Country Profile Bahrain

Real Estate Overview

Property market direction / trend analysis Introduction

Updated: Sep 2009

Since 2001, several decrees have been passed to permit all foreigners, in addition to GCC nationals, to buy and invest in real estate in designated areas. Both foreign buyers and investors can enjoy 100% ownership of land in predetermined areas and also have the option to lease government land through the Ministry of Finance and National Economy. Designated foreign ownership districts in Manama include: Ahmed Al-Faith, Hooray, Bu Ghazal, the Diplomatic Area and Seef. Added to this list are three projects at the Amwaj Islands, Durrat Al-Bahrain and Dannat Hawar. The real estate and construction sectors continued to grow in 2008, collectively accounting for 13.5% of GDP (20% at constant prices) and grew by 11% y-o-y. Real estate projects grow more ambitious by the year, in terms of both scale and design and there are currently some $7.9bn worth of projects underway. While some of the large-scale projects may give Bahrain a profile somewhat reminiscent of Dubai, growth in the kingdom has been more measured and gradual. For example, the country has reverted to land reclamation projects out of necessity, rather than ambition. Limited land area is straining to support a rising population and thus developers have turned to land-reclamation projects to increase available area. Since land reclamation statistics were first recorded in 1981, the kingdoms size has increased by 26 sq km, or 11.4%. Several large-scale reclamation projects are underway, including the $3bn Durrat Al Bahrain project, which consists of 12 artificial islands with a combined area of 20m sq m. Bahrain Bay, Reef Island and Dilmunia a health care development are also under construction. The latest project to be announced is one of the biggest Diyar Al Muharraq, at a total investment of $3.2bn, will cover 6 sq km, and offer 30,000 residential units. As in other Gulf markets, the real estate and construction activity has picked up rapidly over recent years. According to the Survey of Land Registration Bureau the total value of traded land permits rose from BD846m ($2.25bn) in 2006 to BD1.37bn ($3.64bn) in 2007. In the first three quarters of 2008 trading reached BD1.45bn ($3.86bn). The construction sector has been one of the main drivers of overall GDP growth, expanding at a CAGR of nearly 19.4% in constant prices between 2003 and 2007, far outpacing average real GDP growth at 7.1%. Over the same period, the real estate and business services sector grew at a CAGR of 8.6%. According to the CBB, commercial bank lending to the construction sector has been growing at a CAGR of over 60% from 200307. It nearly doubled in 2008 to reach BD1.54bn ($4bn). At 40%, the biggest slice of all lending to the business segment was aimed at construction. New construction permits have been declining since 2006. Last year the municipality issued 3,682 permits for new construction, a 2% decrease from 2007. Total permits (which include those for demolition, renovation, etc.) numbered 11,045, 34% of which were issued for the Northern District. Introduction

Updated: Dec 2007

The Kingdom of Bahrain, meaning 'two seas,' is a cluster of thirty-three islands in the Persian Gulf adjacent to Saudi Arabia. The total area is 700 square kilometres and the largest island, Bahrain, comprises nearly 90% of the country. Land supply is dwindling due to large-scale development in recent decades, and in turn property values have increased dramatically. In the late 1970s and 1980s Lebanons economy was ravaged by civil war, and Bahrain was able to fill the void, becoming the new regional financial centre. Although in recent years Bahrain is losing ground as a leading Persian Gulf economy, as its growth has been slow relative to its neighbours Dubai and Qatar. Some have attributed this stagnation to the enactment of strict labour laws that make it difficult to fire underperforming employees. Bahrain recently began a major economic diversification programme. Several international companies have chosen Bahrain as their regional headquarters which is generating an influx of international executive and their families. Bahrain is now trying to reclaim its role as a regional player. Major construction projects are under way, such as the Bahrain Financial Harbour with an estimated budget of (USD 1.3 billion), Durrat al Bahrain (US$3 billion), Amwaj (US$ 1.6 billion), Health Island Project (US$ 1 billion), Al Areen (US$ 750 million) and Riffa Views (US$ 300 million). Residential

