Bahrain - Economic Overview and Infrastructure Projects August 2016

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Bahrain - Economic Overview and Infrastructure Projects August 2016 Bahrain - Economic Overview and Infrastructure Projects August 2016 UAE | Libya | Bulgaria | USA www.whisperingbell.com Bahrain Infrastructure Report - August 2016 Table of Contents BAHRAIN’S CURRENT ECONOMIC SITUATION .................................................................................................................... 3 BAHRAIN ECONOMIC OUTLOOK .................................................................................................................................................... 3 A LARGE INFRASTRUCTURE PROJECTS PIPELINE UNDERWAY ..................................................................................... 4 KEY INFRASTRUCTURE PROJECTS IN BAHRAIN: ............................................................................................................................................... 5 TOP BAHRAIN PROJECTS ................................................................................................................................................................. 8 KEY INFRASTRUCTURE PROJECTS IN EASTERN SAUDI: ................................................................................................................................... 8 ABOUT WHISPERING BELL ...................................................................................................................................................... 10 Page | 2 Whispering Bell MEA DMCC, PO Box 487151, Dubai, United Arab Emirates. Tel: +9714 448 6690 www.whisperingbell.com Bahrain Infrastructure Report - August 2016 Bahrain’s Current Economic Situation - Despite being highly vulnerable to disturbances in Saudi Arabia’s market, Bahrain’s economy is much more diversified than Saudi Arabia’s, and has a relatively solid and resilient financial sector. - Bahrain’s economy has continued to demonstrate significant resilience throughout the period of depressed oil prices. Inevitably, the pace of growth was somewhat hampered over the past year amid the collapse of global oil prices and the ongoing political instability along with increased pressure on government spending, driving GDP growth down to 2.9% in 2015 from 4.5% in 2014. Yet, the non-oil growth stood at 3.9% reflecting the strength of structural growth drivers in the economy, particularly with a sustained momentum of diversification and a large infrastructure pipeline. - The non-oil economy has been at the forefront of economic growth in Bahrain ever since the second half of 2014, while the oil sector either marginally contributed to the growth or even lagged behind (as in 2015). - According to Bahrain Economic Development Board (EDB), future growth will be driven by a high level of continuity in the non-oil economy, and the commitment of regional governments and investors to long-term projects. The non-hydrocarbon sector is expected to remain around 3.4% in 2016 and 3% in 2017, underpinned by construction, manufacturing, tourism and social and personal services. Bahrain Economic Outlook Bahrain Economic Outlook 2014 2015 2016 2017 2018 Real GDP growth (%) 4.5% 2.9% 2.9% 2.5% 2.2% Non-hydrocarbons sector 4.9% 3.9% 3.4% 3.0% 2.6% Hydrocarbons sector 3.0% -0.9% 2.0% 0.5% 0.5% Nominal GDP growth (%) 2.9% -4.8% 4.8% 7.6% 5.6% Inflation (CPI %) 2.8% 1.8% 3.8% 2.0% 2.0% Current account (% GDP) 4.5% -0.2% -2.7% 0.0% 1.2% Fiscal balance (% GDP) -3.6% -12.5% -13.0% -10.5% -8.9% Source: Bahrain Economic Development Board - Economic growth will also be driven by the Vision 2030 economic development plan, which includes extensive infrastructure developments and aims to diversify and expand the economy under the EDB’s national economic strategy. - Bahrain developments is heavily reliant on GCC funding, particularly from Saudi Arabia which has an economy that is 20 times the size of Bahrain’s. Following the 2011 uprising, Saudi Arabia and three other Arab states worried about Bahrain’s stability pledged USD 10bn to the country. Bahrain’s reliance on external funding is expected to continue Page | 3 Whispering Bell MEA DMCC, PO Box 487151, Dubai, United Arab Emirates. Tel: +9714 448 6690 www.whisperingbell.com Bahrain Infrastructure Report - August 2016 given its political importance, its relatively small sovereign wealth holdings, and its large deficit, and significant debt. - The country is endowed with an open business environment and skilled workforce that have attracted international investors looking to penetrate the fast-growing GCC market. According to a UNCTAD World Investment Report, total foreign direct investment into Bahrain in 2014 amounted to USD 1bn, and inward FDI stocks reached USD 18.8bn, remaining the highest in the GCC and well above the global average, which emphasizes Bahrain’s position