Co Ltd, which has two ongoing projects there - a resort project worth about $200 million, and a shopping mall funded by the government's National Security Agency of Bahrain.

Zhou Jie, deputy general manager of China Harbour Engineering's Bahrain branch, said: "Bahrain's construction market is warming up, stimulated by a series of projects by its government. Governmental and private investment is now flowing into the country."

Mohamed added that one of the flagship projects which would certainly be open to Chinese involvement is its planned new airport, expected to start construction at the end of the year and take two years to build at a cost of about $800 million.

There is also the planned 2,200-km GCC rail network, which will link up countries in the Gulf at a total cost of $30 billion, as well as a rapid transit network for Bahrain itself, expected to cost $8 billion.

Officials point out that Bahrain's business costs, especially utilities and labor, are a major appeal for investors.

"The industrial power price is a little more than 0.2 yuan ($0.031) per kilowatt-hour in Bahrain while the cost in China is around 0.8 yuan per kWh," added Guo.

"Local water costs a little more than $1 per cubic meter, almost the same as that in Beijing or Shanghai, but gas costs $2.25 per mmbtu (million British Thermal Units), an eighth of the cost in China, which could mean huge savings for high energy consumption companies."

Industrial land rents in Bahrain are $1.33 per square meter a year while warehouse rents in Shanghai are about 34 yuan ($5.32) per square meter a month.

Labor costs in Bahrain remain low because 80 percent of its 400,000 workforce is foreign. The monthly cost of a foreign employee is about 200 Bahraini dinars ($533.9) and in the construction industry that can be as low as Bahraini dinars 100 a month, according to Guo.

The average monthly salary in Beijing was $733 in 2011.

"Telecommunications and transportation are very convenient; and the visa-on-arrival policy between China and Bahrain, which came into force in April, has also eased business and tourism," Guo added.

The Bahraini government has introduced a series of favorable policies to attract foreign investment.

"Bahrain has no corporate tax, no personal tax, no capital gains tax, no withholding tax, and no restriction on the repatriation of capital, profits, dividends," said Bader Al Saad, chief of Bahrain International Investment Park.

Guo added that "the favorable policies mean products from foreign companies coming into Bahrain pay no import tariffs when destined for the GCC market, a similar arrangement for foreign companies using Dubai's free zones".

Two sectors being highlighted as offering great opportunities for Chinese small and medium-sized enterprises are light industry and food processing.

"We have great demand for Chinese food products," said Khalid Ali Al Ameen, a board member of the Bahrain Chamber of Commerce and Industry. He said as much as 99.9 percent of Bahrain's food is imported and the country has almost no food processing sector.

Profit margins for food wholesale businesses in Bahrain can be as high as 100 percent as a result, and retail food businesses can see profit margins of 10 to 25 percent, according to Ameen.

As long as Chinese companies are registered in Bahrain and reach the requirement of local employment, they are entitled to enjoy financial support from Tamkeen, an enterprise fund established in August 2006 as part of Bahrain's national reform initiatives tasked with supporting its private sector.

That support includes financial aid, government grants, and programs to enhance companies' productivity, Ameen said.

Bahrain is scheduled to launch online registration services for foreign investors next year.

The country is also planning a 100,000-square-meter commercial center named Dragon City, which the authorities hope will be in business in two years, to attract as many as 400 Chinese merchants, according to Guo.

Dong Liang has spent more than 20 years in Bahrain, and specializes in private healthcare services, another sector which many expect to boom in the coming years.

"Chinese hospitals have some of the world's best technology and management. And I believe investment in this area will also be very bright," he said.