Foreign direct investment in Bahrain

Foreign direct investment in Bahrain

Foreign direct investment is one of the most important sources of investment at the macroeconomic level, and it is one of the most prominent elements that contribute to economic development in any country. It is considered one of the most important components supporting the economy, as it represents a real addition to the country’s gross product, unlike indirect foreign investment, which seeks profit only and does not Adds a real product to the state.

Foreign direct investment is known as a type of international investment, where the direct investor, who is a resident entity in a particular economy, aims to achieve a permanent interest in an institution resident in another economy, and this interest includes a long-term relationship between the direct investor and the direct investment institution. It is also noted that the direct investor has a high degree of influence in the management of the enterprise, which promotes close interaction between the two parties. Foreign direct investment is one of the main means that contribute to enhancing development processes, due to the productive potential it provides, the job opportunities it creates, as well as the financial flows that the local level of savings may not be able to provide. Foreign direct investment represents a real addition to the country's economy, and for this reason all countries seek to attract this type of investment in order to achieve effective economic growth.

Bahrain is the first country in the Gulf Cooperation Council to sign a free trade agreement with the United States of America, which constitutes a major impetus for enhancing investment in the industrial and logistics sectors. The industrial sector contributes an estimated percentage of approximately 13% of GDP to Bahrain’s economy, which reflects the ongoing trend towards economic diversification and makes investment in this sector attractive, especially with the free trade agreements that Bahrain has concluded with 22 other countries around the world.

The Kingdom of Bahrain has taken many measures and structural reforms to create a suitable business environment to attract foreign direct investment, and to reduce sterile procedures that may hinder this type of investment. As a result of these measures and reforms, Bahrain was able to attract foreign direct investment amounting to approximately US$951 million in 2022, with US$290 million directed towards the industrial and logistics sector. These investments are expected to play a role in creating more than 1,200 job opportunities over the next three years. The volume of direct foreign investments attracted by the Kingdom amounted to approximately 951 million US dollars, and these investments were diversified into 66 companies in various fields such as financial services, industry, logistics services, tourism, and communications information technology. These comprehensive investments are expected to contribute to the creation of approximately 4,900 job opportunities over the next three years.

The following table shows the foreign direct investment index as net inflows as a percentage of GDP during the period (2016-2021):

The ratio	the year
80.%	2016
1.50%	2017
30.%	2018
3.90%	2019
2.90%	2020