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Doing Business In Bahrain

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Doing Business In Bahrain ...

     Doing Business In Bahrain:

    A Country Commercial Guide for U.S. Companies

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE

    AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED

    OUTSIDE OF THE UNITED STATES.

    ? Chapter 1: Doing Business In Bahrain

    ? Chapter 2: Political and Economic Environment

    ? Chapter 3: Selling U.S. Products and Services

    ? Chapter 4: Leading Sectors for U.S. Export and Investment

    ? Chapter 5: Trade Regulations and Standards

    ? Chapter 6: Investment Climate

    ? Chapter 7: Trade and Project Financing

    ? Chapter 8: Business Travel

    ? Chapter 9: Contacts, Market Research and Trade Events

    ? Chapter 10: Guide to Our Services

Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 1

    FY2005

     DOING BUSINESS IN BAHRAIN: 1

    A COUNTRY COMMERCIAL GUIDE FOR U.S. COMPANIES 1

    INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2004. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES. 1

    CHAPTER 1: DOING BUSINESS IN BAHRAIN 8

    Market Overview Return to top 8

    Market Challenges Return to top 9

    Market Opportunities Return to top 10

    Market Entry Strategy Return to top 13

    RETURN TO TABLE OF CONTENTS 13

    CHAPTER 2: POLITICAL AND ECONOMIC ENVIRONMENT 14

    RETURN TO TABLE OF CONTENTS 14

    CHAPTER 3: SELLING U.S. PRODUCTS AND SERVICES 15

    Using an Agent or Distributor Return to top 15 Establishing an Office Return to top 16

    Franchising Return to top 24

    Direct Marketing Return to top 25

    Joint Ventures/Licensing Return to top 25

    Selling to the Government Return to top 25 Distribution and Sales Channels Return to top 26 Selling Factors/Techniques Return to top 27 Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 2

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Electronic Commerce Return to top 27

    Trade Promotion and Advertising Return to top 28 Pricing Return to top 39

    Sales Service/Customer Support Return to top 39 Protecting Your Intellectual Property Return to top 39 Due Diligence Return to top 40

    Local Professional Services Return to top 41

    Web Resources Return to top 42

    CHAPTER 4: LEADING SECTORS FOR U.S. EXPORT AND INVESTMENT 45 COMMERCIAL SECTORS 45

    Motor Vehicles and Vehicle Parts 46

    Overview Return to top 46 Best Products/Services Return to top 46 Opportunities Return to top 46 Resources Return to top 46 Medical Equipment 47

    Overview Return to top 47 Best Prospects/Services Return to top 47 Opportunities Return to top 47 Resources Return to top 48 Air Conditioning and Refrigiration Equipment 49

    Overview Return to top 49 Equipment 49

    Best Prospects/Services Return to top 49 Opportunities Return to top 49 Resources Return to top 49 Computers and Peripherals 50

    Overview Return to top 50 Best Prospects/Services Return to top 50 Opportunities Return to top 50 Resources Return to top 50

Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 3

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Telecommunications 52

    Overview Return to top 52 Best Prospects/Services Return to top 52 Opportunities Return to top 52 Resources Return to top 52 Financial Services 54

    Overview Return to top 54 Best Products/Services Return to top 54 Opportunities Return to top 54 Resources Return to top 55 Education and Training 56

    Overview Return to top 56 Best Products/Services Return to top 56 Opportunities Return to top 56 Resources Return to top 57 Electrical Power 59

    Overview Return to top 59 Best Products/Services Return to top 59 Opportunities Return to top 59 Resources Return to top 60 Water Desalination 61

    Overview Return to top 61 Best Products/Services Return to top 61 Opportunities Return to top 62 Resources Return to top 62 Construction 63

    Overview Return to top 63 Best Products/Services Return to top 63 Opportunities Return to top 63 Resources Return to top 64 Agricultural Sectors Return to top 65

    Frozen/Chilled Beef Return to top 65

    Poultry Meat Return to top 65 Resources Return to top 66 CHAPTER 5: TRADE REGULATIONS AND STANDARDS 67

    Import Tariffs Return to top 67

    Trade Barriers Return to top 68

    Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 4

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    Import Requirements and Documentation Return to top 68 U.S. Export Controls Return to top 70

    Temporary Entry Return to top 70

    Labeling and Marking Requirements Return to top 70 Prohibited and Restricted Imports Return to top 70 Customs Contact Information Return to top 72

    Standards Return to top 74

    Overview Return to top 74 Standards Organizations Return to top 74 Conformity Assessment Return to top 75 Product Certification Return to top 76 Accreditation Return to top 77 Publication of Technical Regulations Return to top 77 Labeling and Marking Return to top 78 Trade Agreements Return to top 78