Updated: Sep 2009

The residential market in Bahrain remained healthy in 2008, with strong uptake of new projects on release. With a shortage of available land, the residential market remains undersupplied, especially in the low to middle-income segment. Development has focused on the high-end market over the past few years, as new regulations allowed non-nationals to buy property in designated areas. However the market is still driven by local demand, which has helped to shield it from the worst effects of the global economic crisis and which will lend the sector future stability. Devaluations were most prominent in expatriate-dominated areas. New residential towers dominate favoured districts, particularly those areas such as Juffair and Seef where foreign nationals are able to buy property. That said, local brokers comment that 50% of buyers in freehold projects are Bahraini nationals. Along with Saudis, Kuwaitis and other GCC nationals, Bahrainis remain the key buyers of investment projects. As ever, the level of speculative activity is difficult to gauge, but land registration details suggest that, while trading by foreigners grew in 2007 and spiked slightly in the market peak around mid-2008, end-users still drive demand. In 2007 non-Bahrainis accounted for just 7% by value of all traded land permits. In the first three quarters of 2008 (the latest data available), their share increased slightly to 10%, with foreign trading activity peaking in the second quarter at BD62.7m worth of traded permits, a 70% q-on-q increase. Trading declined in the third quarter for both foreigners and Bahrainis, with nationals continuing to hold around 90% of the land trading market by value. Bahrainis the fifth most densely populated country in the world and the limited available land comes at a premium. Prices climbed sharply from the end of 2007 to Q2 2008 land in Juffair jumped from BD80-90 to BD120/sq ft, while prices in Seef rose to BD240/sq ft. Expensive land, combined with continually rising construction costs, have led developers to focus on the high-end market in order to keep reasonable profit margins. Still, developers had to revise projects over the course of last year, with some planned for release at BD500 or BD600/sq m later rising to BD650 in order to show profit. Conditions in 2009 are markedly different as construction costs have eased by as much as 40%. This will likely encourage development at the lower end, which was largely passed over during the boom times and is facing an acute supply shortage. The social housing shortage is at least 40,000 units, and with half of the Bahraini population under the age of 15, the immense pressure on the market will remain. The government has plans to build 50,000 low cost units by 2014, though some claim 80,000 units will be needed by 2020. Affordability is a key issue Bahraini nationals can obtain housing loans of BD40,000 or $106,000 approximately half the cost of a family home. In May 2008 the CBB raised the loan-to-value limit for residential mortgages from 70% to 90% of total property value. Following this move, outstanding mortgage loans jumped by 43% in the second quarter to reach BD646m ($1.7bn). The availability of home financing has been an important factor in aiding sector growth, though the CBB has cast a careful eye on the sector, which has left it well-protected from the global meltdown of 2008. Nevertheless, lending is expected to ease somewhat in 2009 on account of global economic anxiety and more limited liquidity. An influx of expatriates over the past years has driven up rental rates. Foreigners dominate the market and drove up demand, especially in mature areas of Manama like Juffair and Seef. In the second quarter of 2008, a two-bedroom flat in Seef was renting for about $43,000 per annum, while an apartment of the same size was going for $35,000 per annum in Juffair. One year on, prices have dropped dramatically and the rates in Seef have equalised with those of Juffair. In Q2 2009 two bedroom flats were averaging $24,500 in both areas, a y-o-y decrease of 42% in Seef and 31% in Juffair. The majority of value was lost in the first quarter of the year, indicating the drop may have had more to do with sentiment than market fundamentals. Sales costs have also climbed, at an average of 10-15% per annum for the past three years with reports of a 20% increase in some projects in the nine months from Q3 2007 to Q2 2008. One and two bedrooms have proven most popular with buyers and prices continued to rise until the end of the first quarter, with one and two bedroom apartments in Juffair averaging $2,416/sq m. In the second quarter this declined by 8% to $2,217/sq m In Seef one bedroom apartment prices declined by just 6% in the first quarter to $2,617/sq m with a further 6% drop in the second quarter. Two-bedroom units proved less resilient at 18% q-on-q drop at the start of the year to $2,700/sq m. The price fall eased significantly in Q2 2009 to just 5%, resting prices at $2,517/sq m for the second half. Over the next three to five years, generous levels of new residential stock will be delivered. Some projects in Bahrain have been put on hold but this has occurred on a minimal scale compared to other regional markets. Projects on hold include Seef Gardan (712 units) and First Bahrains 21,000 sq m development in the Seef District (mixed-use). According to CB Richard Ellis, close to 10,000 units are expected in 2009, followed by nearly 16,000 the next year. New developments continue to arise Ahad Holding launched the Al Reef project in late May, which will add 284 units in 2010. In the upper end of the market, short-term supplydemand fundamentals remain somewhat opaque as expatriate job losses in the financial sector are not clear, but most analysts remain optimistic that damage was minimal. Residential

Updated: Dec 2007

A large sector of the residential real estate market is geared to foreign residents, roughly 40% of Bahrains population of 700,000. Short term rentals have become a lucrative niche, attracting a premium in rentals. Many Western expatriates who work in Saudi Arabia during the week, maintain a flat in Bahrain for weekend getaways where leisure activities and the entertainment is more

conducive to their lifestyle. It is only a short 25- km commute to Saudi Arabia across the King Fahd causeway, the main highway linking Saudi Arabia to Bahrain which crosses the Arabian Sea. Demand for rental units has exceeded the available supply, although 40,000 new housing units are scheduled for completion by 2009. Much of this construction is taking place on Amwaj Islands, a large development of luxury apartments and villas on an artificial island located off the coast of Muharraq Island. Once Amwaj is fully developed, some analysts speak of a potential surplus of high quality residential real estate by 2010. The more affluent expats prefer the Juffair, Adliya, and Seef areas, all less than a 10 minute drive from the financial centre. Juffair is near the American military base (The US Navy Base at Juffair) and many of the buildings in these areas are all inclusive, offering laundry and delivery services. A major attraction of the area is that it is near BISA, one of Bahrains top schools. Seef where Bahrains malls are located is one of the most expensive areas. Real estate prices have quadrupled from 2002 to 2007. There has recently been increased trading in residential real estate, principally by other Gulf citizens, predominantly from Saudi Arabia. Leisure

