This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 09 MANAMA 000103 
 
SIPDIS 
 
DEPT FOR NEA/ARP AND EB/IFD/OIA 
DEPT PASS USTR JBUNTIN 
USDOC FOR 4520/ITA/MAC/ONE/CLOUSTAUNAU AND THOFFMAN 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD BA
SUBJECT:  BAHRAIN INVESTMENT CLIMATE STATEMENT 2005 
 
REF: 04 STATE 250356 
 
¶1.  The following is post's Investment Climate Statement 
submission for 2005. 
 
¶2.  Begin text: 
 
INVESTMENT CLIMATE 
 
OPENNESS TO FOREIGN INVESTMENT 
 
The government of Bahrain has a generally liberal approach 
to foreign investment and is eager to improve Bahrain's 
attractiveness to international investors and businesses. 
Top government officials make frequent public statements 
citing growth of foreign investment as one of the 
government's main priorities.  According to the United 
Nation Conference on Trade and Development's (UNCTAD) 2004 
World Investment Report, Bahrain rates number 29 in 
attracting foreign direct investment (FDI), with FDI 
averaging $1.7 billion annually over the past three years. 
The government has focused its efforts on the entry of new 
private firms, particularly in the information and 
communications technology, education and training services, 
tourism, financial services, business services, healthcare 
services and downstream industries. Bahrain's Crown Prince 
is also an outspoken proponent of privatization in Bahrain. 
The Crown Prince took over the chairmanship of the Economic 
Development Board (EDB), a "one-stop-shop" for potential 
investors, and in 2004 was entrusted with the King's labor, 
economic, and training reform visions. 
On September 14 2004, the U.S. and Bahrain signed a 
bilateral free trade agreement (FTA), a comprehensive 
agreement that will remove trade barriers and expand 
commercial opportunities for the peoples of both countries. 
Ratification is expected early 2005.  100 percent of 
bilateral trade in consumer and industrial products will 
become duty-free immediately upon entry into force of the 
Agreement. In addition, Bahrain and the United States will 
provide duty free access on virtually all products in their 
tariff schedules and will phase out tariffs on the remaining 
handful of products within ten years.  Under the Agreement, 
which covers all agricultural products, Bahrain will provide 
immediate duty-free access for U.S. agricultural exports in 
98 percent of agricultural tariff lines.  Bahrain will phase 
out tariffs on the remaining products within ten years. 
Additionally, Bahrain will accord substantial market access 
across its entire services regime, providing among the 
highest degree of market access of any U.S. free trade 
agreement negotiated to date.  Key services sectors covered 
by the Agreement include audiovisual, express delivery, 
telecommunications, computer and related services, 
distribution, healthcare, services incidental to mining, 
construction, architecture and engineering. 
Bahrain has earned a reputation as the Gulf region's 
preeminent financial center.  The Bahrain Monetary Agency 
(BMA) meets the highest international standards of financial 
regulation, and the Government of Bahrain has been a leader 
in combating terrorist financing and money laundering. 
 
The Bahrain Stock Exchange (BSE) allows GCC firms and GCC 
persons to own up to 100 percent of listed companies.  Non- 
GCC firms/persons may own up to 49 percent of listed 
companies.   The Minister of Commerce chairs the BSE Board 
of Directors, but it is operated as an independent corporate 
entity.  The Minister announced that within three years non 
GCC-nationals would be offered up to 100 percent ownership. 
Under the terms of the Bilateral Investment Treaty (BIT), 
U.S. investors gained MFN (or GCC) treatment beginning 
January 1, 2005. 
 
