Investing in the GCC: The Case of Bahrain

BY

Table of Contents

CHAPTER1: INTRODUCTION3

Problem Statement4

Aims & Objectives4

CHAPTER 2: BACKGROUND5

Case of Bahrain6

CHAPTER 3: METHODOLOGY11

Research Method11

Research Design11

Data Analysis11

Ethical Concerns12

References14

Appendix16

Time Scale16

CHAPTER1: INTRODUCTION

The Gulf Cooperation Council (GCC) countries of Saudi Arabia, Oman, Kuwait, Qatar, Bahrain and the United Arab Emirates (UAE) have attracted varying but in general rising levels of foreign direct investment (FDI) by offering various incentives to companies (Sadik, & Bolbol, 2001). This has provided an extra economic driver and created jobs, but growth has stalled in the wake of the global recession since 2008 and the outlook is mixed.

Most GCC countries are heavily reliant on oil revenues to drive their economies. In Saudi Arabia, the region's biggest economy, energy-producing materials made up 53.6% of GDP in 2008. Bahrain and Oman are slightly more diversified, but most states have small populations (1.1 million in Bahrain and 1.5 million in Qatar on 1st January 2009);

In attempts to diversify their economies, countries have been trying to attract foreign investment in a number of sectors such as industry, tourism and media. This is especially true for countries such as Bahrain, with declining oil production and a small local population, who with Saudi Arabia had the highest FDI intensity in 2008, at 8.2% of GDP (Garmhausen, 2008);

FDI into the region rose rapidly in the years up to 2007, although the global recession caused growth to flatten in 2008 in the UAE, Kuwait and Oman. Qatar, Bahrain and Saudi Arabia enjoyed increases, with the latter outstripping the rest with a 57.2% rise in 2007-2008 thanks to a larger economy and natural resources (Business Environment: Bahrain, 2011).

FDI inflows to GCC countries: 2008

Problem Statement

The main problem at hand is to conduct an exploratory study on the challenges and opportunities presented to foreign investors in the GCC specifically looking at the case of Bahrain. The entire study will be based on the analysis of the prevalence of the challenges and opportunities the country presents to foreign investorsa and its effects and challenges posed by it to the administration of the country in particular and at the global level in general.

Aims & Objectives

The aim of this study is to find out the challenges and opportunities presented to a foreign investor in the GCC. However, the research will focus on the economic scenario of Bahrain and find out the challenges and opportunities that a foreign investor faces in Bahrain.

CHAPTER 2: BACKGROUND

GCC countries have attempted to offer an attractive business environment for foreign investors, most obviously through a low or zero-tax policy in the UAE, Qatar and Bahrain. Some have offered exemptions from restrictions on foreign ownership of companies, either by creating “free zones” or by exempting certain sectors from requiring a local partner ('Impact of institutional portfolio investment' 2007). The GCC also offers low labour costs thanks to its proximity to cheap labour forces in India and Pakistan;

Many have made efforts to reduce bureaucracy and red tape to improve the ease of doing business, with Bahrain and Saudi Arabia in the top 20 out of ...