Updated: Sept 2009

Even without a cohesive tourism strategy, visitor numbers have soared in recent years from less than 5m five years ago to 7.8m in 2007, outpacing arrivals in Dubai the same year. Sector growth is mainly derived from regional visitors, especially Saudis, who can easily access the island kingdom across King Fahd Highway for weekend trips. Between 2004 and 2008 visitor arrivals have increased by over 50%, from 5.7m to 8.6m. Popular events like the Bahrain Grand Prix also help to draw in visitors and hotels usually operate at 100% occupancy during the event week. Initial statistics for 2009 suggest that visitor growth may be leveling off in the short term, but the figures remain high. The number of visitors grew 5% in the first quarter, compared to the previous quarter, and then declined by 10% in Q2. Nevertheless a total of 4.5m non-Bahrainis arrived in the Kingdom in the first half, which puts the sector well on pace with 2008 levels. In the past, the government seems to have been content to rely on the steady stream of Saudi visitors, but it is now taking a more ambitious stance toward the sector and aims to double tourism revenues and increase the sectors contribution to GDP to 10% by 2014. Authorities are targeting the high-end segment as well as working to create family-friendly destinations. Beach developments are emerging as a way to target both of these markets. For all its coastline, Bahrain lacks beaches suitable for leisure purposes, a point the government is aiming to change. Investments include an $800m development headed by Ithmaar Bank to rehabilitate Bahrains main public beach, along with plans to improve beaches at Mameer and the Khalifa Grand Corniche at Muharraq. Improving average stay length will be an important aspect of future growth. Currently the average guest spends only two nights in the Kingdom. A tourism masterplan has been created which recommends the establishment of a public-private tourism authority, as in other Gulf states. Also recommended is the creation of 12 zones dedicated to tourism development, with five projects designated as priorities. These include the large mixed use projects such as Amwaj and Al Areen, together with rejuvenation of historic Muharraq town and Adliya District. In June Amwaj launched its first hotel The Dragon, a five-star resort with an estimated development cost of B22m ($58.5m). As the sector is highly dependent on regional tourism, it should be given a boost by the $3bn Friendship Causeway, which is currently under construction and will connect Bahrain and Qatar. Upon completion in an estimated four years the causeway will reduce one-way travel time by about four hours to just 30 minutes. Other transport infrastructure improvements include the expansion of Bahrain International Airport, launched in 2008, which will increase capacity to 15m passengers per annum by 2011, with provision for a second phase expansion that will increase capacity to 22m by 2020. Manama landed in the top 20 of Deloittes 2008 Global Index for both ARR and RevPar. Average room rates increased by 21% yo-y to $223 in the capital city, while RevPar grew by nearly 18% to $159. Occupancy rates run as high as 100% during peak periods and tend to remain buoyant even during summer, when visitor numbers drop. Sector success has beckoned international chains and by 2012 Bahrain is expected to host offerings from developers across the globe, including Japans Nikko Hotels International, Turkeys Rixos and the US-based Hilton Hotels. Other hotel franchises include a Four Seasons, Raffles, Marriott, Kempinski and a second Ritz Carlton. Indeed, hotel supply is expanding rapidly and much of it is catered toward the upper-market. Twenty five-star hotels are expected to open by 2010 and at least five new four-star properties are planned or under construction. According to Lodging Econometrics a hotel real estate research firm six new hotels are expected to come online in 2009, adding over 1,800 rooms to existing supply, which numbered 11,400 rooms/suites in 2008. As the regional tourism market looks to be relatively resilient to the downturn, occupancy rates may slip slightly in the short term, before rebounding toward future growth. Leisure

Updated: Dec 2007

Most of Bahrains centres for leisure activities are geared towards business travellers. One major new development is Durrat Al Bahrain, referred to as the Rising Pearl. The US$ 1.2 billion project spans 13 manmade islands comprising 20 million square

metres. Major attractions include five-star hotels, a golf course and marina. The islands boast 172 villas with boat and beach facilities, along with cafes, restaurants, a shopping mall, and retail shops and markets. Ferry terminals transport guests from island to island. There are also plans for a conference and exhibition centre, an aqua park, mega soft play zones, a water sports centre and spa, a full-scale fitness club, and day-care centre. There are also residential units available. Durrat Al Bahrain is jointly owned by the Bahraini government and the Kuwait Finance House. The development was designed by Dubai-based architects Atkins Middle East and will be located 54 kilometres (33.7 miles) from the Bahrain International Airport, accessible by a 2-line highway linking it from Manama. Office

Updated: Sep 2009

Bahrain ranks high on international lists of business-friendly destinations and the kingdoms thriving financial services sector has generated much demand for office space. It is ranked 2nd in the GCC for ease of doing business, according to the World Bank, and is number one in the Gulf for inward FDI relative to economic size. It was named as the freest economy in the MENA region by the Heritage Foundation in 2009. Business-friendly financial regulations had attracted 415 financial institutions at the end of 2008. Regional competition, however, from Dubai and elsewhere has cast a shadow on the market in recent years. In 2009, the relative strength of the Bahraini economy could allow for the commercial real estate sector to make up for lost ground but, given the shaky global business environment, new demand will remain low. A significant amount of supply is in the pipeline, which raises the danger of oversupply in the medium term. A number of major projects were delivered in 2008, including the$1.3bn, 570,000 sq mBahrainFinancial Harbour,intended as a symbol of the kingdoms strength in the financial services sector. The Bahrain World Trade Centre also opened last year, adding 31,000 sq m of space to the market. Both these developments are considerably above the current standards of market provision and could likely attract occupants away from older space. Change is therefore expected in the secondary tier of the market, with some older stock forced into refurbishment, redevelopment or change of use. According to DTZ there are 500,000 sq m of office space, nearly half of which is in Central Manama. The remainder is split evenly between Sanabis and Seef, and the Diplomatic Area. Office developments in the first year of opening record occupancy rates between 35% and 55%. Office rents are low by Gulf standards and remain in the bottom quartile internationally.Typical leasing costs run around BD15/sq m. Office

Updated: Dec 2007

There is also a shortage of commercial real estate, but an upsurge in construction is soon to balance the market by 2008 when an enormous World Trade Centre (35,000 sq m.) and the Bahrain Financial Harbour (250,000 sq. m) are scheduled for completion. Commercial rent has been increasing rapidly since 2005. Monthly rentals can reach BD 7.5 (nearly US$20) per square metre in the Seef area. Material costs Bahrain has been affected by upward-spiraling costs, as has the rest of the Middle East. Infrastructure The most common form of transport is private car, taxi and shared taxis. There are no plans for an extensive public transport system. Legal Bahrain is opening its freehold market to foreigners to the benefit of the real-estate market. Social Bahrainis a majority Shiite country while the ruling Royal Family are Sunni. The opposition party Al Wefaq National Islamic Society is the majority group in Parliament. Bahrainis are alarmed by the rapid increase in property values and rental prices, claiming they are being driven out of the market as developers increasingly sell and rent to non-Bahrainis.