In March 2004, as part of an effort to stimulate the 
insurance industry and reinforce Bahrain's position as a 
major insurance center in the Middle East, the BMA lifted 
the requirement that foreign insurance brokers and loss 
adjusters have a local partner to operate.  These firms, 
which were previously required to have at least 51 percent 
Bahraini ownership, are now permitted to operate with 100 
percent foreign ownership.  The BMA is holding consultations 
on further reform in areas such as captive insurance, 
solvency, business conduct, risk management and financial 
crime, enforcement, BMA reporting and public disclosure, 
intermediaries, and Islamic insurance.  Taxation and import 
laws apply equally to Bahraini and foreign-owned companies, 
and foreign investors must comply with the same requirements 
and legislation, as do local firms. 
In anticipation of the Gulf Cooperation Council Customs 
Union, Bahrain reduced customs tariffs to five percent in 
January 2002 for imported goods, except alcohol (125 
percent) and tobacco (100 percent), and exempted a list of 
417 food and medical items from customs duties entirely. 
Bahrain was required to implement its GCC customs union 
requirements in 2005, but in fact implemented them in 2003. 
Upon ratification of the U.S.-Bahrain FTA, 98 percent of 
U.S. exports to Bahrain will enter duty free. 
In an economy largely dominated by parastatals (outside of 
the financial services sector), the Government of Bahrain 
seeks to foster a greater private sector role in economic 
growth. Following the creation of a Supreme Privatization 
Council in the spring of 2001, the King of Bahrain, Shaikh 
Hamad bin Isa Al-Khalifa, issued a decree on October 2002 
laying out guidelines for privatizing tourism, 
telecommunications, transport, electricity and water, ports 
and airport services, oil and gas and postal service 
sectors. 
The telecommunications sector was the first key sector to be 
liberalized in Bahrain following the government's announced 
interest in opening traditionally government-controlled 
industries.  The Telecommunications Regulatory Authority 
(TRA), established in late 2002, awarded a mobile 
telecommunications services license to MTC Vodafone, thus 
ending the monopoly of Bahrain's telecom services provider, 
BATELCO.  The license was awarded under the 
Telecommunications Law, which took effect January 2003. 
Telecommunications liberalization also extended to paging 
services, very small aperture terminal (VSAT), public access 
mobile radio services, international telecommunications 
facilities, international telecommunications services, 
national fixed services, internet service provider (ISP) and 
value-added services license following the full 
liberalization of the sector on July 1, 2004.  As of 
December 2004, the TRA announced the provision of three 
International Telecommunications Facility licenses (IFLs), 
five International Telecommunications Services Licenses 
(ISLs), five VSAT licenses, fifteen value-added Services 
(VAS) "Class" licenses and eight Internet Service Provider 
(ISP) licenses. 
 
The public transportation service was also privatized in 
¶2003. CARS, a Bahraini-UAE joint venture, started operating 
in May 2003 with 41 new, air-conditioned, 52-seat buses. The 
CARS company completed its plan to acquire 20 new buses by 
the end of 2003. Its total investment in the public 
transportation privatization project is approximately $10 
million. 
 
The Kingdom's first independent power plant project (IPP) 
was also successfully tendered and awarded in 2004 to 
Bahraini-based Al Ezzel Independent Power Producer (IPP), 
which is equally owned by a Belgian-Gulf consortium of 
Tractebel EGI and Gulf Investment Corporation. 
 
Four international operators have also been short-listed to 
manage Mina Salman and the new Hidd port. 
 
The Government, under the privatization law, has made a 
commitment to gradually dispose of its interests and stakes 
in certain companies. But the National Assembly's lower 
house members (Council of Representatives) have criticized 
the Government's disinvestment of the remaining state 
holdings in the Bahrain Telecommunication Company (BATELCO). 
 
Bahrain requires that pharmaceutical products be imported 
directly from a manufacturer with a research department and 
that the products be licensed in at least two other GCC 
countries, one of which must be Saudi Arabia.  Drugs and 
medicines may be imported only by a drug store or pharmacy 
licensed by the Ministry of Commerce after approval by the 
Ministry of Health.  Bahrain prohibits the importation of 
weapons (except under special license), pornography, wild 
animals, radio-controlled model airplanes, foodstuffs 
containing cyclamates, and children's toys containing methyl 
chloride (and other articles declared harmful by the 
Ministry of Health).   Bahrain is also taking steps to ban 
the import of 127 chemicals. 
 
Bahrain has phased out most subsidies for export industries, 
but permits duty-free importation of raw materials for 
export products and of equipment and machinery for newly 
established export industries.   All industries in Bahrain, 
including foreign-owned firms, benefit from government- 
subsidized utilities. 
 
