Bahrain: The challenge of staying competitive
As any startup will attest, agility and quick response to market demand is key to survival. The same can be applied to other stakeholders in the startup ecosystem. Recently, the Middle East and North Africa’s capital cities have scrambled to establish entrepreneurship hubs and so the competition has intensified, particularly for the smaller nations whose budgets do not match the deep pockets of some of their neighbour’s.
In the midst of decrees and announcements, Bahrain has managed to establish a business environment that the Milken Institute believes will position the country as a “major hub for finance, technology and innovation”.
Since 2015, foreign direct investment (FDI) has increased from 0.2 per cent of gross domestic product (GDP) to 4 per cent in 2018. The number of firms in the private sector has increased by 50 per cent alongside a 30 per cent rise in the number of jobs in the private sector according to data from the Labour Market Regulatory Authority. According to Milken’s report, micro, small and medium-sized enterprises account for 30 per cent of GDP.
Fuelling this growth has been Bahrain's geographic position and its proximity to Saudi Arabia, providing easy access to the region's largest market. But now that the Kingdom has embraced entrepreneurship and has pushed through several agendas and government initiatives to encourage foreign investment, Bahrain risks losing its competitive edge.
We spoke with Pakiza Abdulrahman, manager of startups at the Bahrain Economic Development Board (EDB), a government agency tasked with attracting investment and supporting private sector growth.
EDB’s Startup Bahrain initiative has been instrumental in encouraging entrepreneurship, but how much involvement should the government have?
Governments should play an enabling role and not lead the innovation agenda. We want to enable the ecosystem to sit together and collaborate and bring to the table the most important matters that we as regulators should fix and improve.
Bahrain is strategically positioning itself as a gateway to the global market, particularly for Egyptian and Mena-based startups. We have very close proximity to the largest market in the Middle East [Saudi Arabia]. Our mandate is to diversify the economy, attract FDI and create jobs that are in line with the knowledge economy and Bahrain’s 2030 Vision.
Saudi is a huge market to navigate, it is easier to come in as a GCC-based operation. What we try to do in Bahrain, is to focus on incentives and benefits that are provided to startups setting up in the country. We don’t have a freezone area, the whole country is open to 100 per cent foreign ownership.
As our strategic position with the East and West, we’re positioning ourselves for different niches.
What are these niches?
Fintech, IOT [internet of things], e-commerce, logistics. Game development and publishing has been something really big for Bahrain recently. The calibre [of talent] in the country is high, they’re bilingual, tech savvy, they know the culture of Saudi and the Middle Eastern market and we have high mobile penetration.
Where are the startups that set up in Bahrain from?
The majority of startups are coming from the UK, South East Asia, India, Singapore and the Middle East, from Lebanon, Jordan and Egypt. Companies from Saudi Arabia and Kuwait are also coming. It is 30-40 per cent cheaper to set up here than in the UAE. It is a 50:50 ratio split of Bahraini and resident founders of startups and foreign companies.
Amazon chose Bahrain to launch its Amazon Web Services (AWS), what impact has that had?
The Amazon impact has been huge, it gives testament to the strong ICT infrastructure in Bahrain, the connectiveness with other data centres globally, it gives testament of the eagerness of the government to move to the cloud. We have a cloud-first policy, all government entities have to be on the cloud, that created huge hype in the country and pushed the private sector banks that were reluctant to go on the cloud. It has also opened up a huge opportunity for local talent to be upskilled.
Saudi Arabia is embracing entrepreneurship, how can Bahrain maintain its advantage as a gateway to the country?
We’re a small market, we need to be very creative and strategic in the way we tackle this challenge. We have been doing so by opening up to global markets, empowering education among different sections in the ecosystem, whether it's youngsters or early retirees from government programmes with ideas and skills they need to be directed. This is what we do at Startup Bahrain – we keep the momentum and rooting back to the single platform that gives you all of this – it is community driven we back it up and it grows as the community grows. We do a lot of roundtables to listen to the startups and try to shape up the market and shape up the regulation as they need.
Markets in KSA and UAE are huge and saturated as well, sometimes for South Korean companies and Asian and Arab-based companies, they find it hard to navigate. At EDB, we handhold startups and accelerators throughout the whole process of registration, ensuring they come out of it with meaningful relationships and introduce them to key decision makers.