New developments / progress in existing projects The Bank of Bahrain and Kuwait (BBK) recently announced a new series of mortgage and equity finance products for low to middle income Bahraini and non-Bahraini residents. Today the property market is healthy but difficult to access for many living in Bahrain. Amwaj Gateway Cost: US$ 1 billion Completion expected: Due for commissioning during the last quarter of 2009. Amwaj Gateway is luxury property project located on the Amwaj Island, off the Muharraq coast with 5,000 individual project units. It covers roughly 2 790 000 square metres. It is a mixed-use development comprised of residential towers, 94 duplex and triplex townhouses (some beach-front), and 550 assorted apartments ranging from one to five bedroom units in a 185,800 square kilometre area. The units are expected to go on sale in late 2007 and new owners to occupy the units in 2009. The developers of the Amwaj Gateway are Yara Investment Company and the RealCapita. WorldTrade Centre Cost: US$ 3 billion The Bahrain World Trade Centre (BWTC) comprises two 50-story towers reaching 240 metres in height, including 34 stories of office space for rent. There will also be an exclusive shopping mall. The development is 15 minutes away from the international airport and 20 minutes from the Saudi causeway. Abraj Lulu project Comprises three towers: Gold Pearl Tower; Silver Pearl Tower;Black Pearl Tower. Other amenities include a swimming pool, landscaped gardens, tennis court, internet caf, and a health spa and a gym. Durrat Al Bahrain US$1.2 billion, 20 square kilometres. Joint venture between the government of Bahrain and Saudi Arabias Dallah Real EstateFunding provided to expatriates on a 20-year basis with a required deposit of 10-percent at an interest rate of 5-percent. Foreign nationals are entitled to purchase property, which would provide them with residency permits in Bahrain. BahrainCityCentre BD 6 million (US$15,995,521; 8,000 square metres; a Cineco Cineplex movie complex operated by the Bahrain Cinema Company, including 20 screens and a seating capacity of 4,200.

Background
Introduction
The official name of Bahrain is the Kingdom of Bahrain (Mamlakat al Bahrayn). Bahrain, an archipelago of 33 islands, with an area of 707 square kilometres, is situated in the Arabian Gulf, off the east coast of Saudi Arabia. Bahrain Island is the largest of the islands; at about 48 kms long and 16 kms wide it covers some 700 sq kms. By contrast, Muharraq, the second largest island, is only 21 sq kms. At the centre of Bahrain is its highest point, Jebel Dukkhan. The majority of Bahrain's oil wells are to be found in this area. Theccountry has been headed since 1783 by the alKhalifah family, members of the Bani Utbah tribe, who expelled the Persians. Sheikh Hamad bin Isa alKhalifah is currently the king of Bahrain. From 1861, when a treaty was signed with Britain, until independence in 1971, Bahrain was virtually a British protectorate. The country has enjoyed increasing freedom of expression, and monitors say the human rights situation has improved. However, opposition groups and campaigners continue to press for political reforms, including greater powers for the elected assembly. Bahrains economy is comparatively less dependent on oil than most other Gulf States. Having been the first to discover oil in 1932, the economy has become increasingly diversified and one of the acknowledged banking, financial services, and human resources development and training centres in the Gulf. The economic environment is liberal, but well regulated; the authorities have managed recent oil price fluctuations sensibly and successfully trained Bahraini nationals for private sector employment. Bahrainisation, a policy employed by industry and government in the last twenty years, is in effect in abeyance and may be

replaced shortly by a new, less stringent system of incentives to employ Bahrainis, created by the Economic Development Boardc. Bahrainhosted its first Formula One Grand Prix in 2004. Since then, the Bahrain Grand Prix has been making significant contribution to Bahrains tourism. In 2006, the Bahrain Grand Prix accounted for more than a third of the total earnings from tourism, apart from providing a source of employment. The King Fahad causeway, which opened in 1987 and connects Bahrain to Saudi Arabia, has benefited Bahrains tourism and trade with GCC countries. In Bahrain, petroleum production and processing account for about 60% of export receipts, 60% of government revenues, and 30% of GDP. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Gulf region. Financial and insurance services contributed 30% of GDP in 2006. Central Bank of Bahrain is leading the way to establish Bahrain as the premier Islamic banking centre in the Middle East, with 16 Islamic banks and financial institutions already based in the kingdom. The continuing development of the Bahrain Financial Harbour is a key element of the governments strategy. Bahrain is a member of the Gulf Cooperation Council (GCC). Time Difference GMT+3 Working week days Government Offices Sunday to Thursday (Closed on Friday and Saturday) Private Sector Saturday to Thursday Banks Sunday to Thursday

Location:
Bahrain is located in the Arabian Gulf, situated between Saudi Arabia's east coast and the Qatar peninsula.

Capital:
Manama 26 13 North, 50 35 East

Second Largest City:

Al?Muharraq ? 26 15 North, 50 36 East

Third Largest City:

Al?Rifa ? 26 7 North, 50 31 East

Land Size:
707 sq km

Bordering Countries:
Bahrain is situated midway in the Arabian Gulf close to the shore of the Arabian Peninsula. The islands are about twentyfour kilometres from the east coast of Saudi Arabia and twentyeight kilometres from Qatar. Bahrain is connected to Saudi Arabia through the 23km long King Fahad Causeway.