Periodically, foreign firms experience difficulty obtaining 
required work permits and residence visas for expatriate 
employees due to the Bahraini government's efforts to 
promote greater numbers of Bahraini citizens in the 
workforce. However, this does not appear to be a matter of 
high-level policy, and often can be resolved on a case-by- 
case basis.  Where problems occur, U.S. businesses are 
encouraged to apply to the highest levels of the concerned 
ministries and to consult the U.S. Embassy. 
 
Bahrain offers several advantages to U.S. investors, 
including a Bilateral Investment Treaty with the United 
States (in force as of May 2001) and a bilateral Free Trade 
Agreement (FTA) signed in September 2004. 
 
The government actively seeks Bahraini and foreign private 
investments in large infrastructure projects.  Previously, 
most such activity (other than hotels) was funded by 
development agencies from other Gulf countries (particularly 
Kuwait, UAE, and Saudi Arabia).  Foreign-owned companies are 
eligible for partial financing from the state-owned Bahraini 
Development Bank (BDB), if they meet certain criteria such 
as providing training and employment to a significant number 
of Bahrainis. 
 
CONVERSION AND TRANSFER POLICIES 
 
Bahrain has no restrictions on the repatriation of profits 
or capital and no exchange controls.  Bahrain's currency, 
the Bahraini Dinar (BD), is fully and freely convertible at 
the fixed rate of USD 1.00 = BD 0.377 (1 BD = $2.659). There 
is no black market or parallel exchange rate.  Foreign 
exchange is readily available and a devaluation of the 
Bahraini Dinar over the next year is highly unlikely.  There 
are no restrictions on converting or transferring funds, 
whether or not it is associated with an investment. 
 
EXPROPRIATION AND COMPENSATION 
 
There have been no expropriations in recent years and no 
cases in contention. The U.S.-Bahrain Bilateral Investment 
Treaty (BIT) protects U.S. investments by banning all 
expropriations (including "creeping" and "measures 
tantamount to") except those for a public purpose. In such a 
case, it must be carried out in a non-discriminatory manner, 
with due process, and prompt, adequate, effective 
compensation. 
 
DISPUTE SETTLEMENT 
 
Bahrain has a long-established framework of commercial law. 
English is widely used, and well-known international 
(including U.S.) law firms, working in association with 
local partners, provide expert legal services both 
nationally and regionally.  Fees are charged according to 
internationally accepted practices.  Although only a 
Bahraini lawyer can argue in a Bahraini court of law, 
lawyers of other nationalities can and do work on cases. 
 
From May 2001, the U.S.-Bahraini BIT provides for three 
dispute settlement options:  1) submitting the dispute to a 
local court; 2) invoking dispute-resolution procedures 
previously agreed upon by the national or company and the 
host country government; and 3) submitting dispute for 
binding arbitration to ICSID (International Center for 
Settlement of Investment Disputes) or any arbitral 
institution agreed upon by both parties. 
 
The GCC Commercial Arbitration Center, established in 1995, 
serves as a regional specialized body providing arbitration 
services.  It assists in resolving disputes between GCC 
countries or between other parties and GCC countries.  The 
Center implements rules and regulations in line with 
accepted international practice.  Thus far, few cases have 
been brought to arbitration.  The Center conducts seminars, 
symposia, and workshops to help educate and update its 
members of any new arbitration related matters.  The 
Center's contact details are as follows: 
 
GCC Commercial Arbitration Center 
P.O. Box 2338 
Manama, Kingdom of Bahrain 
Tel: +(973) 17-214-800 
Fax: +(973) 17-214-500 
Website: www.gccarbitration.com 
Email: arbit395@batelco.com.bh 
 
Arbitration procedures are largely a contractual matter. 
Disputes are historically referred to an arbitration body as 
specified in the contract, or to the local courts. 
Increasingly, Bahraini companies, in dealings with both 
local and foreign firms, include arbitration procedures in 
their contracts.  Most commercial disputes are resolved 
privately without recourse to the courts or formal 
arbitration.  Bahraini law is generally specified in all 
contracts for the settlement of disputes that reach the 
stage of formal resolution.  Occasional lawsuits against 
individuals or companies for nonpayment of debts have been 
adequately handled by Bahrain's court system. The guidelines 
laid down by the International Chamber of Commerce (ICC) in 
Paris are generally respected, and disputes have been 
occasionally referred to arbitration at the ICC in Paris. 
Bahrain is a signatory to the New York Convention of 1958 on 
the Recognition and Enforcement of Foreign Arbitration 
Awards. 
 
