Economic Report: Bahrain's Financial Sector and Investment Barriers

This report provides a comprehensive analysis of the Bahrain economy, highlighting its open market structure and the significance of its financial sector, particularly in banking and tourism. It examines the country's key exports, such as petroleum, and their contribution to the GDP. The report delves into various business opportunities within Bahrain, including the fintech and manufacturing sectors, as well as the emerging logistics and real estate markets. It also addresses significant challenges to investment, such as limited credit information, inadequate investor protection, and issues related to the recovery of insolvency. The report concludes by emphasizing the need for regulatory reforms to protect investor rights and promote infrastructure development, thereby facilitating sustainable economic growth in Bahrain.

Running Head: BAHRAIN ECONOMY
BAHRAIN ECONOMY
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Bahrain possesses an open economy and its currency is the second highest valued
currency in the universe. The country has been heavily investing in banking and tourism. It's
capital city is Manama and it is home to several financial industries. In 2008, Bahrain was named
one of the fastest growing financial centers by the Global Financial Centers. The financial sector
has been boosted by the regional boom that is driven by the increasing demand for oil. Bahrain’s
chief product for export is petroleum which accounts for approximately 60% of the export
receipts and contributes about 11% of the overall GDP.
Recent research shows that Bahrain has the ablest economy in both the Middle East area.
Several, sectors offer business opportunities in Bahrain. The state has been a leading regional
hub for more than four decades and has a fin-tech sector that is growing at a very fast rate. The
manufacturing sector has also been making a great contribution to economic growth (Najjar,
2015). The classy downstream aluminum segment has been set to gain profits and is a major
expansion that has made Alba one of the largest mono site smelter FMCG meant to meet
growing demand across GCC. There is also an emerging logistic center which is meant to
improve infrastructure including the expansion of the International Airport of Bahrain. There is
also an emergence of entrepreneurs everywhere coming to Bahrain so as to create businesses
(Ismail & Karem, 2016). It is therefore important to note the business opportunities that the
entrepreneurs come up with.
The real estate market has been one of the fastest growing sectors in the GCC area over
the last ten years. In the recent past; it has even been considered more of a necessity than a frill
since the universe is transforming to the post-oil era putting into consideration the contribution of
oil in the economy of Middle East countries (Hussein, 2017). The latter has been caused by the

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strategic location of the kingdom of Bahrain near the Kingdom of Saudi Arabia .the kingdom of
Bahrain however faces many obstacles in terms of investment that in most cases lead to the
deceleration of the country’s potential growth in the near future.
There exist several barriers to investment in Bahrain and these obstacles can easily lead
to the deceleration in the potential growth in the future. The following are some of the barriers to
economic growth.
Limited Credit Information
Bahrain was classified the 105th position in the global ranking as far as the rights of
borrowers and lenders were concerned. The latter was done after measuring the degree of
facilitating the lending and the convenience of the credit info. Due to the imperfectness of credit
info, for the creditors and also the meager coverage for the credit bureau of the listed adults, the
economic growth has been affected negatively (Samad, 2016). There are also no strong
regulatory rules for the protection of the rights of both the lenders and borrowers and this is a
major factor that contributed to the low rank of the Kingdom of Bahrain.
Invasion of Investors’ Protection
Recent research ranked Bahrain in the 108th position as far as the implementation of
legal procedures is concerned. The legal procedures are supposed to aim at protecting the small
shareholders from the abuse of corporate assets by the directors of the companies. The kingdom
of Bahrain lacks proper legal procedures for the protection of both local and foreign investors.
There is also very poor enforcement of contracts and bureaucracy. The latter is evident when the
performance of the judicial commission is examined.

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Recovery of insolvency
The consequence of the units’ liquidation is highly affected by the above-discussed challenges.
The insolvency is shown by computing time and the cost of liquidation processes and the charges
of repossession. The recovery rate of Bahrain was measured to 42% which is slightly
sophisticated than the typical rate for the GCC republics.
Conclusion
As discussed above, the Kingdom of Bahrain is one of the countries whose economies
have the highest potential of output. There exist numerous opportunities for investment in the
country and the investors need to be vigilant to take up the opportunities. However, there are also
challenges that are making it not possible for investors to invest in Bahrain. The country needs to
come up with policies that will ensure that the rights of investors are well taken care of.to
overcome these challenges, the government of Bahrain needs to come up with a body of
regulations and also make laws that will ensure that the rights of investors are clearly stated and
followed. There should be also a stronger campaign for the critical infrastructure and
development plans development projects.

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References
Hussein, K. (2017). Banking efficiency in Bahrain: Islamic vs conventional banks. Manama: The
Islamic Research and Teaching Institute.
Ismail , K., & Karem, M. A. (2016). Intellectual capital and financial performance of banks in
Bahrain. Journal of Business Management and Accounting, 3(2), 63-77.
Najjar, N. (2015). The impact of corporate governance on the insurance firm’s performance in
Bahrain. International Journal of Learning and Development, 2(2), 1-17.
Samad, A. (2016). Performance of Interest-free Islamic banks vis-à-vis Interest-based
Conventional Banks of Bahrain. International Journal of Economics, Management and
Accounting, 4(3), 23-35.