Coastline:
161 km

Climate:
Bahrain 's climate is hot in summer and moderate in winter. During the period from November to April, the weather is usually cool and pleasant with the temperatures ranging between 15 to 24 C. The weather becomes colder between December and March when the Shamal (northern wind) blows. From July to September the average temperature is 36 C with high humidity.

Natural Resources:
Oil, associated and nonassociated natural gas, fish, pearls

Natural Hazards:
Periodic droughts; dust storms

Environment - Current Issues:

Desertification, resulting from the degradation of limited arable land, periods of drought, and dust storms; coastal degradation (damage to coastlines, coral reefs, and sea vegetation) resulting from oil spills and other discharges from large tankers, oil refineries, and distribution stations.

Environment - Policies And International Agreement:

BaselConvention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal Convention on Biological Diversity Convention on Wetlands of International Importance Especially as Waterfowl Habitat (Ramsar) MontrealProtocol on Substances That Deplete the Ozone Layer United Nations Convention on the Law of the Sea (LOS) United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa United Nations Framework Convention on Climate Change Convention on the prevention and punishment of the crime of genocide

Members Of The Following Associations and Affiliations:

Arab Bank for Economic Development in Africa (ABEDA) Arab Fund for Economic and Social Development (AFESD) Arab Monetary Fund (AMF) Economic and Social Commission for Western Asia (ESCWA) Food and Agriculture Organisation (FAO) Group of 77 at the United Nations (G77) Gulf Cooperation Council (GCC) International Bank for Reconstruction and Development (IBRD) International Civil Aviation Organisation (ICAO) International Criminal Court (ICC) International Criminal Police Organisation (Interpol) International Federation of Red Cross and Red Crescent Societies (IFRCS) International Finance Corporation (IFC) International Hydrographic Organisation (IHO) International Labour Organisation (ILO) International Maritime Organisation (IMO) International Monetary Fund (IMF) International Organisation for Standardisation (ISO) International Red Cross and Red Crescent Movement (ICRM) International Telecommunication Union (ITU) Islamic Development Bank (IDB) Legal Aid Society (LAS) Multilateral Investment Guarantee Agency (MIGA) NonAligned Movement (NAM) Organisation for the Prohibition of Chemical Weapons (OPCW) Organisation of Arab Petroleum Exporting Countries (OAPEC) Organisation of Islamic Conference (OIC) United Nation (UN) United Nations Conference on Trade and Development (UNCTAD) United Nations Educational, Scientific and Cultural Organisation (UNESCO) United Nations Industrial Development Organisation (UNIDO) Universal Postal Union (UPU) World Customs Organisation (WCO) World Federation of Trade Unions (WFTU) World Health Organisation (WHO) World Intellectual Property Organisation (WIPO) World Meteorological Organisation (WMO) World Trade Organisation (WTO)

Economic
Economic Overview
Updated: Sep 2009
Introduction : Real GDP growth in 2008 stood at 6.3% and, according to the Central Bank of Bahrain (CBB), nominal GDP reached $21.9bn in 2008. The EIU predicts that real growth will dip to 3% in 2009, making it one of the few economies in the GCC expected to post positive numbers this year. Bahrainis less dependent on oil and experienced a calmer rate of growth than the double-digit paces seen in some of the regions economies, factors that have helped to minimise the impact of the current downturn. The island kingdom has also dodged the problem of inflation, which was 3.1% according to the Central Informatics Organisation (CIO). This rose to 5.1% in December 2008 and is likely to drop to 3% in 2009 (IMF). While it is less dependent on oil than others in the GCC, the sector is still certainly prominent in the economy. In 2008 hydrocarbons accounted for 28% of total GDP in nominal terms (13.5% in real terms) and 85% of revenues. Oil production has settled at about 40,000 bpd, but this is set to increase. The state has awarded several tenders to international oil companies for exploration and production and is aiming to increase output to 75,000 bpd by 2013. Production is forecasted to peak at 100,000 bpd thereafter. The financial services sector is the real engine of the economy, providing around 27% of GDP. Bahrain competes with others in the region as a centre of Islamic banking and international financial institutions operate in Bahrain, both offshore and onshore, without restrictions. The global financial crisis has taken a toll on the sector, although it still remains sound. According to Kuwaitbased research and investment firm Global Financial House (GIH), the consolidated assets of banks grew at a CAGR of 24.7% from 2004-2007, at which point they reached $245.8bn. In 2008 growth nearly halted to just 2.7%. The global financial crisis thus poses some obvious risks to the Bahraini economy. Bank profits are expected to drop this year, but capitalisation and asset quality are considered sound. According to Fitch Ratings, capital adequacy ratios at major banks were in excess of the Central Banks minimum 12% in the first quarter. Bahrain is known for its comprehensive regulatory structure, which will help to shield the sector from international damage. In March Al-Salam Bank and Bahrain Saudi Bank announced plans to merge and more consolidation activity is possible in the second half of the year. On the stock market, the Bahrain All-Share Index showed a loss of 61% over 2008 to 1,084.07 points. The index showed minimal volatility in 2009 but lost 17% of value by August the worst decline in the Gulf this year. The index stood at 1515.52 on September 1st. While other markets in the region have enjoyed something of a rebound, the BSE has not mainly due to the exchanges weight toward banks and financial institutions, which have been haunted by negative sentiment. Retail, real estate and tourism also rank high and industry is a targeted government area for diversification, with a focus on aluminum and downstream hydrocarbon industries. High oil prices in 2008 led to a budgetary surplus (before rollover) of BD617.3m ($1.6bn). For the 2009-10 fiscal year, the state is expecting to post a deficit of BD1bn ($2.7bn).