The United States government, under the Middle East 
Partnership Initiative, is providing technical assistance to 
Bahrain to expand the use of Alternative Dispute Resolution 
techniques in commercial law disputes.  Some American firms 
have complained of Bahraini courts' willingness to accept 
cases involving termination of contract when the U.S. firm 
believes it was firmly within its rights to terminate the 
contract. 
 
PERFORMANCE REQUIREMENTS AND INCENTIVES 
 
There are no special performance requirements imposed on 
foreign investors.  This is reinforced by the U.S.-Bahrain 
BIT, which forbids mandated performance requirements as a 
condition for the establishment, acquisition, expansion, 
management, conduct or operation of a covered investment. 
Foreign and Bahraini-owned companies must meet the same 
requirements and comply with the same environmental, safety, 
health, and other labor requirements.  Officials at the 
Ministries of Labor, Commerce, and Industry supervise, on a 
non-discriminatory basis, companies operating in Bahrain. 
 
Industries must be set up in identified industrial areas. 
An Environmental Impact Statement (EIS) must be filed by all 
manufacturing facilities.  After one complete year of 
operation, a manufacturing facility is eligible for relief 
from tariffs imposed by other GCC states on imported goods. 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
In principle, private entities may freely establish, 
acquire, and dispose of interests in business enterprises, 
subject to the limitations noted in this chapter. 
 
The U.S.-Bahrain Bilateral Investment Treaty (BIT) provides 
benefits and protection to U.S. investors in Bahrain, such 
as most-favored-nation treatment and national treatment, the 
right to make financial transfers freely and without delay, 
international law standards for expropriation and 
compensation cases, and access to international arbitration. 
The BIT guarantees national treatment for U.S. investments 
across all sectors, with exceptions for ownership of 
television, radio (or other media), fisheries, and 
privatization of oil dredging or exploration.  Bahrain also 
provides most-favored-nation or national treatment status to 
U.S. investments in air transportation, the buying or 
ownership of land, and the buying or ownership of shares 
traded on the Bahrain Stock Exchange (BSE). 
 
Because of the national treatment offered American firms in 
the Bilateral Investment Treaty (BIT), American firms 
interested in selling products exclusively in Bahrain are no 
longer required to appoint a commercial agent, though many 
chose to do so anyway.  A commercial agent is any Bahraini 
party appointed by a foreign party to represent the foreign 
party's product or service in Bahrain. 
 
Bahrain permits 100 percent foreign-ownership of new 
industrial entities and the establishment of representative 
offices or branches of foreign companies without local 
sponsors.  Wholly foreign-owned companies may be set up for 
regional distribution services and may operate within the 
domestic market as long as they do not exclusively pursue 
domestic commercial sales. Private investment (foreign or 
Bahraini) in petroleum production is permitted only under a 
production-sharing agreement with BAPCO, the state-owned 
petroleum company. 
 
Since January 2001, foreign firms and GCC nationals may own 
land in Bahrain.  Non-GCC nationals may now own high-rise 
commercial and residential properties, as well as property 
in tourism, banking, financial and health projects, and 
training centers, in specific geographic areas. 
 
PROTECTION OF PROPERTY RIGHTS 
 
The Bahraini legal system adequately protects and 
facilitates acquisition and disposition of property rights. 
The concept of a mortgage exists, and there is a recognized 
and reliable system of recording such security interests. 
However, there is currently no mortgage law that guarantees 
lenders the right to repossess property in case of mortgage 
non-repayment. 
 
