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CONTENTS Bahrain  Economic AnalysisLegal Information Info-Prod Country Guide  

Investment and Trade Issues

Investment Incentives

The Bahraini government actively promotes foreign investment and, in recent years, has promulgated regulations permitting 100 percent foreign ownership of new industrial establishments and for the establishment of representative offices or branches of foreign companies without local sponsors. Most other commercial investments, however, are subject to government approval and generally must be made in partnership with a Bahraini national controlling 51 percent of the equity. Foreign nationals are not permitted to purchase land in Bahrain with certain exceptions made for GCC nationals. The government encourages the employment of local nationals by setting local-national employment targets in each sector and by restricting the issuance of expatriate labor permits.

Investment Incentives Applying to Both Foreign and Bahraini Firms

The Government of Bahrain, in recent years, introduced an industrial incentive program for private companies to employ locals and special measures to support new and existing small and medium-sized industries. These incentives include:

  • Labor: A subsidy of US$ 11,925 per year for the first three years, for each Bahraini employed by companies setting up factories in pioneering industries; US$ 7,950 per year for downstream industries, and US$ 2,650 per year for companies setting up factories in existing industries.
  • Electricity Charges: A 50 percent rebate for the first five years in all industries.
  • Land Rental: A 100 percent rebate of rental fees in Government industrial areas for the first five years, for all industries.
  • Customs Duties: A 100 percent rebate of customs duties for the first five years, for all industries.
  • Export Credit Facility: Available to all industries.
  • Tariff Protection: Subject to the approval of the National Committee on Tariff Protection, 10 to 20 percent protection may be given to pioneering downstream industries.

Trade Agreements

The Basic Statute of the Gulf Cooperation Council (GCC) was signed in 1981 and the signatories thereto are Saudi Arabia, Oman, Kuwait, the United Arab Emirates, Qatar and Bahrain. The GCC aims to attain cooperation in all fields, to draw up comparable legislation in finance, trade, education, health, tourism and administration, to establish research centers and to encourage scientific development in industry. The ministers from the GCC countries are cooperating with a view towards unifying customs tariffs, establishing a regional stock market and allowing Gulf companies to open representative offices in other Member States.

The Uniform Economic Agreement was executed on 11 November 1981. It sets out various objectives which are to be realized by domestic legislation in the Member States. The Agreement deals with the free movement of goods within the Member States and exemption of goods from customs and other duties imposed by States on imports. It contemplates uniform customs tariffs for goods entering the area of the GCC from outside. It also deals in general terms with the issue of free movement of workers between Member States, leaving the practical realization of these goals to separate legislation to be agreed upon by Member States. The Agreements also cover development programs, oil policy, scientific policy and cooperation on technology transfer agreements with third parties.

The Member States have formed a customs union and have adopted a unified customs schedule based on the Brussels Tariff Nomenclature, the international standard for the classification of goods for customs.


Bahrain is, in some respects, a free port. There is no regulation restricting foreign trade with the exception that all goods imported into or exported from Bahrain must comply with certain requirements. Anyone wishing to import goods into Bahrain for sale or consumption must obtain a general license from the Customs and Ports Directorate of the Ministry of Finance and National Economy.

Customs duties are levied only on goods imported for sale in Bahrain. The rates of duty include the following: 5 percon foodstuffs and non-luxuries; 10 percent on general luxuries; 20 percent on vehicles; 50 percent on cigarettes and tobacco; and 125 percent on alcoholic drinks.

The Government of Bahrain permits the duty-free importation of raw material inputs for incorporation into products for export and the duty-free importation of equipment and machinery for newly established export industries. Except under special license, the private importation of weapons is generally prohibited, and only one private company is authorized to import explosives. The Government of Bahrain provides indirect export subsidies in the form of preferential rates for electricity, water and natural gas to select industrial establishments.

Imported and exported goods are classified according to the Standard International Trade Classification (SITC), Revision 1.


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