The fifth installment of the hugely successful Euromoney GCC Financial Forum – co-hosted by the Bahrain Economic Development Board – took place at the Four Seasons Hotel in Manama on 23-24 February 2016. The forum brought together a 500-strong audience to assess the impact of the current economic climate on financial services in the GCC and to chart the way forward for the regions’ financial sector.
In the following interview with Euromoney Conferences, the Economic Development Board’s chief executive, Khalid Al Rumaihi reflects on how Bahrain is addressing the challenges presented by the current macroeconomic and market environment, as well as the EDB’s strategic priorities for the years ahead:
Euromoney Conferences: How would you describe Bahrain’s strategy around financial services, particularly in light of the economic challenges the region is facing?
Khalid Al Rumaihi: Clearly these are challenging times, as highlighted by the recent downgrades by the ratings agencies, linked to the fall in oil prices, but governments across the region are taking sensible steps to help address the broader challenges, including accelerating diversification efforts, continuing to invest in core infrastructure, and streamlining and redirecting government expenditure.
In Bahrain, the government is working on implementing a comprehensive programme of structural economic and fiscal reforms to further strengthen the country’s long-term development and to achieve a balanced budget within three budgetary cycles. As S&P noted last month: “The government is making headway in its consolidation plan, introducing price increases on fuel, accelerating fee increases on tobacco and alcohol, and cost cutting at the ministry level.”
From an economic investment perspective, we continue to focus on our core strengths which have helped drive forward diversification over the past few decades. We have a well-educated and motivated workforce, strong connections to the rest of the region and a business environment that allows the private sector to thrive.
We see the benefits of this in the financial services sector, where we are global leaders in areas such as Islamic finance and have a strong regional offering in financial sub-sectors that benefit from our lower costs – KPMG recently reaffirmed that Bahrain offers the region’s lowest cost environment for the financial services sector – and wider local talent pool, including areas such as ancillary services and wealth management.
Euromoney Conferences: How does financial services fit into the overall strategic vision for the EDB over the next five years? Do you have the team and the resources to achieve that vision?
Khalid Al Rumaihi: The EDB is focused on five key sectors where we believe the Kingdom has particular competitive advantages and which offer strong potential for growth – financial services; ICT; tourism; manufacturing; and transportation and logistics.
The link between them all is that Bahrain has something to offer businesses and there is a real demand for investment in the coming years. These sectors also have high potential to create high quality local jobs – this is important for the Kingdom, but it is also important for international businesses for which one of the main attractions of investing here is often the quality of the local workforce.
The EDB is focused on encouraging investments that work for Bahrain but also work in the long term for the businesses involved – we don’t just want them to set up, we want them to thrive.
Financial services is obviously something that Bahrain has long been known for – and also an area where we have seen other centres emerging in the region in the last decade or so. However, we think it is a mistake to view the financial sector as a ‘winner takes all’ tournament – we think there is great scope for complementary growth, and indeed this is something we are already seeing. Growth in one part of the region does not mean that other centres in the region will suffer.
While we will remain a full service financial centre, there are areas – such as Islamic finance, ancillary services and asset management – where Bahrain’s particular strengths – for example in terms of the access to the GCC market and the expertise of the local workforce – will lead to more rapid growth.
Furthermore, the EDB certainly has the right team to achieve this, and have a clearly defined strategy that will help attract investment, create jobs, and contribute to the continued growth and development of the Kingdom’s economy.
Euromoney Conferences: Why is ancillary services a focus area for Bahrain and who will it be competing with – just regional players or international as well?
Khalid Al Rumaihi: Ancillary services are one area where we expect more rapid growth. The growing importance of the GCC market means that businesses are increasingly focused on building back and mid-office support in the region and disruption within some of the traditional markets for these services has created opportunities for Bahrain, where there is the local expertise and where the value proposition works for international businesses. For example, reflecting this trend, in recent years both Citi and Standard Chartered have located regional call centre operations in Bahrain.
Euromoney Conferences: How do you see global and regional financial services developing in the light of changes in the following areas: regulatory oversight and technological disrupters?
Khalid Al Rumaihi: Regulation will need to continue to develop and evolve, reflecting both global trends and challenges, but also the regional situation and evolution of the sector. This is an area where the Central Bank of Bahrain has shown clear leadership over the past forty years.
The FinTech sector offers exciting opportunities in the region, and is an area where we hope Bahrain makes real progress.
The Gulf region is characterised by a growing young population with significant spending power and a strong interest in technology, creating a strong platform for FinTech investment. And as well as having a long track record in the financial services sector, Bahrain has a liberal and advanced ICT infrastructure, an established regulatory framework and policies, and one of the highest mobile and broadband penetration rates in the world. This means the Kingdom offers an ideal testing ground for new technologies and ideas.
A recent survey by Ernst & Young found that 70% of young Bahrainis were interested in the idea of starting their own business, twice as much as anywhere else in the Gulf, and helping to support and encourage this is an important area for the EBD moving forward. We’re focused on helping address some of the major barriers for entrepreneurs, including mentorship and funding, demonstrated by recent announcements such as the launch of an accelerator programme in partnership with C5 Capital and Amazon Web Services.
Euromoney Conferences looks forward to returning to Bahrain in February 2017, for the sixth annual GCC Financial Forum.
Visit the Euromoney Conferences website for information about our other upcoming events in the Middle East region: http://www.euromoneyconferences.com/