The U.S.-Bahrain FTA commits Bahrain to enforce world-class 
IPR protection.  Bahrain signed the Berne Convention for the 
Protection of Literary and Artistic Works and the Paris 
Convention for the Protection of Industrial Property in 
¶1996. Revised legislation to implement Bahrain's obligations 
under the TRIPS Agreement is currently under review. Bahrain 
is also considering joining the WIPO Copyright Treaty and 
the WIPO Performances and Phonograms Treaty. Bahrain has 
drafted and is in the process of passing new laws related to 
intellectual property to bring Bahrain's local laws into 
compliance with its current Paris Convention commitment and 
to position it to join the Nice Agreement, Vienna Agreement, 
Patent Cooperation Treaty, Trademark Law Treaty, Madrid 
Agreement, Budapest Treaty, and the Rome Convention. 
 
The government has made dramatic progress in reducing 
copyright piracy, and there are no reports of significant 
violations of U.S. patents and trademarks in Bahrain. The 
government's copyright enforcement campaign began in late 
1997 and was based on inspections, closures, and improved 
public awareness. The campaign targeted the video, audio and 
software industries, with impressive results. The 
commercially pirated video and audio markets have been 
virtually eliminated. However, software piracy, which has 
shifted from retail to end-user violations, remains 
problematic. 
 
There are no technology transfer requirements that force 
firms to share or divulge technology through compulsory 
licensing to a domestic partner, nor are firms forced to 
commit to undertake research and development activities in 
Bahrain. 
 
TRANSPARENCY OF THE REGULATORY SYSTEM 
 
In October 2002, Bahrain implemented a new government 
procurement law that establishes the basic framework for a 
transparent, rules-based government procurement system.   It 
provides that certain procurements may be conducted as 
international public tenders open to foreign suppliers.  To 
implement this law, a tender board, chaired by a Minister of 
State, was established in January 2003 to oversee all 
government tenders and purchases.   In the past, government- 
tendering procedures for large projects were not highly 
transparent.  U.S. companies sometimes reported operating at 
a disadvantage compared with other international firms. 
Contracts were not always decided solely based on price and 
technical merit, and selected, pre-qualified firms were 
occasionally invited to bid on major government tenders.  As 
of January 2003, however, the Tenders Board processes all 
tender decisions valued at $26,525 (BD 10,000) or higher. 
Individual ministries and departments may still process 
projects valued at less than $26,525 (BD 10,000).   U.S. 
firms report that the process is greatly improved over the 
previous system, though some challenges remain.  U.S. firms 
have indicated that the Bahraini government does not always 
strictly follow accepted procedures in the two-envelope 
(technical and financial) tendering process.  A local 
representative with strong connections may still be 
important in the bidding process. 
 
In the case of manufacturing enterprises, bureaucratic 
procedures and red tape created stumbling blocks mainly due 
to the lack of coordination between government ministries, 
which must sign off at one stage or another of the licensing 
procedure. 
 
In an effort to streamline licensing and approval 
procedures, the Ministry of Commerce opened the Bahrain 
Investors Center (BIC) in October 2004 for both local and 
foreign companies seeking to register in Bahrain.  This high- 
tech, customer-friendly facility, located in one of 
Bahrain's largest malls, is part of a larger effort by the 
GOB to attract firms to use Bahrain as their "Gateway to the 
Gulf" by setting up regional operations in the country.  The 
BIC is designed as a "one-stop shop" providing all 
commercial licensing and registration services.  It houses 
representatives from all relevant ministries (over a dozen) 
and private sector representatives from the 
telecommunications, legal, banking, and consulting 
industries under one roof. 
 
Officials from the Ministry note that the BIC can process 
and issue 80 percent of commercial registration applications 
within 24 hours and an additional 10 percent of commercial 
registrations within five working days.  The remaining 10 
percent, mostly those having to do with health, environment, 
power and or other essential services, are processed 
separately according to sector specific regulations and 
licenses are issued on a case-by-case basis. 
 
Draft legislations are proposed by the Cabinet and by both 
the lower house (Council of Representatives) and upper 
houses (Shura Council) of the National Assembly. Once a 
draft law has been produced and submitted to the lower and 
upper houses of the National Assembly for approval, it is 
then passed to the Cabinet for the King's signature. After 
the King signs the law, the law is published in the Public 
Gazette and is promulgated. 
 