    Web Resources Return to top 79

    CHAPTER 6: INVESTMENT CLIMATE 80

    Openness to Foreign Investment Return to top 80 Conversion and Transfer Policies Return to top 83 Expropriation and Compensation Return to top 83 Dispute Settlement Return to top 83

    Performance Requirements and Incentives Return to top 84 Right to Private Ownership and Establishment Return to top 84 Protection of Property Rights Return to top 85 Transparency of Regulatory System Return to top 86 Efficient Capital Markets and Portfolio Investment Return to top 87 Political Violence Return to top 87

    Corruption Return to top 88

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    Bilateral Investment Agreements Return to top 88 OPIC and Other Investment Insurance Programs Return to top 88 Labor Return to top 89

    Foreign -Trade Zones/Free Ports Return to top 89 Foreign Direct Investment Statistics Return to top 90 Web Resources Return to top 92

    CHAPTER 7: TRADE AND PROJECT FINANCING 94

    How Do I Get Paid (Methods of Payment) Return to top 94 How Does the Banking System Operate Return to top 94 Foreign-Exchange Controls Return to top 95

    U.S. Banks and Local Correspondent Banks Return to top 95 Project Financing Return to top 96

    Web Resources Return to top 96

    CHAPTER 8: BUSINESS TRAVEL 97

    Business Customs Return to top 97

    Travel Advisory Return to top 97

    Visa Requirements Return to top 97

    Telecommunications Return to top 98

    Transportation Return to top 99

    Language Return to top 100

    Health Return to top 100

    Local Time, Business Hours, and Holidays Return to top 100 U.S. EMBASSY, BAHRAIN 2005 HOLIDAY SCHEDULE 101

    Temporary Entry of Materials and Personal Belongings Return to top 102 Web Resources Return to top 102

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CHAPTER 9: CONTACTS, MARKET RESEARCH, AND TRADE EVENTS 104

    Contacts Return to top 104

    Market Research Return to top 111

    Trade Events Return to top 111

    CHAPTER 10: GUIDE TO OUR SERVICES 113

Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 7

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Chapter 1: Doing Business In Bahrain

    ? Market Overview

    ? Market Challenges

    ? Market Opportunities

    ? Market Entry Strategy Market Overview Return to top

    ? Bahrain's almost $9.6 billion 2003 GDP economy has been growing 4 to 5 percent per

    year for the last five years. Its population of nearly 690,000 enjoys a per capita

    income estimated at $16,900 on a purchasing power parity basis. The Government of

    Bahrain keeps price inflation low and its currency stable (the Bahraini Dinar is

    pegged at .377 to one U.S. dollar).

? The U.S. trade deficit with Bahrain in 2004 was $128 million, a negative swing of

    $247 million from the $119 million trade surplus in 2003. U.S. goods exports in 2004

    were $278 million, down 44 percent from the previous year. Corresponding U.S. thimports from Bahrain were $406 million, up 7.4 percent. Bahrain is currently the 88

    largest export market for U.S. goods. The stock of U.S. foreign direct investment

    (FDI) in Bahrain in 2003 was $196 million; up from $70 million in 2002. In February

    2002, the former Emirate of Bahrain became the Kingdom of Bahrain, and adopted a

    new constitution. Subsequent democratic reforms include universal suffrage, the first

    municipal elections in half a century (May 2002), and the first parliamentary elections

    in 30 years (October 2002). In 2005, the Heritage Foundation listed Bahrain as the

    world’s 20th freest economy – the highest ranking in the region. The United States

    Trade Representative (USTR) concluded bilateral Free Trade Agreement (FTA)

    negotiations in May 2004 and signed the Free Trade Agreement in September 2004.

    Implementation of the FTA awaits ratification by both legislatures. The agreement

    seeks to expand and promote the scope of economic, commercial, investment, and

    trade relations between the two countries.

? The volume of trade between the U.S. and Bahrain ($684 million in 2004) dropped

    significantly from 2003 to 2004 because of a decline in U.S. exports to Bahrain of

    over $200 million, mostly attributed to a fall in sales of aircraft and parts following

    several years of strong sales. The U.S. is consistently one of Bahrain’s leading trading

    partners with $278 million in U.S. exports to Bahrain in 2004. U.S. products that

    traditionally do particular well are in aircraft and motor vehicles, mechanical and

    electrical, and medical equipment. U.S. firms are also involved in major infrastructure

    projects. Over 180 U.S. companies are currently represented in Bahrain with virtually

    all major U.S.-product brand names represented in local retail stores.

