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Bahrain industrial strategy aligns with GCC goals

19 December 2023

 

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With limited energy resources and land compared with its larger neighbours, Bahrain needs a targeted industrial strategy that supports economic development across the region and plays to the island kingdom’s strengths. 

“We look to complement the GCC rather than compete,” says Industry and Commerce Minister Abdulla bin Adel Fakhro. 

“We always look for industries where we can fit in each other’s supply chains so that we can substitute imports from outside of the GCC with products from within the GCC.”

The ministry has a strategy for each of its key sectors, with most starting in 2022 and typically running for four years. The strategies encompass industry, small and medium-sized enterprises (SMEs) and digital businesses. Targets include increasing contribution to overall GDP.

Target sectors

Bahrain’s industrial strategy covers five main target sectors.

“Downstream aluminium is very important because we have Alba [Aluminium Bahrain], which is the largest single-site smelter outside of China and continues to expand and grow production,” says Fakhro. 

“We have a new downstream aluminium park to the south of Alba, and the big advantage for companies there is they can buy hot metal.

“We also provide other incentives, such as low-cost land and energy, and provide support with the purchase of equipment. 

“Through the labour fund Tamkeen we can help with the workforce.”

There are also plans to expand Alba with the Line 7 project. Last year, a firm was appointed to complete the feasibility study for the project, which is expected to have a similar production capacity to the Line 6 expansion project – within the range of 540,000 metric tonnes a year.

Petrochemicals is another major industry for Bahrain.

“We have a presence in that sector with Bapco Energies and GPIC [Gulf Petrochemical Industries Company]. They are major producers, so downstream petrochemicals is another opportunity,” says Fakhro. 

Like aluminium, there will be a significant increase in capacity in the near future as the $7bn Bapco Modernisation Programme (BMP), which involves boosting the total throughput at the Sitra refinery to 400,000 barrels a day (b/d) of oil, enters the final stages.

The other three industrial sectors are food manufacturing, medicine production and new sectors including semiconductors and the production of components for use in renewable energies. 

In-country value

To support local industries, Bahrain is establishing an in-country value system that determines a supplier’s local content, similar to those implemented in Saudi Arabia and the UAE.

“Companies with a good in-country value score get a 10 per cent advantage on government tenders,” says Fakhro. 

Bahrain is also working with other GCC states to create an in-GCC programme. “What we are trying to do with this is jointly recognise other countries’ [in-country] value. This means a product produced in Bahrain would get an advantage in another market, such as Saudi Arabia or the UAE,” says Fakhro.

“Likewise, a GCC employee would be equivalent to hiring a local employee. We are looking at different ways to become one market.”

These programmes are still being negotiated, with discussions at the GCC currently centred on determining what constitutes a GCC product.

“That is the start. When we have a clear definition of what a GCC product is, then we can open the doors,” says Fakhro.

As a small country with a long history of being a trading hub, Bahrain is keen to access larger markets. Hence its industrial strategy is outward-looking. As well as working on a GCC-wide in-county value system, there have been several other key developments in recent years.

“We have a very interesting project funded by [Abu Dhabi-based holding company] ADQ. It has four countries: the UAE, Egypt, Bahrain and Jordan. This group of countries came together soon after the Covid-19 pandemic to complete each other’s supply chain,” says Fakhro. 

Known as the Integrated Industrial Partnership for Sustainable Economic Development, ADQ has backed the partnership with $10bn of investment. Its target sectors are agriculture, food, fertilisers, medicines, textiles and apparel, metals, petrochemicals and plastic.

We have a highly skilled workforce that is well-educated with a strong work ethic

Other focus areas

Semiconductors are of particular interest to Bahrain and the country hopes to play an active role in this sector. 

“We are interested in that sector. The world realised that this sector will be critical in the future, and there needs to be manufacturing in other parts of the world so that one nation does not have a monopoly. 

“The sector suits Bahrain because it does not require a lot of energy or land,” says Fakhro. 

“Bahrain’s big asset is its people. We have a highly skilled workforce that is well-educated with a strong work ethic. This attracts all types of businesses in many sectors, especially in advanced manufacturing and the ICT sector,” says Fakhro.

Another important area of focus for the ministry is supporting SMEs and local startups.

“We are working hard to improve the ecosystem for SMEs,” says Fakhro. “The major challenge for SMEs is access to financing. This is not only in Bahrain; it is a worldwide challenge. Bahrain is home to over 300 multinational banks, but still, that doesn’t by default mean that SMEs have easy access to money.”  

The other challenge is access to international markets. “Especially when you look at sectors such as manufacturing, Bahrain will give you limited growth potential. We support SMEs with exports. We have a government-owned entity, Export Bahrain, that facilitates export support for Bahraini companies, including SMEs.”

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Colin Foreman

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    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

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