Entrenched local business interests with influence the 
government can cause problems for potential competitors. 
Interpretation and application of the law sometimes varies 
by ministry, and may be dependent on the stature and 
connections of an investor's local partner.  However, 
investors are usually pleased with government cooperation 
and support. 
 
EFFICIENT CAPITAL MARKET AND PORTFOLIO INVESTMENT 
 
Consistent with the government of Bahrain's liberal approach 
to foreign investment, government policies facilitate the 
free flow of financial resources.  Foreigners and Bahrainis 
alike have ready access to credit on market terms. 
Generally, credit terms are variable, but often are limited 
to 10 years for loans under $50 million.  For major 
infrastructure investments, banks will often offer to assume 
a part of the risk, and Bahrain's onshore and offshore banks 
have shown extensive cooperation in syndicating loans for 
larger risks.  Generally, Bahrain's banks are described as 
eager for solid investment opportunities. 
 
The banking system is sound, and undergoes examination and 
supervision by the Bahrain Monetary Agency (BMA), which has 
a solid international reputation.  In November 2004 Bahrain 
hosted the inaugural meeting of the Middle East and North 
Africa Financial Action Task Force (MENA FATF).  Bahrain 
worked hard over the last few years to start this body and 
to host it in Manama.  There was an initial planning meeting 
in January 2004 in Manama and the FATF unanimously endorsed 
the MENA FATF proposal in July 2004.  Bahrain's leadership 
was instrumental in the establishment of this regional body. 
 
POLITICAL VIOLENCE 
 
Bahrain experienced intermittent civil unrest in the mid 
1990's.  These disturbances were directed primarily against 
the regime, but in a few cases expatriate property, 
including homes, vehicles, and places of business were 
damaged or destroyed.  Although the situation improved 
steadily after 1997, the 2002 upsurge in violence between 
Israelis and Palestinians sparked anti-Israeli and anti- 
American demonstrations in Bahrain. The protests peaked in 
April 2002 when a mob attacked the U.S. Embassy and set fire 
to U.S. Government vehicles. Since that incident, large- 
scale protest activity has subsided.  Bored youths rioted in 
downtown Manama on December 31, 2002 and inflicted 
significant damage to public and private property.  The 2003 
Iraq war sparked a few political protests near the American 
and British Embassies in which some private and government 
property was damaged. 
 
In October 2003, the Bahraini Court charged 10 youths for 
violence during protests against a planned concert by a 
Lebanese singer whose performance was deemed immoral by 
Islamists. Protesters threw petrol bombs during pitched 
battles with police, damaging private vehicles. 
 
In March 2004, rioters protesting liquor sales attacked a 
restaurant in Bahrain, burning and damaging privately owned 
vehicles. The foreign co-owner of the restaurant estimated 
$15,262 (BD 5,000) worth of physical damage to the property. 
 
The government is prosecuting four extremists who are 
accused of plotting to attack government and public 
facilities in Bahrain. 
 
CORRUPTION 
 
According to U.S. firms, high-level corruption is sometimes 
an obstacle to foreign direct investment and contracting, 
particularly in the contract-bidding process.  In the case 
of some high-value contracts, government-tendering 
procedures have not always been transparent and contracts 
have not always been decided on the basis of price and 
technical merit.  However, petty corruption is relatively 
rare in Bahrain.  The bureaucracy is sometimes inefficient 
but it is honest.  Giving or accepting a bribe is illegal. 
Officials have been dismissed for blatant corruption, but it 
is never so stated officially; no one has been tried in 
court for corruption.  The King and Crown Prince have come 
out publicly in favor of reducing corruption and some 
Ministries have initiated clean-up efforts to reduce the 
problem.  The expatriate business community is cautiously 
optimistic that there is growing transparency in the 
government procurement process.  A new law to thoroughly 
revamp government procurement procedures went into effect in 
January 2003.  Bahrain is not a signatory to the OECD 
Convention on Combating Bribery. 
BILATERAL INVESTMENT AGREEMENTS 
Bahrain and the U.S. signed a bilateral investment treaty 
(BIT) in September 1999, the first BIT between the United 
States and a GCC state. The agreement entered into force in 
May 2001. 
 
