The Gulf country is diversifying its economy, offering Chinese companies more chances to invest in local emerging industries

Efforts to diversify the Gulf's economies are creating new opportunities for international investors, especially businesses from China, according to the Bahrain Economic Development Board.

The board is an investment promotion agency with an overall responsibility for attracting investment into Bahrain, and is focusing on targeting economic sectors in which the Kingdom offers significant strengths, including tourism, manufacturing, ICT and logistics and transport services, as well as other sub-sectors.

Bahrain is an ideal hub from which to access these opportunities, according to the EDB, and a large number of Chinese businesses are already using the Kingdom for their regional headquarters. Huawei has based its Middle East regional headquarters in Bahrain since 2004 to service the Kingdom's telecommunications market. Bahrain was also the location for the Bank of China's first Middle East office.

China is already the third-largest non-Gulf Cooperation Council market for Bahraini exports. According to the EDB, in 2014, China became Bahrain's largest source of imports for non-oil goods, with annual non-oil imports standing at more than $1 billion.

Commenting on how Bahrain and the GCC markets can support Chinese businesses, Khalid Al Rumaihi, chief executive at the Bahrain EDB, said: "Chinese businesses have been among the world's leaders in a number of fields and as they increasingly look to expand their operations internationally, the GCC offers very exciting opportunities for further growth."

Today, the six economies that make up the GCC - Saudi Arabia, United Arab Emirates, Qatar, Oman, Kuwait and Bahrain - make up an economy currently worth around $1.5 trillion, according to the International Monetary Fund. The IMF expects GCC's economy to reach $2 trillion by 2020.

There is a wide range of opportunities available in the Gulf for Chinese investors, according to Simon Galpin, managing director of the Bahrain EDB.

"The Gulf region has a young, growing, affluent and highly-educated population," He said. "This is a driving demand for goods and services, and there is a particular demand for digital products and services, an area where China has been at the forefront of global innovation in recent years."

Bahrain is investing considerably in infrastructure, according to Al Rumaihi. He says the Kingdom currently has a pipeline of infrastructure projects worth more than $32 billion, while throughout the Gulf region, the pipeline is expected to reach $2 trillion in the coming years.

The Kingdom has also recently introduced a number of regulatory reforms, designed to boost innovation and growth. These include cutting the time to export goods to Saudi Arabia via the King Fahd Causeway, reducing the minimum capital required for start-ups, further liberalizing foreign ownership regulation and laws to support the creation of limited partnerships, protected cell companies and trusts. Further reforms are also expected to include a new bankruptcy law and the creation of a regulatory sandbox by the Central Bank of Bahrain to support the development of fintech.

"Infrastructure is vital for any economic growth story. It drives growth; it has a multiplier effect on any economy," said Al Rumaihi.

In the last 10 years alone, the GCC has seen trade between member countries grow nearly tenfold, from about $15 billion 10 years ago, to about $120 billion today, according to Al Rumaihi.

"But while investment in infrastructure is vital, it is not enough on its own. We also need to focus on the ease of doing business, especially as governments are forced to adjust to a new oil price norm of between 40 and 60 dollars a barrel - to transform their economies and to think about new ways of generating revenues," Al Rumaihi said.

This change has forced transformation away from a government allocation model, in which the government is the driver of growth, to a private-led growth model, in which the government is a facilitator of growth, according to Al Rumaihi.

"I really think that in that new norm, getting the soft infrastructure right, as well as the hard infrastructure, is going to be critical," he said. "When I say soft infrastructure, I am really referring to the laws and regulations that are going to encourage investment, that are going to protect investor rights, remove the red tape and make it easier to grow."

The story is provided by the Bahrain Economic Development Board. For more information on investing in Bahrain and the Gulf, the Bahrain EDB has two dedicated offices in Beijing and Hong Kong, led by Mr Yun Jiang. He can be reached at: yun.jiang@bahrainedb.com. You can also visit: www.bahrainedb.com.

Bahrain fact box

Capital: Manama

Head of State: His Majesty King Hamad bin Isa Al Khalifa

Population: 1.3 million (approximately 50 percent expatriates)

Area: 770 square kilometers (comparable to Singapore)

Languages: Arabic, English (used as a business language) Currency: Bahraini Dinar (BD)($1= 0.38 BD)

Time zone: GMT+3

Religion: Islam (85 percent, state religion). Local Christians, Hindus, Jews and others enjoy freedom of religion

Bahrain has one of the most diversified economies in the region. Bahrain was the first Gulf state to discover oil and the first to diversify away from oil. Today oil and gas represent less than 20 percent of GDP. Other major sectors include financial services (16.4 percent), manufacturing (14.6 percent), transport and communications (7.2 percent).

The Heritage Foundation Index of Economic Freedom 2016 lists the country as the freest economy in the Middle East and North Africa region and 18th globally. KPMG 2016 rates Bahrain as having some of the region's lowest operating costs, with cost of doing business in the financial sector 30 percent lower than Dubai and 40 percent lower than Qatar. The HSBC Expat Explorer Survey 2016 puts Bahrain ninth globally and first in the MENA region.

Bahrain is investing more than $32 billion in key infrastructure projects across a broad range of sectors in the coming years, including transport, housing, manufacturing, energy, tourism, healthcare and education.

Provided By Edb

An employee works at Aluminium Bahrain, one of the largest aluminium smelters in the world. Photos Provided To China Daily