Why Bahrain remains a key player in GCC’s financial sector

The kingdom has built a financial services sector comprising more than 360 local, regional and global institutions

by Dalal Buhejji

March 18, 2023

The financial services sector is a primary driver of Bahrain’s economy.

Today, it stands as the largest non-oil contributor to our economy, making up around 17 per cent of the GDP.

Over the years, the kingdom has built a financial services sector comprising of more than 360 local, regional and global institutions. The sector is also a great employer of Bahrainis. The total workforce is around 13,600 – of which around 70 per cent are Bahraini, and most are high-value jobs.

Competitive operating costs in Bahrain

Part of the reason why Bahrain was able to build a foundation for a vibrant financial ecosystem is its competitive operating costs, which have always made it an attractive investment destination for financial companies and has contributed to creating sustainable economic development in the kingdom.

In KPMG’s Cost of Doing Business report, Bahrain once again topped the GCC region as the most cost-competitive region for financial services institutions. The report’s findings show that, compared to the GCC region, Bahrain enjoys a cost advantage of up to 27 per cent in terms of annual operating costs in the financial services sector.

It is also the most competitive GCC country in terms of the annual cost of living, 23 per cent below the regional average.

Business-friendly environment

Cost-competitiveness is not something new for the kingdom. For years, Bahrain has been recognised for its business-friendly environment, where companies, particularly financial institutions, have been able to grow their operations and flourish.

The findings in the report goes back to multiple points. Companies in the kingdom enjoy various cost advantages, including zero corporate tax and 100 per cent foreign ownership for most sectors.

Bahrain also has no free zone restrictions, which makes it easier for companies to operate out of anywhere and to easily lease office spaces, which brings the costs down. Another key advantage that the companies benefit from is the kingdom’s regulations. We have a track record in adopting new technologies and innovation.

Bahrain was the first in the GCC to fully liberalise the telecoms market, and the first in the MENA to adopt the ‘cloud-first policy.’

Bahrain has also built the region’s first onshore fintech regulatory sandbox, and established the region’s first and still largest fintech hub, which provides a supportive space for new fintechs to innovate. The kingdom has been a pioneer in creating forward-looking regulations related to crypto and digital assets.

Bahrain’s central bank is a highly regarded regulator which has always strived to be competitive by embracing innovation, and that is why it has played a vital role in supporting financial technologies, from crypto to open banking, through the introduction of pioneering regulation.

Pool of talent

Complementing the kingdom’s established and trusted business environment to support the financial services sector, is a young, enthusiastic, well-educated and talented workforce – with skills ready-made for the jobs of the future.

Adding to that, the cost of employment is much more competitive than neighbouring countries, which reflects the quality in what we have to offer. When it comes to talent, international financial institutions
can benefit from the support of governmental bodies such as Tamkeen, the kingdom’s labour fund, which can support in upskilling Bahrainis employed at their organisation.

Our digital-friendly regulations need to be continuously developed and refined in order for us to keep attracting fast-growing companies in fintech. We also need to keep investing in our talent, and ensure they’re equipped with the right skills to future-proof their careers.

That way, Bahrain is always ready to embrace the next wave of innovation – not only in financial services but across all sectors.

Learn about the the importance of creative industries sector and Tamkeen’s support to this sector.#TamkeenStrategy #TamkeenSupport #CreativeIndustries pic.twitter.com/2MtF2D4VDb

— Tamkeen (@TamkeenBahrain) February 19, 2023

Economic recovery plan

Today, government reforms and the national Economic Recovery Plan, which was launched in October 2021, are creating an environment in which businesses and talent will thrive, in a truly diversified economy.

Through the Economic Recovery Plan, Bahrain aims to grow the financial services sector’s contribution to GDP to 20 per cent by 2026, and then increasing the contribution to 25 per cent.

The financial services sector development strategy focuses on five main priorities: creating job opportunities, developing capital markets, strengthening legislation and regulatory policies, growing the insurance sector, and developing financial services and fintech.

The plan also aims to provide 3,000 training opportunities annually in key areas of the financial sector by the end of 2024, to provide the workforce with skills that can future-proof their careers.

The MENA region’s economic growth in the coming years represents a great opportunity for international investors, and Bahrain is an attractive great gateway for them to enter this region.