As of July 2003, Bahrain had bilateral investment protection 
agreements in place with Algeria, China, Egypt, Jordan, 
Malaysia, Morocco, Syria, Philippines and the UK.  Bahrain 
has economic and commercial cooperation agreements with 
Australia, Bangladesh, China, Egypt, France, Greece, India, 
(Iraq), Jordan, Morocco, the Netherlands, Russia, Singapore, 
South Korea, Syria, Tunisia, Turkey and the UK. Bahrain has 
air transportation tax agreements with China, France, 
Greece, Singapore, Turkey, UK, U.S. and Yemen, and two 
transportation agreements with Syria.  Bahrain has concluded 
double taxation agreements with Egypt, France, India, 
Jordan, Malaysia, Morocco, the Philippines, Thailand and 
Tunisia. 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
On April 25, 1987, Bahrain and the U.S. Government signed an 
agreement regarding activity in Bahrain by the Overseas 
Private Investment Corporation (OPIC).  The agreement opened 
the way for extension of such OPIC facilities as investment 
insurance, reinsurance, and investment guarantees to U.S. 
private investors interested in doing business in Bahrain. 
 
LABOR 
The Bahrain labor force is estimated at 330,000, nearly two- 
thirds of whom are expatriates.  The GOB publicly states 
that unemployment, which official statistics put at 14.3 
percent of Bahrainis in Bahrain's workforce, is the 
country's foremost domestic political problem.  The United 
Nations Development Program (UNDP) estimates real 
unemployment among Bahrainis to be 15 to 20 percent and as 
high as 30 percent in some Shi'ite villages. In  2001 
Bahrain's Cabinet approved a two-year project worth over $65 
million to train and update professional skills of 
unemployed Bahrainis. One of the government's primary 
initiatives for combating unemployment is "Bahrainization," 
or the replacement of expatriate workers by national ones. 
In 2002 the Government of Bahrain reserved certain 
professions, including heavy vehicle drivers, for Bahraini 
nationals. 
Crown Prince Salman bin Hamad Al Khalifa launched a national 
debate in 2004 that is aimed at creating a new economic and 
labor vision for the Kingdom.  Draft labor reform 
legislation seeks to levy a monthly fee to employers of 
foreign workers.  The fees would enter a fund to be used for 
training Bahraini workers.  The proposal has attracted quite 
a bit of controversy and it is not clear how the issue will 
be resolved. 
The Government of Bahrain is seeking to establish Bahrain as 
a regional center for human resource development. Bahrain 
has over 50 training institutes that offer training in a 
variety of areas such as hospitality, information 
technology, business studies, English language studies, and 
banking.  Major training institutes include the Bahrain 
Institute for Banking and Finance (BIBF), Bahrain Training 
Institute (BTI), KPMG, and the British Council.  Bahrain has 
agreed to host the U.S.-funded Entrepreneurship Center, 
which will train regional business people in business 
skills.  Both educational and vocational training curricula 
have been criticized recently for not adequately preparing 
Bahrainis for the workforce.  The government is making 
concerted efforts to turn this situation around. 
 
Another major step that the GOB is undertaking is the 
formation of trade unions. Government officials developed a 
new labor union law to allow trade unions and to establish a 
system that would ensure and protect workers rights.  The 
new labor union law went into effect in Fall 2002. 
Bahrain's trade unions must be associated with the Bahrain 
Trade Union Federation. 
 
FOREIGN TRADE ZONES/FREE TRADE ZONES 
 
Mina Salman, Bahrain's major port, provides a free transit 
zone to facilitate the duty-free import of equipment and 
machinery.  The North Sitra Industrial Estate is an 
industrial free zone and another one is planned for Hidd. 
Foreign-owned firms have the same investment opportunities 
in these zones as Bahraini companies. 
 
A 1999 law requires that investors in industrial, or 
industry-related, zones launch a project within one year 
from the date of receiving the land, and development will 
have to conform to the specifications, terms and drawings 
submitted with the application.  Changes are not permitted 
without approval from the Ministry of Industry. 
 