Updated: Dec 2007

Introduction : Bahrain enjoyed robust economic performance in 2006. Gross Domestic Product (GDP) grew by 19.7% at current prices and 7.8% at constant prices in 2005; and this strong rate of growth continued into 2006, with the economy growing by 13.1% in nominal terms and 7.1% in real terms during 2006. Although Bahrains growth rates have historically tended to follow international oil prices, the non-oil sector, which is estimated to have had a real growth of 8.0% in 2006, has been a significant component of the overall growth in the Bahrain economy. Bahrain was the first country on the Arabian side of the Persian Gulf to discover oil in 1932. Oil wealth dramatically improved education and health care, but the country's oil reserves are relatively limited in comparison to most of its neighbours. Bahrain has therefore developed a more diversified economy than most of the Gulf States. Recognising that the country cannot depend on oil revenue alone, Bahrain has established itself as a commercial centre in the Middle East, and transferred its economy into a service economy. Today, the economic base of Bahrain includes oil and petrochemicals, manufacturing such as aluminium, dry dock for super tankers, banking, oil, financial and commercial services. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the region, and its central location has also made it a favourable transit spot for many airlines to numerous western and eastern destinations.cFor several consecutive years Bahrain ranked number one on the Human Development Index among Arab countries. It has a number of well established, non-oil dependent industries, as well as the infrastructure needed to sustain these industries. There has been an increase in private sector activity in recent years. This situation stems from the general decline in oil prices during the 1980s, which resulted in decreasing revenues. This financial downturn made an increase in free enterprise and foreign investment necessary in order to maintain the country's high standard of living and to guarantee its economic welfare. Bahrain became a member of the World Trade Organisation (WTO) in 1992 and has since overhauled many laws and regulations. Inflation Inflation in Bahrain was 3.5% in 2006 and is estimated to drop to 2.4% in 2007.

Currency:

Bahraini Dinar (BD) Total Labour Force 380,000 (2005) Employment by Sector (as % of working population)

Labour Force Split:

Industry 54% Services 43% Agriculture 1%

GDP: GDP Per Capita: Industrial Production Growth Rate:

US$ 16.1 Billion (2006) US$ 34,605

2% (2000 Estimate) per annum

Adult (15+ unemployment rate) Total 4% (2006)

Unemployment Rate:

Males 4% (2001) Females 10% (2001)

Exports -US$ 11.56 Billion (2006 Estimates) Major Exports 2006 % of Total Petroleum 79.7 Aluminium 13

Imports, Exports and Commodities:

Imports -US$ 8.51 Billion (2006 Estimates) Major Imports 2006 % of Total Oil 54.8

Major International flights from Bahrain International Airport: Abu Dhabi, Alexandria, Amman, Amsterdam, Athens, Bangalore, Bangkok, Beirut, Cairo, Colombo, Damascus, Dammam, Delhi, Dhaka, Doha, Dubai, Frankfurt, Hong Kong, Jeddah, Karachi, Kathmandu, Kuala Lumpur, London, Manila, Mumbai, Muscat, Paris, Riyadh, Sharjah, Tunis Tourism Cultural / heritage tourism, adventure sports

Leisure and tourism:

Total Number of Hotels 117 (2006) Total Number of Hotel Rooms 5,754 (2006) Total Number of Hotel Suites 1,106 (2006) Annual Number of Tourists 5.4 Million (2006)

Government Debt:

24% of GDP (2006)

Demography
Population:
Total - 1,128,000

Population - Capital City:

Manama - 176,553

Population - Second Largest City:

Al'Muharraq - 97,458 (2006 Estimate)

Population - Third Largest City:

Al'Rifa - 86,100 (2006 Estimate)

Age Structure:
Age 0-14 - 29.2% of the population Age 15-64 - 67.7% of the population Age 65+ - 3.1% of the population

Sex ratio:
134 (Number of Males per 100 Females)

Population Growth Rate:

2.5% per annum

Life Expectancy:
Males - 73 Females - 76

Health Care System:

Bahrain enjoys an advanced level of health as manifested by its health status indicators. Healthforall objectives were achieved early in the 1990s. Comprehensive health services are provided to the citizens in Bahrain free of charge. The Ministry of Health (MOH) offers most services through the primary health care which is the cornerstone of the health system. The

accessibility and coverage are almost 100%. Bahrains national health strategy for the period 20022010 is the action framework for long term development of the health system. Good collaboration have been achieved with other ministries, such as the Ministry of Interior to reduce road traffic accidents and collaboration with the Ministry of Education for the school health programme including eye screening and oral health. In addition, collaboration exists with several civil society organisations and professional associations. The Government is funding the provision of comprehensive health services for all Bahrainis and is the major source of health service funding. NonBahrainis are also heavily subsidised by the Government. The expenditure on health however is relatively low compared with other Gulf Cooperation Council (GCC) countries and countries with similar income levels. A health insurance scheme with extensive deliberation by all stakeholders was introduced in 2006. Noncommunicable diseases such as cardiovascular diseases (CVD), diabetes, cancer and injuries, are rising dramatically in Bahrain, and represent the leading causes of death in the country. Tobacco smoking among both men and women is a concern. Obesity is an emerging major problem, with prevalence of obesity as measured by Body Mass Index of 21.2% in men and 48.6% in women. Communicable diseases are largely under control in Bahrain. The country has a very efficient immunisation programme. Infectious diseases of childhood have been almost eradicated in Bahrain. However; viral infections are on the slight rise. These include: gonococcal infection, syphilis; and viral hepatitis. Available data indicate a low prevalence of HIV, but accurate data are not available. Performance of the health system has been impressive with very low under 5 and maternal mortalities. Bahrain has achieved success in human resources development, where the College of Health Sciences has graduated nurses and allied health professionals and has helped in the training of personnel from other countries. Also the Medical Equipment Directorate is considered as a WHO regional training centre for medical equipment repair and maintenance.

