Advantage to setting up business in Bahrain
The Kingdom of Bahrain presents many of the advantages expected of most developed countries around the world. Bahrain is often referred to as a gateway to the Arab states, being located in the center of the Middle East and composed of an island archipelago with access to shipping traffic through the Persian Gulf, as well as a land route to the Arabian peninsula via the King Fahd Causeway which connects the kingdom to the eastern coast of Saudi Arabia. This combination of geographic location and existing infrastructure mark Bahrain as a vital link in the global supply chain connecting the Middle East to the world market.
Bahrain is one of the first post-oil economies in the Middle East, although currently invested in banking, transportation, and tourism sectors, the majority of the kingdom’s earnings are still being derived from oil refining activities. Bahrain has maintained the distinction of being one of the 79 nations currently classified by the World Bank as high income economies as of 2016, with a reported GDP (in terms of per capita purchasing power) of $51,956 as of 2017. The personal wealth and upward mobility of most Bahraini citizens enables the kingdom to be rated one of the world’s most economically liberal societies, ranked 18th (in between Finland and the Netherlands) by The Heritage Foundation on the economic freedom index as of 2016. In consideration of the contemporary measures of individual wealth, the population of Bahrain can be safely considered to represent one of the world’s most desired target markets for retailers of all sectors.
In addition to being affluent, most of Bahrain’s society is urbanised, estimated to number around 1.3 million people (as of 2016) living and working largely in the densely populated northern half of the main island known locally as al-Awal Island. Although Arabic is the kingdom’s official language, the English language is widely used by the expatriates constituting half of Bahrain’s resident population. Due in part to its historical status as a protectorate of the United Kingdom from the 19th century up to the assertion of its sovereignty in 1971, Bahrain’s society has been considered one of the most progressive in the Middle East: their parliament consisted of four female representatives in 2011 and the kingdom was the first among the Arab States to field a Jewish ambassador.
The Kingdom of Bahrain has served as a moderating influence in the region since its declaration of independence, and its maintenance of international relations have made the nation one of the safest in the region. Bahrain is a founding member of the Gulf Cooperation Council (GCC) and maintains bilateral relations with 190 nations, resulting in the relative ease of GCC citizens making the transition to residents and non-GCC visitors obtaining visas effective for up to two weeks upon arrival without prior arrangements or sponsorship. Bahrain is also a member of the Arab League regional organization, and endorses the organization’s policies with regard to maintaining peace in the Middle East and a two-state solution for the protection of Palestinian rights. The kingdom has been a long-time supportive ally of its largest neighbor, Saudi Arabia, and hosts multiple embassies in addition to the US Navy and its 5th Fleet. The US Navy began maintaining its presence in the region for a brief period at the end of World War 2, and has been actively patrolling the regional waters in conjunction with Bahrain’s own US-equipped military since 1995.
Bahrain’s Ministry of Industry, Commerce and Tourism has made concerted efforts to entice foreign investment in the form of free trade zones with additional tax benefits for commercial entities operating in these areas. Bahrain’s designated free trade zones provide additional incentive for foreign investment and trade in the form of close proximity to the kingdom’s port facilities and various tax exemptions. Located on reclaimed land east of Bahrain’s city of Manama, the free trade zones are known as two distinct areas: Bahrain International Investment Park (BIIP), and the Bahrain Logistics Zone (BLZ) The former (BIIP) is intended for industrial entities undertaking manufacturing activities, where companies are exempt from minimum capital requirements and tax waivers are applied for the trade of raw materials and equipment with GCC nations. The latter (BLZ) is governed by the Kingdom of Bahrain’s Ministry of Transportation, and tenancy is favored for import and export activities where entities involved in product assembly, retail storage, distribution, or logistics operations can take advantage of the port infrastructure.
As of the time of this writing (2017), Bahrain imposes no taxes on income or capital gains for either individuals or commercial entities, with the exception of 46 percent of net profits earned from activities in oil and gas sectors. Bahrain currently imposes no Value Added Tax (VAT), at least until 2018, when a tax rate of between three to five percent will come into effect. All corporations and individuals operating within the kingdom have been responsible for payroll taxes and contributions towards social security and welfare since the inception of Bahrain’s General Organization for Social Insurance (GOSI).