FOREIGN DIRECT INVESTMENT STATISTICS 
 
Foreign investments in Bahrain range from partial foreign 
ownership of large parastatals in the oil and 
telecommunications sectors to restaurant franchises.  As the 
economy is virtually tax-free, the government does not 
maintain detailed statistics foreign direct investment 
flows.  The largest, by value, of foreign holdings in 
Bahrain include: 
 
-- Aluminum Bahrain (ALBA) and the Gulf Petrochemical 
Industries Complex (GPIC), each of which are owned as joint 
investments by several Gulf states. 
 
-- Britain's Cable and Wireless' 20 percent holding in the 
Bahrain Telecommunications Company (BATELCO). 
 
-- U.A.E. based Majid Al Futtaim Investments are investing 
$26.4 in the new Bahrain City Center cinema complex. 
 
-- Bahrain National Gas Company (BANAGAS) is owned by 
Bahrain, a Saudi investment firm and Caltex Bahrain. 
 
-- Amwaj Islands tourism project is jointly owned by 
Bahraini, Kuwaiti and Saudi corporate and individual 
investors. 
 
-- The $600 million tourism project of Al Areen Desert Spa 
and Resort is owned by the Government of Bahrain, various 
private investors and Gulf Finance House. 
 
-- The development of the $1.3 billion Bahrain Financial 
Harbor project, owned by Gulf Finance House, personal and 
corporate G.C.C. investors. 
 
According to U.S. Embassy records, approximately 180 U.S. 
companies were operating, in one form or another, in Bahrain 
as of January 2005.  Many of the U.S. firms are in the 
services sector and thus do not have a large capital 
investment in Bahrain despite a significant local presence. 
Among the larger U.S. investments are: 
 
-- Citibank's new regional headquarters building, opened in 
2001, valued at nearly $30 million. 
 
-- Coca Cola's local bottling plant, purchased at a cost of 
USD 13 million.  Another $15 million flows into the economy 
annually with operating costs investment. 
 
-- Shaw-Nass, a manufacturing plant owned by Shaw 
Industries, a U.S. pipeline manufacturer, in partnership 
with a Bahraini firm, A.A. Nass. 
 
-- Owners of The Diplomat Radisson SAS Hotel and Executive 
Apartments expansion project cost owner, National Hotels 
Company B.S.C., $18 million. 
 
-- U.S. operational headquartered Foster Wheel Energy 
Limited, a subsidiary of Foster Wheeler Limited, were 
awarded a front-end engineering design (FEED) contract to 
revamp Bahrain National Gas Company's (BANAGAS) liquefied 
petroleum gas (LPG) facilities. 
 
-- Marriot International signed a contract with 
International Trading and Investment Company (ITICO) to open 
and manage the first Marriot Executive Apartments in 
Bahrain. 
 
-- Wimberly Allison Tong and Goo (WATG) were appointed by 
the General Organization for Social Insurance (GOSI) to 
prepare the preliminary designs for the $212 million resort 
development of the Marina Club. 
 
American firms are also heavily involved in large-scale 
consulting and construction projects in Bahrain.  Here are 
some examples: 
 
-- Bechtel is responsible for the Engineering Procurement 
Construction and Management (EPCM) of aluminum smelter 
ALBA's $1.7 billion fifth potline expansion project. 
 
-- Parsons are the designers and supervising engineers for a 
$26 million-flyover project in Bahrain's Seef area. 
 
-- Great Lakes Dredge and Dock is performing dredging 
operations in conjunction with the $464 million new port. 
 
-- Cisco Systems have signed an agreement with Bahrain's 
Central Informatics Organization (CIO) establishing a 
regional Cisco networking academy. 
 
-- Binnie, Black and Veatch International Limited are the 
consultants of Phase 3 of the Hidd (Power) and Desalination 
Complex.  The project was estimated to cost $400 million. 
 
-- Kuljian Corporation, are consultants for Ras Abu Jarjur 
desalination plant expansion, which is estimated to cost 
$26.5 million. 
 
WMONROE