? Capitalizing on Bahrain's long history as a trading nation, the Government of Bahrain

    has developed the transportation and communication infrastructure necessary to

    attract and foster international business. Diversifying its economy to reduce Bahrain’s

    reliance on oil, the government has become a regional financial center with a

    Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 8

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    regulatory infrastructure of high international standards. To overcome its small size,

    Bahrain has further sought to position itself as a regional services hub. After early

    success, the financial, telecommunications, and transportation sectors have faced stiff

    competition from Dubai and elsewhere. In its quest to increase foreign investment,

    the Government of Bahrain targeted six "economic clusters" for further expansion:

    tourism, information and communication technology, health care, education and

    training, business services, and financial services. Downstream aluminum and

    petrochemicals industries also remain priorities.

    ? Oil revenues generate almost three-quarters, the government is (73% in 2003), and

    inexpensive gas fuels aluminum, iron, and petrochemical production facilities. The

    Bahraini Government hopes that exploration by ChevronTexaco and Petronas in

    recently opened offshore sites will yield commercially viable finds of oil.

    ? Based on the 2003-2004 budget, government expenditures will account for close to

    30 percent of Bahrain's GDP. The government is deeply involved in industry, with

    wholly or partially government-owned enterprises still dominating much of the

    economy. Such leading enterprises as Bapco (oil refining), ALBA (aluminum) and

    Batelco (telecommunications), are all parastatals of varying degree. On February 8,

    2005, Bapco announced access to $1 billion in credit facilities from nine regional and

    international banks to develop and fund new investments, to include a $685 million

    low-sulphur diesel project and a gas desulphurization project.

    ? Islamic banking is growing steadily. The Government of Bahrain seeks to strengthen

    the Islamic financial market in Bahrain.

    ? The Government of Bahrain is moving ahead with a number of industrial and

    infrastructure projects, which are driven by commercial, economic and social

    imperatives (expansion of electricity and water networks, job creation, and export

    expansion), which was made possible by years of healthy oil revenues. Market Challenges Return to top

    ? The divide between the government and the private sector is not well defined in

    Bahrain, leading to potential conflicts of interest. In a few cases where entrenched

    local business interests are threatened, government decision-making becomes opaque.

    U.S. companies note a lack of transparency in government project tendering at times

    (see Chapter 6, Investment Climate). The GOB implemented a new tenders law in

    January 2003 to promote a more transparent tendering process. The newly established

    Tenders Board regulates and oversees most of the Government‘s tenders and

    purchases.

    ? Entrenched local business interests with government influence 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. Departures such as these from the consistent, transparent application of Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 9

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    regulations and the law remain rare, and investors are usually well pleased with

    government cooperation and support.

    ? Bureaucracy and poor coordination between ministries on occasion impedes new

    industrial ventures. The government's priority of "Bahrainization" of the labor force

    a quota system requiring employers to employ a minimum percentage of Bahrainis

    can lead to delays and confusion over work permit issuance and renewal. The Crown

    Prince launched a labor reform process seeking to promote the employment and

    training of Bahraini workers. The process may result in legal changes in the labor

    field.

? Periodically usually due to the Bahraini government’s efforts to promote greater

    numbers of Bahraini citizens in the workforce foreign firms have problems

    obtaining required work permits and residence visas for expatriate employees.

    However, this is not a matter of high-level policy and can often be resolved on a case-

    by-case basis.

Market Opportunities Return to top

    ? Bahrain offers a number of advantages as a business or investment destination,

    including a Bilateral Investment Treaty (BIT) with the United States (in force as of

    May 2001) and a bilateral Free Trade Agreement (FTA) signed in September 2004.

    English is widely spoken, and the openness of a centuries-old trade-based culture

    makes businesses and visitors feel welcome. The presence of the U.S. Navy's Fifth

    Fleet and Bahrain's designation as a Major Non-NATO Ally have given the island

    international recognition.

    ? The Government of Bahrain has substantially liberalized Bahrain's economy and

    deepened commercial ties with the U.S. In the past two years, Bahrain has passed

    laws liberalizing foreign property ownership and tightening its anti-money laundering

    laws. Bahrain was removed from the U.S. Special 301 Watch List in 1999, and has

    remained off through 2005.

    ? In spring 2002, the Government announced reforms allowing expatriates working in

    Bahrain to change jobs more easily, which introduced more flexibility into the labor

    market. In September 2002, the Government announced that both Bahrainis and

    expatriate workers would have the right to join unions under the new labor and trade

    unions law.

    ? The U.S.-Bahrain Bilateral Investment Treaty (BIT) entered into force in May 2001,

    as the first BIT in the GCC. 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, Doing Business in Bahrain: A Country Commercial Guide For U.S. Companies 10

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