Literacy Rates:
Adult Literacy Rate (Age 15 and over) (%) Total - 87% (2001) Male - 89% (2001) Female - 84% (2001)

Language:
Arabic is the official language.

Other Languages:
English

Ethnicity and Split:

Bahraini - 63% Asian - 19% Other Arab - 10% Iranian - 8%

Religion:
(Percentage of total population) Muslim (Shia and Sunni) - 81.2% Christian - 9% Others - 9.8%

Political System:
Bahrain is a constitutional monarchy. The King, H.H. Hamed Bin Isa Al Khalifa, succeeded his father, the then Amir, H.H. Shaikh Isa Bin Salman Al Khalifa, on 6 March 1999. Control over policymaking remains in the hands of the King and the ruling Al Khalifa family, although constraints on press freedom and political activity have been loosened since King Hamad's accession. The Executive Branch is composed of the Head of State, the Head of Government, and the Cabinet. King Hamad bin Isa Al Khalifa is the Chief Executive and Head of State. The Cabinet is appointed by the King and headed by the Prime Minister. The legislative branch of state consists of a bicameral Parliament, half of which is appointed by the King, the other half of which is chosen by the people through elections. While political parties are prohibited, social organisations focused on politics are permitted. The bicameral National Assembly (parliament) came into being in 2002, but the opposition objected to the appointed house being given equal voting rights to the elected house, and boycotted the first election. Parliament can propose (but not draft) legislation and has the right to amend and reject the national budget. King and Head of State Sheikh Hamad bin Isa AlKhalifa Prime Minister Sheikh Khalifa bin Salman alKhalifah Foreign minister Sheikh Khaled bin Ahmad alKhalifah

Country Media List:

Print Media

Akhbar alKhaleej Private, Arabic language daily AlAyam Private, Arabic language daily BahrainTribune Private, Englishlanguage daily Gulf Daily News Private, Englishlanguage daily

Broadcast Media

Bahrain Radio and Television Corporation (BRTC) Staterun broadcaster; operates five terrestrial TV networks

Lifestyles Assessments:
Registered Private Motor Vehicles in use (Total) - 241,813 (2005) Number of Personal Computers - 121,000 (2004) Credit cards in circulation - 158,465 (2006)

Internet Connectivity:
Internet Users - 155,000 (2007) Internet Subscribers - 67,373 (March 2007) Internet Penetration - 21.0 % Broadband Subscribers - 38, 628 (2006) Broadband Penetration - 5.2%

Consumer Trends:
Total Number of Vehicles Imported - 27,830 (2006)

Higher Education:
Government Universities

Universityof Bahrain Arabian Gulf University

Private Universities

Birla Institute of Technology International Centre Bahrain Institute for Banking and Finance Baisan Institute of Hospitality Management AhliaUniversity Arab Open University Arabian Gulf University

Vocational Institutes Government

Collegeof HealthSciences GulfCollegefor Hospitality & Tourism Bahrain Training Institute

International Relations
Introduction
Introduction : Bahrain has pursued a policy of close consultation with neighbouring states. Bahrain became a member of the United Nations and the Arab League in 1971. In 1981 it joined its five neighbours - Saudi Arabia, Oman, Kuwait, the U.A.E. and Qatar - to form the strategic Gulf Cooperation Council (GCC). Bahrain has complied with GCC efforts to coordinate economic development and defence and security planning. Bahrain concurred with the GCC decision to drop secondary and tertiary boycotts against Israel. Bahrain also responded positively to Kuwaits request to deploy the GCC collective defence force, "Peninsula Shield," during the build up and execution of Operation Iraqi Freedom (OIF) in 2003. Bahrain hosted the second Forum for the Future meeting in November 2005 to further advance the partnership between the G8 and the broader Middle East and North Africa, and hosts the annual IISS Gulf Dialogue (the Manama Dialogue). This is organised by the London-based International Institute for Strategic Studies (IISS), one of the worlds leading international affairs research institutes. In addition to maintaining strong relations with its largest financial backers, Saudi Arabia, Kuwait and the U.A.E., Bahrain has worked to improve its relations with Qatar but its relations with Iran are not so warm. Bahrain-Iran relations have been strained since the discovery in 1981 of an Iran-sponsored coup plot in Bahrain. Bahraini suspicions of the Iranian role in local unrest in the mid-1990s remain.

Internal Stability:
Bahrain does not face significant internal stability issues and is comparatively stable country in the GCC region. In the past, however there have been incidents threatening Bahrains internal stability. The government foiled an attempted coup in 1981. In the mid-1990s, Bahrain suffered a spate of anti-government disturbances stemming principally from the disaffection of the Shia majority. There have been few major disturbances since then, but recent political reforms have widened the opportunity for all sectors to participate in political life. There are also concerns about the countrys Shia populations ability to threaten internal stability.

Insurgent Groups:
Though there have been terrorist threats in the past; Bahrain is relatively less inflicted by terrorism compared to other Middle East countries. The influence of the West in Bahrain has been a source of annoyance for Islamic fundamentalists. The government has enacted strong anti-terror laws to combat terrorism in Bahrain.

Major Security Threats:

Bahrain does not face any immediate threat to national security. The countrys relations with Iran remain less than cordial because of Bahrains suspicion of Tehrans hand in 1981 attempted coup. Bahrain s territorial dispute with Qatar also came to an end after an International Court of Justice (ICJ) ruling facilitated a peaceful settlement of the matter.

