What are the main business interests in a country like Bahrain? If you’re like a lot of people, the first thing to come to mind is oil. And for good reason – the first oil discovery in the Gulf that catalyzed growth in the region was made in Bahrain in 1932 through a partnership with Chevron, Texaco (then Standard Oil of California and the Texas Company), and the Bahrain Petroleum Company. In fact, the oil rig that started it all is still producing oil to this day.
But for American companies, there are a lot of opportunities in Bahrain outside the oil industry. Despite being the smallest economy in the Gulf, Bahrain is also the most diverse, with non-oil sectors accounting for 80 percent of the country’s GDP. Additionally, the U.S.-Bahrain Free Trade Agreement is in its 11th year, and Bahrain’s leadership has a strong vision for deepening U.S.-Bahrain commercial cooperation.
The U.S. Chamber of Commerce recently visited the Kingdom of Bahrain to participate in two regional forums: one with 10 American Chambers of Commerce (AmCham) part of the AmCham Middle East & North Africa Council, and a second Trade Facilitation Workshop with regional customs officials, USAID, and the Office of the U.S. Trade Representative. The Chamber also conducted meetings with Bahraini ministers and U.S. companies on the ground. The businesses expressed a renewed sense of optimism for their operations in the Middle East region.
Following the visit, the Chamber’s U.S.-Bahrain Business Council sees five major opportunities for bilateral cooperation that can enhance opportunities for U.S. companies operating in Bahrain:
- Free Trade Agreement – The U.S.-Bahrain Free Trade Agreement has helped increase two-way trade and investment benefitting both U.S. and Bahraini companies. However, the agreement is still underutilized – Bahrain can help provide a key logistics hub and point-of-entry for U.S. small and medium-sized enterprises into the Gulf Cooperation Council market. For U.S. and Bahraini companies exporting into the U.S., the Tariff Preference Level for textile imports is another area worth re-examining with Congress; its expiration in 2016 has led to more than 100 job losses in the U.S. and thousands in Bahrain.
- Infrastructure/Oil & Gas Services – Bahrain’s $32 billion infrastructure investment program is a high-value target for many U.S. engineering and construction management firms. Similarly, $7 billion plans to diversify Bahrain’s energy mix with natural gas and downstream petrochemicals expansion are ideal projects for U.S. technical expertise. Reauthorizing the U.S. Export-Import Bank can help activate U.S. supply chains to compete for these high-value contracts. In the meantime, U.S. businesses are losing ground to foreign competitors whose countries provide export credits, and Bahrain is no exception. For the $5 billion refinery expansion project in Bahrain, U.S. companies have had to partner with foreign subcontractors with the backing of their countries’ robust export-import banks in order to remain competitive.
- ICT and FinTech – New incubators and accelerators are emerging in Bahrain with an emphasis on entrepreneurship and small and medium-sized enterprise growth. Similarly, U.S. tech companies have been taking a second look at the country, with Microsoft partnering on an accelerator for startups and Amazon bringing cloud services to help leverage the strong human capital and innovation ecosystem in both private sector and government. Bahrain is also in the process of overhauling its finance and banking laws to leverage its expertise in financial services and Islamic financing to position itself as a regional FinTech hub.
Defense – Bahrain is a key U.S. ally that hosts the U.S. Navy’s Fifth Fleet with approximately 4,000 Americans living in the Kingdom and 200 U.S. companies operating there. During its first 100 days in office, the new U.S. administration has shown increased understanding of Bahrain’s security concerns. At the highest levels, the U.S. has assured Bahrain that they will have access to desired defense equipment and technologies from leading U.S. companies. This week, the U.S. Administration informed Congress it plans to approve the sale of 19 F-16 fighter jets to Bahrain. As Congress reviews this purchase, the enhanced security brought to a strategic ally and the benefit to the U.S. economy—$4 billion in military and defense procurements, and nearly 200 new jobs in the United States—should be paramount.
Civil Aviation – Bahrain’s central location in the Gulf and flight connections through the Middle East region and Southeast Asia can help U.S. carriers compete with Gulf rivals. Currently, there are no direct passenger flights on any U.S. carrier into the Gulf Cooperation Council Countries, including major destinations such as Dubai, Doha, and Riyadh. Coupled with the Fly America Act, transit passenger volumes, and the large Saudi Arabian market next door, a direct flight from a U.S. carrier into Bahrain’s expanding airport—where there is no direct competition—could be a game-changer for U.S. civil aviation in the Middle East and beyond.
There is great potential for commercial relations to flourish under the new U.S. administration, and with the right policies in place, U.S.-Bahrain business partnerships can build on this shared success to develop new growth prospects. A pragmatic approach to the region that builds upon the fundamental security and defense relationship and deepens the growing bilateral business partnerships is a winning formula that will set the tone for U.S. policy toward the Middle East for the years to come.