as one of the region’s most welcoming economies. Bahrain has one of the lowest operating costs in the region, and a solid investment regulatory framework. According to the Heritage Foundation’s 2014 Index of Economic Freedom, Bahrain is the freest economy in the region, and this helped boost growth and contributed to the success of foreign investors business story in country. - To accelerate growth, Bahrain recently introduced a flexible visa policy that allows nationals from almost 100 countries to obtain an online visa either ahead of travel or on arrival. In addition to 36 countries now eligible for e-visa applications, residents from a further 60 countries will also now be able to apply for a visa on arrival. A large Infrastructure projects pipeline underway - Amid declining revenues from the energy sector, Bahrain is pushing ahead with new projects to stimulate growth. MEED Projects in mid-June estimated the overall project pipeline in Bahrain at USD 72.7bn, 4.7% higher than last year’s. Of this, a large pipeline of "strategically significant" priority infrastructure projects carried out by the government, the GCC Development Fund, and the private sector was estimated at around USD 32 billion. - The construction industry in Bahrain will largely benefit from the GCC’s USD 10bn Gulf Development Programme which will support the country’s ambitious infrastructure build-up and investment plan. Around USD 6bn of the GCC fund has already been allocated to date and about USD 3.7bn has been tendered. The housing sector secured 35% of the funds while other major beneficiaries included electricity and water projects (22%), airport expansion (14%) and roads (12%). - The construction industry in Bahrain has long been characterized by relative openness and ease of access, with the kingdom remaining in fourth place out of 185 countries on the World Bank’s 2014 “Ease of Doing Business” survey’s “dealing with construction permits” category. According to the survey, private contractors seeking construction permits in Bahrain face 11 procedures taking an average of 60 days to complete compared to the OECD average of 11.9 procedures and 149.5 days. Page | 4 Whispering Bell MEA DMCC, PO Box 487151, Dubai, United Arab Emirates. Tel: +9714 448 6690 www.whisperingbell.com Bahrain Infrastructure Report - August 2016 Key Infrastructure Projects in Bahrain: In the section below, we list some of the most recently updated and largest Infrastructure projects in Bahrain. - Transport infrastructure: Bahrain has been particularly focusing on connections with neighbouring Saudi Arabia. Air transport infrastructure, which has lagged behind other countries in the region, is significantly attracting investments. o Bahrain International Airport Expansion Project: Perhaps the most significant of these is the expansion and modernisation of Bahrain International Airport (BIA). The USD 1.1bn expansion project is designed to increase the capacity of the facility by more than 50% from 9 million to 14 million passengers a year. The terminal project was awarded to a consortium of Arabtec Construction and Turkey’s TAV earlier this year. Pending packages include maintenance, repair and operation hangar, ICT systems, and the air traffic control center building. The first phase of the project is to be completed by mid-2019, at which point much of the current terminal building will be demolished to make way for the second phase which is due to be finished by the end of the 2020. The GCC Fund is expected to cover some 70% of the overall project cost. o Building Bahrain’s second airport: The government has also announced plans to build the country's second airport on a purpose-built island off the north coast. - Another major focus of activity is housing: The government push to provide affordable housing has seen a host of new projects and is expected to underpin growth over the medium term. Bahrain is pursuing an ambitious program of developing 40,000 housing units within a decade. The Ministry is seeking to develop new PPPs and has launched a Social Housing Financing Scheme supporting home purchases by nationals. o The state-owned Eskan Bank is looking to establish joint ventures with international developers for the purpose of developing 15,000-16,000 housing units. Potential partners have been approached in the GCC, Turkey, China, and South Korea. Under the planned joint ventures, the government would allocate land to build equity in the projects, while the developers along with financial service providers would fund the construction. The JVs are due to develop government land in Ramli and Al Madina al Shamaliya (Northern Town) as well as to redevelop more mature areas in Umm al Hassam, and Isa Town. o Diyar al Muharraq expects its USD 3bn Marassi al Bahrain development to have its first residents within two years. The
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