Transnational Issues:
Bahrain had long-standing territorial dispute with Qatar in the past. On March 16, 2001, the International Court of Justice (ICJ) announced its judgment on the maritime delimitation and territorial dispute between Bahrain and Qatar. The binding judgment awarded sovereignty over the Hawar Islands and Qitat Jaradah to Bahrain and sovereignty over Zubarah (part of the Qatar Peninsula), Janan Island and Fasht ad Dibal to Qatar. The peaceful settlement of this dispute has allowed for renewed cooperation, including plans to construct a causeway between the two countries.

Legal
Property Law:
Foreign Ownership Rights (March 2010) In the Kingdom of Bahrain generally foreign nationals and companies may only own property in new developments. In summary 1. 2. Bahraini and other GCC nationals are permitted to own property in all areas of the Kingdom. Non-GCC nationals may own property in specified newly developed areas.

Property Law: Land Ownership Bahraini and GCC nationals are permitted to own land in all areas of Bahrain. Non-nationals and foreign companies are permitted to own property and real estate in new developed areas only, including:

The Greater Manama area, such as Ahmad Al-Fateh District, Hoora area, Bu Ghazal area, Northern District of Manama including Diplomatic Area (areas of high rise residential and commercial structure with elevation of 10 storeys or above) Seef District (elevations of 10, 5 and 3 storeys) New tourism developments such as Durrat Al Bahrain, Amwaj Islands and Al-Areen Desert Resort Areas which fall within the sphere of the Bahrain Financial Harbour (BFH), the Bandar Al Seef Area and Reef Island.

Legal system:
The legal system of Bahrain is a mixed system based on British Common Law models and Sunni and Shia Sharia traditions. The Bahraini Constitution, amended in 2002 states that the judiciary is to be an independent body whose functioning and organisation are to be regulated by law. The Constitution also declares that Sharia is to be a principal source of law. Judicial Structure and Court System The judiciary is organised into two branches: the Civil Law Courts and the Sharia Law Courts. The Civil Law Courts are authorised to settle all commercial, civil, and criminal cases, and all cases involving disputes related to the personal status of non-Muslims. These courts are structured in a three-tier system, starting with the Courts of Minor Causes, also called the Lower Courts and the Court of Execution, which have jurisdiction over civil and commercial matters. The Middle Courts have jurisdiction over criminal matters. At the second level is High Court of Appeal, or the Senior Civil Court. Cases at these levels are presided over by a minimum of two judges. The Sharia Law Courts have jurisdiction over all issues related to the personal status of Muslims, both Bahraini and non-Bahraini. The Judiciary Act stipulates that they hear all matters relating to inheritance, gifts, wills, and charitable donations (Waqf). There are two levels: the Senior Sharia Court and the High Sharia Court of Appeal. At each level is a Sunni Sharia Court with jurisdiction over all personal status cases brought by Sunni Muslims, and a Jaafari Sharia Court with jurisdiction over cases brought by Shia Muslims. The High Sharia Court of Appeal must be composed of a minimum of two judges. In the event of a disagreement, the Ministry of Justice shall provide a third judge and the decision will be based on a majority vote. Supreme Court Law No. 8 of 1989 established the Supreme Court of Appeal or Court of Cassation. This institution serves as the final court of appeal for all civil, commercial, and criminal matters. In addition, cases dealing with the personal status of non-Muslims may be appealed to this body. The Court of Cassation is composed of a chairman and three other judges who are appointed by decree. As a practical matter, the civil courts do not invoke Sharia law except when the issue is concerned with inheritance.

Tax Regimes:
Bahrain has an extremely low-tax environment, both for foreigners and for nationals. There is no corporation tax, and there has traditionally been no income tax, although from June 2007 employees will start paying 1% of their salaries into a national unemployment insurance scheme, a figure that employers will also need to match. There is also a 10% municipal tax on rents, and a 3% levy on all hotel bills.

Infrastructure
Road:
Total 3,164 km Paved causeway links Bahrain and Saudi Arabia 23 km

Rail / Train Networks:

None

Air and Sea Ports:

International Airports

Bahrain International Airport

Seaports

Manama Mina' Salman Sitrah Khalifa bin Salman Port (New Project)

Waterways:
None

Utilities:
Improved Drinking Water Coverage1 (%) Urban 100 (2002) Improved Drinking Water Coverage (%) Rural NA Improved Sanitation Coverage2(%) Urban 100 (2002) Improved Sanitation Coverage (%) Rural NA
1

UN Definition Improved drinking water technologies are those more likely to provide safe drinking water than those characterised as unimproved. Improved drinking water sources comprise: household connections, public standpipes, boreholes, protected dug wells, protected springs and rainwater collection. Unimproved drinking water sources include: unprotected wells, unprotected springs, rivers or ponds, vendorprovided water, bottled water and tanker truck water. Bottled water is not considered improved due to limitations in the potential quantity, not quality, of the water.
2

UN Definition Improved sanitation facilities are those more likely to ensure privacy and hygienic use. Improved sanitation facilities comprise: connections to a public sewer, connections to a septic system, pourflush latrines, simple pit latrines and ventilated improved pit latrines. Public or shared latrines, open pit latrines and bucket latrines are considered to be unimproved sanitation facilities.

Telecommunications:
Fixed Line Phones 198,046 (March 2007) Cell Phones Total 940,727 (March 2007) Operators Fixed Line

Bahrain Telecommunications Company (BATELCO) Lightspeed Communications Nuetel Communications 2 Connect Kalaam Telecom (Bahrain) Mena Telecom Etisalcom Bahrain Company Elephant Talk Bahrain

Operator Mobile

Bahrain Telecommunications Company (BATELCO) MTCVodafone