Bahrain has a $90 per barrel breakeven oil price, so the country is moving forward with serious economic diversification plans among which to become the Fintech hub of the region.
The economy of Bahrain has particular strength in the financial services and technology sectors and related industries and benefits from a central Gulf location as a gateway to $1.5 trn GCC market, low cost of operations, and a talented workforce.
To tackle all this diversification, Dubai-headquartered multi-dimensional media firm Mediaquest organized the Top CEO Conference and Awards in Bahrain for its fifth edition on April 11, 2019, at Al Areen Palace and Spa, where business leaders and more than 30 expert speakers from across the region and the world, will gather to discuss various topics weaved around the central theme of “Growth in a Volatile Future”.
Where is tourism in this picture
The non-oil economy expanded 2.4% yoy in Q3 2018, led by the construction sector which saw spending increase by 16.3% yoy, Real estate and business activities increase by 3.2% and manufacturing by 3.8%.
But tourism figures heavily in this equation.
H.E. Shaikh Khaled Bin Humood Al Khalifa, CEO of the Bahrain Tourism and Exhibitions Authority, said during a session entitled ‘Bahrain’s Growth Dynamics’ that in terms of the tourism sector and its contribution to the economy, the number one obstacle was knowledge.
“We didn't have enough information in terms of how much the daily average expenditure of tourism was. Data was not available and in order to plan the future we had to know where we stand.”
“We didn't have enough information in terms of how much the daily average expenditure of tourism was. Data was not available and in order to plan the future we had to know where we stand.” – H.E. Shaikh Khaled Bin Humood Al Khalifa, CEO of Bahrain Tourism and Exhibitions Authority
“Up to 40 full-time employees actually do daily surveys, whether it's on the causeway or the airport, or the seaport or tourism destinations, in order to understand who is a tourist who is not, and based on that data, we were able to build our strategy.”
In the past 40 years, Bahrain launched seven international offices around the globe, including Saudi Arabia, Kuwait, India, Germany, France, and Russia. Today, there are more than 68 tour operators in London alone from a handful in the near past.
“We sold 9800 packages through our offices, contributing 5.2 million Bahraini dinars ($13.8 million) to the economy just through the London office,” he said. “Another chartered flights program with Russia from last April brought around 7800 Russians for another BD 5.2 million."
In 2018, Tourism contributed 6.5% to the Bahraini GDP.
How is Bahrain economically?
Many years ago, the challenge was, what is the opportunity in Bahrain? How big is the opportunity? And since then it’s been about how able is it able quantify and identify the challenges, and how to find the most efficient strategies to bring in that extra revenue?
Dr. Jarmo Kotilaine: Chief Economist Bahrain Economic Development Board, said that looking at the structure of the economy today, Bahrain is a diverse economy, with the largest sector, still very narrowly, the oil and gas sector.
“But that is now less than 18% of the real GDP of this kingdom. So we're in an interesting situation where in fact, developing the oil sector further has become part of the diversification strategy,” Kotilaine said.
“How do we move towards being primarily productivity driven, because this is ultimately the only way that can give sustained improvements in living standards. And I think that this is where we get into areas like innovation and digitization and entrepreneurship.”
He added that risks exist in any economy but are not cause for concern in Bahrain.
“GDP numbers are coming from issues not linked to oil but more about human capital ideas about infrastructure investment, telecommunications, construction, private education, and private healthcare. More fundamentally, I think we are seeing this change towards a more dynamic mentality across the board.”
Rishi Kapoor, Co-CEO at Investcorp, also added that Bahrain is keen to not just encourage, not just facilitate, but also drive private sector participation in the buildup of its local economy and diversifying into services, space, financial, technology, tourism, entertainment, leisure, travel, and others.
How is the financial ecosystem behaving?
Jassim Alseddiqi, CEO of the Abu Dhabi Financial Group (ADFG), said that his group has invested more than three years ago attracted by the opportunity, pricing, financial and regulatory infrastructure in place and the sophistication that was there for a while.
“So when you talk about Bahrain, we have been working on IT infrastructure, whether it's physical infrastructure or the legal framework, or the banking infrastructure, for a very long time. And we are seeing a shift now, or a diversification from being only a financial services hub, into a touristic hub, and also a technology hub,” Alseddiqi said.
“With the new Amazon Web Services having a home in Bahrain, [this presents] a statement of confidence in what we're here doing in the tech sector. Today, I think Bahrain is always reinventing itself. It has to adapt to different changes, whether positive or negative. And we see this happening, and happening quickly.”
“Bahrain is seeing a shift now, or a diversification from being only a financial services hub, into a touristic hub, and also a technology hub” – Jassim Alseddiqi, CEO of the Abu Dhabi Financial Group (ADFG)
He added that the risk is going to be the fear of missing out.
“I think, advancement in financial technologies should not be hindered by risk management, or by the excuse of that we can risk or create financial stability. On the contrary, financial technology on FinTech would actually help in reducing potential risks on the financial industry.”
Bahrain’s FinTech bay
Khalid Saad, CEO at Bahrain FinTech Bay, said that initially the discussion first started about, “let's change, let's embrace, you know, digitization and invasion.”
“The conversation has completely changed over the last few years, either from a governance or a jurisdiction perspective, or whether from an institutional perspective,” Saad said.
“The conversation has completely changed over the last few years, either from a governance or a jurisdiction perspective, or whether from an institutional perspective” – Khalid Saad, CEO at Bahrain FinTech Bay
“As regulators evolve, and as our software infrastructure starts to develop, the playing field [is changing]. So over the past two years, and specifically over the past year, we've seen that a lot of people are now starting to see investments in technology, digitization and efficiency as a strategic imperative and some have embraced it much more aggressively than others.”
He added that technology is bringing a growth opportunity to financial services in FinTech.
“And you have, to a certain extent, a tricky balancing act, because you're trying to bring all the partners with you, at the same time, yet technology cannot be restrained in a way. So I mean, how do you manage to maintain the opportunity?
“You go to stitch that fabric of stakeholders that will want to push the mantle and develop the ecosystem. But at the same time, given that some are moving at a much lower speed, you have to be conscious that you cannot also slow down because technology is moving at such a rapid speed because you cannot lose out on not enabling innovation and keeping up with the rapid technological change. It's a very difficult balance. And I think you, you have to move at a very rapid pace.”
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